IRS guidance could cripple new HSA direct primary care access law

Related: How will HSA-compatible direct primary care work? The IRS explains

Commenters who support improved direct primary care access for HSA users argue that a batch of IRS guidance showing how the IRS is interpreting the OBBBA provision would keep the OBBBA provision from working the way supporters in Congress intended, by creating confusion about what employers can do.

HSAs and direct primary care practice memberships: Federal law requires workers who use HSAs to combine the HSAs with high-deductible health plan coverage.

A direct primary care practice charges the members monthly, quarterly or annual dues. The practice can then handle checkups, sore throats and bad cuts without charging extra fees.

OBBBA lets HSA users spend $150 of HSA cash per individual per month, or $300 per family per month, on direct primary care practice dues.

In theory, the OBBBA provision appears to let workers with HSAs spend $1,800 per individual per year, or $3,600 per family per year, to get no-deductible primary care.

The IRS guidance comments: Comments on the IRS direct primary guidance were due March 6. The IRS received 23 comments.

The IRS interpretation of how OBBBA affects use of HSA cash to pay direct primary care dues "is more restrictive than the law intended," according to J. Kevin McKechnie, executive director of the American Bankers Association's HSA Council. "The guidance should ensure that employers are permitted to pay the periodic fees for direct primary care service arrangements on behalf of employees and their dependents enrolled in high-deductible health plans paired with an HSA, and allow the employer and plan administrators to determine whether or not these services fall before the deductible without regard to the employees' eligibility to fund an HSA."

Jay Keese, executive director of the Direct Primary Care Coalition, also questioned whether the IRS is really reading OBBBA the way Congress intended.

The IRS should make it it clear that employers can pay for a direct primary care service arrangement, or DPCSA fee, on behalf of the employees and dependents in an arrangement that combines an HSA with a high-deductible health plan, "as a payment as a primary care service, which comes before the deductible as any other payment for primary care would," Keese writes. "Furthermore, the IRS should clarify that employers may take this action without making an individual ineligible to contribute to his or her HSA. This interpretation promotes first-dollar coverage of primary care services through a DPCSA and implements congressional intent to grow and expand the use of DPCSAs to help make Americans healthy again."

Representatives for the American Benefits Council and the Purchaser Business Group on Health also asked the IRS to state more clearly that, when an employer pays a DPCSA period fee on behalf of HSA program enrollees, the employer can treat the payments as a pre-deductible payment for primary care without hurting an employee's eligibility to contribute to an HSA.

Matthew Peterson, CEO of the local markets, individual and specialty products division at UnitedHealth's UnitedHealthcare unit, says UnitedHealth would like to see the IRS revise the definition of "primary care services" used in the guidance.

The definition "is constructed primarily as a set of exclusions — procedures involving general anesthesia, prescription drugs other than vaccines, and laboratory services not typically administered in an ambulatory primary care setting," Peterson says. "While these exclusions help clarify what does not qualify as primary care, they do not provide an affirmative standard describing what does constitute primary care services."

The IRS should give some examples showing what thinks does qualify as primary care, Peterson says.