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H.R. 365 |  S. 1358:

The Primary Care Enhancement Act


The Primary Care Enhancement Act (H.R. 365 and S. 1358 ) is a bipartisan bill which expands access to high-functioning primary care services for Americans of all income and age levels. The legislation clarifies to the tax code to remove a major federal regulatory barrier keeping patients, providers and employers who use Health Savings Accounts (HSAs) from using innovative Direct Primary Care (DPC) medical homes to improve health outcomes and reduce costs.


  • Today, IRS rules prohibit individuals with HSAs paired with high deductible health plans (HDHPs) from having an agreement with a DPC provider.


  • IRS incorrectly interprets DPC arrangements as health plans under Section 223(c) of the Internal Revenue Code; furthermore IRS says the law is unclear whether or not primary care services e are qualified health expenses under Section 213(d) of the code, if services are paid for with a capitated periodic fee rather than fee for service. 


  • The Primary Care Enhancement Act clarifies the tax code, making it clear that patients with HSAs paired with HDHPs have access to great primary care with a DPC medical home.

  • Department of Health and Human Services (HHS) regulations already define DPC medical homes as primary care services – HHS rules note that they are an important delivery reform being defined in state laws.


  • Current IRS policy inappropriately interprets DPC arrangements as a form of health plan—despite other interpretations in state and federal law.


  • As long as IRS interprets DPC as a health plan, simply having an agreement with a DPC provider bars an individual from funding an HSA.

  • IRS rules also need to be clarified to allow fees for periodic fee-based DPC to be paid for using HSA funds.


  • IRS regulations are clear: HSAs must be paired with an HDHP, and the HSA holder may not have a second health plan.

  • Twenty-three states have passed defining DPC outside of state insurance regulation and many others offer guidance which concurs that DPC Medical Homes are medical services, not health plans.

  • DPC is currently offered in exchanges, with self-insured employers, unions, in Medicare Advantage and Medicaid MCOs.


Individuals with HSAs are the only people with health coverage who are barred by federal regulations from having a DPC provider.


  • Some in Congress support HSAs but some do not. Regardless of your opinion of HSAs, this change is a matter of fairness to the growing number of patients who already have HSAs, allowing them to access the same high functioning primary care arrangements that those without HSAs may have.


  • As of 2015 about 24% of all coverage includes an HSA paired with an HDHP. That number is rapidly growing as premium costs rise for employers and in exchanges. As DPC can remedy some of the concerns with HSAs by forcing behaviors that encourage regular primary care visits, better health outcomes and appropriate spending of HSA funds result.


  • If employers who have HSAs in their benefit mix can’t offer DPC to their employees, it will be difficult for practices to grow and offer enhanced primary care access to patients anywhere but in the individual market.


Representatives, please Co-Sponsor, H.R. 365, the Primary Care Enhancement Act introduced by Reps. Erik Paulsen (R-MN) and Earl Blumenauer (D-OR).


Senators, please Co-Sponsor the S. 1358, Primary Care Enhancement Act introduced by Senators Bill Cassidy, MD (R-LA) and Maria Cantwell (D-WA)

Tax Treatment of Direct Primary Care with Health Savings Accounts (HSAs) 


There is currently a lack of clarity in the tax code about how Direct Primary Care (DPC) agreements should be treated vis-à-vis Health Savings Accounts (HSAs).  The Internal Revenue Code (IRC) clearly states that HSAs must be paired with a high deductible health plan (HDHP).  Section 223(c) of the IRC also prohibits individuals with HSAs from having a second health plan to cover services not covered by the HDHP.  Current Treasury Department interpretation of the IRC treats DPC monthly fee arrangements like a second health plan, rather than a payment for a medical service.  As such, under current policy, individuals with HSAs are effectively barred from having a relationship with a DPC provider, because the DPC agreement makes the individual ineligible to fund the HSA. However, 23 states have passed laws defining DPC as a medical service outside of health plan or insurance regulation.  Regulations promulgated by HHS under the ACA, likewise define DPC correctly as a primary care service, not a health plan.

Furthermore, the code is unclear about whether monthly payments to physicians practicing under the DPC model are considered a “qualified medical expense.”  As such, under Sec. 213(d) of the IRC, employees might not be able to use their HSA funds to pay physicians using the DPC model.  The growing number of employers who offer their employees HDHPs paired with HSAs have had significant difficulty being able to offer DPC as a health benefit.  

Clearly, when the regulations for HSAs were developed, DPC was not contemplated. IRS definitions should be updated so that the tax code is synchronized with other relevant state and federal laws.

Two parts of the Internal Revenue Code (IRC) need clarification to permit individuals who hold Health Savings Accounts (HSAs) to get high functioning Direct Primary Care:

  • DPC medical homes do not constitute a health plan under IRC Section 223(c), and;

  • Periodic payments to DPC practices for primary care services are to be treated as qualified medical expenses under Sec.213 (d).

Representatives Paulsen and Blumenauer write "Dear Colleague" on the Primary Care Enhancement Act

Affordable Care Act: Direct Primary Care Medical Homes


The Affordable Care Act (P.L 111-148) recognizes DPC as a delivery reform and allows DPC Medical Homes to offer coverage in health insurance exchanges in combination with a wraparound insurance policy provided by a qualified health plan (QHP). Working together, the two must satisfy all other essential health benefits requirements under H.R.3590. DPC practices provide all primary care in a monthly fee arrangement. The QHP is used for hospitalization, specialty care and other more costly services.

Federal Exchange Rules


HHS proposed rules on affordable health care exchanges on July 15, 2011, which clearly state that: “direct primary care medical homes are not insurance.” The exchange rules (CMS–9989–F) became final without modification on March 12, 2012. Section B, Part 156 (g) §156.245 on the treatment of direct primary care medical homes should clear the way for state insurance regulators to recognize DPC medical homes as a benefit that can be offered within the exchange but is not subject to risk or capitalization requirements of insurers or HMOs. This is an important distinction.

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