Direct Primary Care Arrangements Raise Questions for State Insurance Regulators
Over the past year, new health coverage products that are not subject to the consumer protections of the Affordable Care Act have hit the individual market. One type of limited health-insurance-like offering that was already available but is now gaining attention is a direct primary care arrangement, or DPCA. Most often, a DPCA is a contract between a primary care provider and a patient, under which the provider agrees to deliver primary care services in exchange for a monthly fee, which typically runs between $50 and $150. While the terms continue to evolve, DPCAs can be distinguished from “concierge” practices, another type of retainer-based practice, which tend to bill insurers in addition to charging retainer fees and might target a wealthier clientele.
Although new models are emerging, under the traditional DPCA the provider does not accept insurance reimbursement, and patients’ fees cover outpatient, nonspecialty services such as preventive services, basic lab services, and chronic disease management. The DPCA typically does not include coverage of prescription drugs, specialty care services, hospitalization, or most other benefits provided by a medical insurance policy. The rising popularity of DPCAs, particularly among the uninsured, raises questions about how the model could affect consumers’ finances and the stability individual market.
Critical Consumer Protections and Insurance Standards May Not Apply to DPCAs
The Affordable Care Act (ACA) recognizes the DPCA model and allows a qualified health plan to provide coverage of certain services through a “direct primary care medical home plan” as long as the health plan otherwise meets all standards applicable to individual health insurance. However, federal law does not consider a standalone DPCA (i.e., without a supplementary qualified health plan) to be health insurance and therefore does not require these arrangements to meet any of the federal consumer protections that otherwise apply to individual health insurance, such as guaranteed issue (coverage guaranteed regardless of health status, gender, or other factors), community rating (charging the same prices regardless of health status), and coverage of essential health benefits established by the ACA. Under the ACA, enrolling in a DPCA does not qualify as “minimum essential coverage” needed to comply with the individual mandate.
Currently 24 states exempt DPCAs from the regulatory authority of their insurance code by statute.1 This means that insurance regulators are generally barred from requiring DPCAs to meet state insurance standards and requirements, such as those governing benefits, premium rates, licensure, solvency, and oversight. That said, five of these states explicitly prohibit DPCAs from discriminating on the basis of health status when deciding whether to offer membership to a consumer, while two states prohibit DPCAs from setting rates based on the health risk of the individual applicant. However, it is unclear how the states enforce these protections. Further, 19 of these states allow a primary care provider to terminate a DPCA for any reason, which could allow practices to drop patients who use a lot of medical services.
On the other hand, some of the remaining 26 states have taken more hands-on approaches to regulating these arrangements by, for example:
- issuing an opinion explicitly finding that DPCAs are not exempt from the department of insurance’s authority (New York, Georgia)
- establishing an explicit regulatory infrastructure governing DPCAs (Oregon)
- issuing informal guidance that DPCAs might be subject to managed care regulations under certain circumstances (California), and
- establishing guidelines for determining how a DPCA might cross the line and become subject to regulation as insurance (Maryland, Massachusetts).
Concerns for Consumers and the Individual Insurance Market
While the DPCA model presents a number of benefits for consumers, such as easier access to primary care and potentially greater attention from their physicians than traditional coverage might offer, states may want to consider the potential risks they pose to consumers and to the stability of the individual market.
Advocates of the DPCA model generally recommend that patients combine their DPCAs with high-deductible health plans, but reports indicate that some consumers are entering into a DPCA in lieu of ACA-compliant coverage.2 These consumers might be caught unaware by the limited scope of services available to them; when they get sick, medical services such as hospitalization, prescription drugs, or rehabilitation may not be covered.
While some practices accepting direct primary care contracts serve vulnerable populations including the chronically ill and undocumented immigrants, others might have an economic incentive to enroll healthier members who are least likely to use services. In addition, with the repeal of the individual-mandate penalty (set to go into effect next year), healthier consumers might migrate toward low-cost alternatives to ACA-compliant coverage like DPCAs, leaving a sicker risk pool, with higher premiums and fewer plan choices, in the ACA-compliant market.
For state insurance regulators, there is the added concern that some DPCA practices might take on insurance risk by allowing unlimited visits or promising to deliver a broader scope of services than just primary care. For example, a DPCA might cover services like prescription drug coverage, or access to a dermatologist or an emergency physician, while charging an insufficient monthly fee. Without state regulatory oversight, there might be a greater risk of DPCA insolvency when demand for promised services unexpectedly exceeds the practice’s ability to provide them.
Expanding access to primary care is critical to improving population health and it’s important to consider how to best integrate the benefits of DPCAs into our health care system. However, state insurance regulators must protect consumers and markets by enforcing insurance standards and preventing financial insolvencies. With the rise in popularity of DCPAs, states might have to consider, or reconsider, their regulatory stance toward these arrangements.
1. While Montana does not have a statute exempting DPCAs from the regulatory authority of the Department of Insurance, the Commissioner of Insurance and Securities has issued an advisory memorandum stating that DPCAs which meet certain criteria will not be considered as doing the business of insurance under Montana law.
2. DPCA fees are not an IRS-recognized “medical expense” and enrollees are barred from paying their DPCA fees through their health savings accounts. Advocates of DPCAs are pushing to amend the Internal Revenue Code to remove this prohibition.