New healthcare model could take off with budget bill changes
While the recent budget reconciliation bill, known as the One Big Beautiful Bill Act (OBBBA) is known for some very atrocious cuts to coverage, some are celebrating the major expansion of Direct Primary Care (DPC). Proponents see this expansion as one cost-effective way of expanding or maintaining coverage in the nation.
What is DPC?
DPC is a healthcare model where patients pay a recurring, fixed fee (monthly or annually) directly to a primary care physician for access to a defined set of services. The model is not technically insurance and billing does not go through insurance. The physician bills the participant monthly or annually and the participant has access to all of the limited covered services offered by the doctor or practice. DPC usually offers a defined set of primary-care-oriented services, including routine checkups, chronic disease management, acute care visits, and some laboratory tests. The program may include extended hours, tele-health, and other engagement options.
Proponents like this model for several reasons:
- It emphasizes primary care and establishing a strong personalized-care relationship with your doctor.
- An emphasis on primary care is not only cheaper but can also reduce the utilization of more expensive services, such as emergency room and inpatient care.
- Ongoing primary care can control chronic conditions, stop disease progression, and refer to specialists as conditions exacerbate. While specialists are more expensive than primary care, active engagement with a specialist is still cheaper than even higher cost services.
Opponents see DPC as limited and nowhere near comprehensive coverage. As well, a DPC may not serve those with multiple co-morbidities or severe disease states very well. If DPC is contracted for alone, they are right. But DPC can be teamed up with high-deductible health plans (HDHP) or other coverage. While I still like comprehensive coverage better, DPC and an HDHP would offer reasonably robust coverage. Indeed, many employers are struggling to offer comprehensive offerings. And when they do, employee costs due to premiums as well as deductibles and cost-sharing can be prohibitive for some. They either don’t take what the employer is offering or cannot really access it along the way. So, DPC and HDHPs could offer a solution in these cases – reasonably robust but cost-effective offerings are better than no coverage at all.
What does DPC remind me of?
In many ways, DPC is a throwback to the emergence of healthcare as a social benefit in America. Way back when or then, employers battled with the loss of productivity when employees were sick or injured on the job. Employers began contracting with doctors on a per employee or flat fee basis to care for their employees. The move was not entirely altruistic. It was more about economics – getting someone back to work as quickly as possible. Over time, employers also contracted with hospitals for higher level care that was usually limited. The arrangements with doctors led to the birth of Blue Shield around the country. The arrangements with hospitals led to the birth of Blue Cross around the country. Over time, these regional associations of doctors and hospitals emerged as large insurance entities.
What did the budget reconciliation bill do on DPC?
The budget reconciliation bill sought to expand DPCs in the following ways. The DPC and Health Savings Account (HSA) compatibility take effect for months beginning after December 31, 2025.
- The bill clarifies that certain DPC arrangements will not be considered “health plans,” enabling individuals with DPCs to remain eligible for HSAs.
- DPC account holders can utilize their HSAs to pay for DPC service arrangement fees.
- But there will be some limits to use HSAs for a DPC. The fixed periodic fees for DPC cannot exceed $150 monthly for individuals or $300 monthly for covering more than one individual. These limits will be adjusted for inflation starting in taxable years after 2026. DPCs qualifying for HSA compatibility are limited to offering only primary care services. They cannot include procedures requiring general anesthesia, prescription drugs (other than vaccines), or laboratory services not typically administered in an ambulatory primary care setting.
The impact
The OBBBA aims to expand access to DPCs by making them more financially accessible to individuals who utilize HSAs. DPCs will grow both individually but also as an employer offering. While not right for everyone, combining DPCs with HSAs and HDHPs could be a reasonable alternative and meet the Affordable Care Act’s definition of minimum essential coverage.
Why will DPCs grow?
Employers have seen huge utilization and cost increases the past few years. Trends are running between 6% and 9% per year and the increases will continue in the future. While employer’s have sought to shelter employees from massive increases in costs, surveys seem to indicate that employers now will need to pass on more costs to employees – in premiums, deductibles, and cost-sharing. Smaller employers may look to DPCs with HSAs and HDHPs to lower their costs as well as those of employees. Creative funding by employers may emerge, where employers fund the HDHPs, DPCs, and help fund the HSA.
The GOP also wanted to expand the concept of Individual Coverage Health Reimbursement Arrangements (ICHRA). In this model, employers fund the HRA to allow employees to purchase their coverage in the individual marketplace. The ICHRA concept will grow as well, but perhaps less so due to the expiration of enhanced premium subsidies in the Exchange and what could be huge premium hikes there. The House version of the OBBBA had some expansion of ICHRA, but it was stripped from the final bill in the Senate.
#ichra #dpc #hdhp #hsa #hra #coverage #budgetreconciliation
— Marc S. Ryan
