by Jordan Roberts
Director of Government Affairs, John Locke Foundation
Health care legislation or health care reform often consists of new regulations or new restrictions on what a patient can do or how they access care. Whenever health care reform goes the opposite way – removing restrictions and opening up options for consumers – it should be celebrated. A recent executive order from the Trump administration falls into that deregulation category.
President Trump signed the Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First in late June of this year. It allows a patient to use tax-advantaged health savings account dollars for direct primary care. The executive order has significant implications for health care access and spending.
What exactly does this mean? In this research brief, I will look closer at what this rule change will mean for consumers and employers.
President Trump has issued two significant executive orders on health care policy since his inauguration. In October 2017, the President signed the first executive order directing the appropriate federal agencies to expand the use of association health plans, short-term, limited-duration insurance, and health reimbursement accounts.
The second one, and the one of interest for this research brief, was signed in June of 2019. This is a significant executive order that could bring some relief to patients and employers. The executive order deals with many areas of health care, such as price transparency, direct purchasing, health savings accounts, and direct primary care.
One of the most important provisions of the executive order is laid out in section 6, subsection B, which reads:
(b) Within 180 days of the date of this order, the Secretary of the Treasury, to the extent consistent with law, shall propose regulations to treat expenses related to certain types of arrangements, potentially including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses under section 213(d) of title 26, United States Code.
Employers, patients, and direct primary care doctors should be particularly excited about this rule change. If finalized, direct primary care patients and doctors will have significantly more opportunity to utilize this arrangement.
Before examining the rule change, let’s make sure to understand what health savings accounts and direct primary care are.
Health savings accounts (HSA) are a tax-advantaged savings account that must be exclusively used for qualified health expenses. To qualify for an HSA, an individual must be enrolled in a high-deductible health plan. Both the employer and employee can contribute to this account on a pre-tax basis. Direct primary care (DPC) is a type of primary care arrangement that does not utilize insurance. Instead, a patient or family get around-the-clock access to the primary care doctor for a small monthly fee. DPC’s are gaining popularity. According to DPC Frontier, a DPC resource website, there are 1,132 DPC practices in 48 states.
Can you see why these two ideas are often associated with each other? DPC doctors accept a monthly fee, usually between $50 and $200 depending on age and family size, and HSAs allow consumers to put away tax-free money to spend on specific health expenditures.
However, as the law currently stands, you cannot use your HSA dollars to purchase a DPC membership. (You can use it for a 23andMe kit but not DPC.) The Trump administration is seeking to address this problem with the new executive order.
Under the qualified health expense section of the tax code that delineates the services HSA dollars can be used for, a DPC membership fee is not included. Instead, DPC membership fees are considered a “second health care plan” rather than a legitimate expense for which to use HSA dollars. In this way, the government prohibited consumers from using their own money to purchase affordable primary care from a doctor they chose. This is the kind of backward thinking the Trump administration is attempting to combat with this executive order.
Beyond removing the third-party payer from the purchase of primary health care, DPC doctors are an appealing option. With no insurance paperwork to fill out, doctors can spend more time with patients to help with actual treatment and disease management. DPC doctors can also purchase pharmaceuticals at cost and contract for imaging services.
Beyond the obvious benefits for patients, such as more flexibility to use their dollars to purchase the type of health care they would like, employers may find this option much more appealing too. Contributing to an HSA and providing a high-deductible health plan may be a way to cut health care costs for employers and improve health outcomes for employees.
Throughout the national health policy debate, there is a push for more consumer-driven health care purchasing. Pairing an HSA with a DPC membership and a high-deductible health plan could provide a significantly more affordable health coverage arrangement than typical commercial insurance plans provide.
Given the rise in DPC practices and the emphasis on direct health care purchasing, this executive order is a welcome move by the Trump administration. Now patients will be allowed greater flexibility to use their HSA dollars to purchase the type of coverage that best fits their health needs, rather than what the government deems a legitimate health expense.