Menu
Tax Notes logo

Transcript Available of IRS Hearing on Medical Arrangement Regs

OCT. 7, 2020

Transcript Available of IRS Hearing on Medical Arrangement Regs

DATED OCT. 7, 2020
DOCUMENT ATTRIBUTES
[Editor's Note:

Correction, November 9: Speaker Keith Hopkinson's last name was incorrectly transcribed as Hopkins in the original transcript. It has been corrected. Tax Notes regrets the error.

]

UNITED STATES DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

TELECONFERENCE PUBLIC HEARING ON PROPOSED REGULATIONS

"CERTAIN MEDICAL CARE ARRANGEMENTS" [REG-109755-19]

Washington, D.C.

Wednesday, October 7, 2020

PARTICIPANTS:

For IRS:

JOHN P. MORIARTY
Associate Chief Counsel Income Tax and Accounting

RICHARD C. GANO IV
Attorney
Income Tax and Accounting

AMY S. WEI
Senior Counsel
Income Tax and Accounting

ELIZABETH A. HANDLER
Special Counsel
Income Tax and Accounting

STEPHEN B. TACKNEY
Deputy Associate Chief Counsel Employee Benefits
Exempt Organizations, and Employment Taxes

ALEXIS A. MACIVOR
Branch Chief
Financial Institutions and Products

For U.S. Department of Treasury:

KIMBERLY KOCH
Attorney-Advisor Office of Tax Policy

Speaker:

APPALENIA UDELL
Law Office of Appalenia Udell

KATY TALENTO
Alliance of healthcare Sharing Ministries

JAY KEESE
Direct Primary Care Coalition

JOEL NOBLE
Samaritan Ministries International

KEVIN MCBRIDE
Sharable LLC, McBride Law PC

MARK GAUNYA
National Association of Health Underwriters

JOEL ALLUMBAUGH
Opportunity Solutions Project

SHANNEÉ TRACEY
My Christian Care

KATY JOHNSON
American Benefits Council

JAMIE LAGARDE
Sedera

DEBBIE L. HARRISON
Business Group on Health

THOMAS CONNORS
Liberty Health Share

JENNIFER MOONEY

DR. ROBERT GREENLEE

EMMA WILL
American Lung Association

ELISSA ENGLISH-O'BRIEN
Northern Hospitality

JEREMY SCHUPBACH
Proactive MD

FRANKLIN HARRINGTON
American Association of Nurse Practitioners

TED BUDD
N.C. Congressman

WILLIAM SHORT
ABA Health Savings Account Council

KEITH HOPKINSON
Christian Healthcare Ministries

JAMES LANSBERRY

BRADLEY HAHN
Solidarity Health Share

STEPHANIE KRENRICH
American Cancer Society Action Network

DR. RUSSELL MOORE
Southern Baptist Ethics & Religious Liberty Commission

KATHRYN DREGER
Georgetown University

DR. JOEL BESSMER
Strada Healthcare

KATIE BERGE
The Leukemia & Lymphoma Society

CLINT R. FLANAGAN
Nextera Healthcare

* * * * *

PROCEEDINGS

(1:33 p.m.)

MR. MORIARTY: We are here for a public hearing on proposed regulations (inaudible) certain medical care arrangements and hope everyone is here for that reason. If not, you're certainly welcome to listen in but just be aware that we are talking about proposed regulations on certain medical care arrangements.

And I do want to thank all of our speakers. We have today a total of 28 speakers to share their views, their thoughts on the proposed regulations. This is an important part of the process for us. As we write regulations, we do so on behalf, not of the Internal Revenue Service or even the Treasury Department but the American public. And it's important that we receive input from everyone who is interested — in particular, today, our 28 speakers. So in advance, let me thank you for participating and participating actively in the important process.

I am pleased to introduce you to our panel of government attorneys who were involved in drafting the proposed regulations. As I said, I'm John Moriarty. I'm the associate chief counsel for Income Tax and Accounting. That's the office that drafted the proposed regulations.

I have with me Richard Gano, who was the principal drafter of the proposed regulations.

Amy Wei, who acted as his reviewer — that is, overseeing the drafting of the proposed regulations. Elizabeth Handler, who is on my immediate staff is the special counsel and coordinated the project. Because the project involves multiple jurisdictions, multiple tax issues, if you will, we are joined today by Stephen Tackney, the deputy associate chief counsel for Employee Organizations and Employment Taxes, Employee Benefits. And Alexis MacIvor, a branch chief in our office of Financial Institutions and Products. She is a renowned expert if I may venture an opinion personally (inaudible) and because this is a joint effort between the Internal Revenue Service and the Department of Treasury, we are joined by Kim Koch, the Treasury attorney-advisor from the Office of Tax Policy, who worked on the regulations with us.

As I mentioned, we do have 28 speakers today, 10 minutes a speaker. We will be going until shortly after six o'clock. You will certainly understand that "they" means it's a courtesy to everyone who is scheduled to speak. We will be asking speakers to stick strictly to their 10 minutes of allotted time. And I would ask that anyone who speaks identify themselves by name when they speak, so if any of the panelists have questions they should identify themselves by name when they ask the questions. And there is, for those of us who may not have seen it, an updated list of speakers available. If you go to the regulations. gov website you can find the updated list. Many of you have heard the discussions about two of our speakers switching positions today, and one speaker who is scheduled to speak unfortunately dropped out. So instead of 29 speakers we have 28.

Without more, I would like now to commence the process. Our first speaker today is Appalenia Udell. And apologies to you, Appalenia and to anyone else as I go through this if I mispronounce names. I'll try my best but some names are challenging.

So Appalenia, are you here with us and ready to go?

MS. UDELL: I am. Good afternoon. This Appalenia Udell. I am a health lawyer admitted to the State Bars of California, Colorado, and Washington. I have a particular expertise in direct primary care and experience with healthcare sharing ministries. Our law office also provides pro bono patient advocacy services.

We would like to start by taking a moment just to express our gratitude to all of the brilliant minds and kind hearts that worked on the proposed rule. We submitted extensive commentary back in August and we take this opportunity simply to affirm that generally we support all of the tenets in the proposed rule. We feel very strongly that healthcare sharing ministries or other alternative cost shares are an essential piece of the puzzle that helps to keep traditional insurers honest. We think that they are an excellent entrant into this market and we are happy to have them.

We would also like to express that we support a more open enrollment as it relates to the definition of direct primary care provider with specificity. We would like to see that nurse practitioners be included in that definition without any restriction as they have unrestricted practice in 21 states. We do note, however, that there are some specialists that would benefit from working with the direct primary care model, namely OB/GYNs, psychiatry, physical medicine and rehabilitation all lend themselves very well to DPC. And if we have sort of a narrow definition of provider there is a risk those people would be omitted from the system.

So that being said, we would like to spend the majority of our testimony speaking actually to how the proposed rule affects direct primary care as it relates to its relationship with high-deductible health plans and healthcare savings accounts.

In our experience health insurance is really best suited for specialist care and emergency care. So cancer treatments or terrible ski accidents where somebody has to be life flighted out, those are great utilities for healthcare insurance.

What we find across the board is that health insurance is not well suited for primary care. It artificially increases the cost, which deters optimized utilization. It disrupts preventative care utilization, which manifests downstream as costly specialist care and basic procedures, hospitalizations, and post-acute care, all of which are very expensive.

On the other hand, at its core, direct primary care is preventative medicine. DPC is narrowly circumscribed, and it does not include specialist or emergency care, which are really best suited for cost mitigation through health insurance. Direct primary care does not function as health insurance, and as you know, dozens of state laws acknowledge this fact.

So interpreting DPC to negotiate HSA contributions forces patients who can only afford or only have access to through an employer a high-deductible health plan into a position where they are forced to spend 25 to 28 percent of their total take-home income in meeting their high deductible premiums and share of costs for what would otherwise be extremely affordable healthcare.

And this is not a financially viable strategy, and it results in crushing medical debt and related bankruptcies.

Now, this rulemaking comes at a precipitous time in the SARS-CoV-2 pandemic. As you know, millions of Americans have already been diagnosed with COVID-19, and millions more will be diagnosed before the pandemic is over. But domestically and abroad, early studies show that many COVID survivors often demonstrate long-term damage to essential body systems, including cardiovascular, respiratory, and neurological functions.

In the year to come, we are facing an entirely new class of patients with chronic disease, and we do not have a public health plan to manage that. We are already functioning in a rolling generation of physical shortage that was exacerbated by the aging of the Boomer generation. And so now to incur a whole new cost, a patient with chronic disease is going to be a very serious public health problem.

Now, we consider direct primary care a valuable contribution to this emerging public health problem, but in order for it to be a solution, direct primary care cannot be hobbled by negative treatment in relationship to high-deductible health plans and health savings accounts.

So for these reasons, we encourage the department to rescind its previous opinion and use this rulemaking to permit direct primary care used in conjunction with high-deductible health plans and health savings accounts.

And I will yield my remaining time.

MR. MORIARTY: Thank you. Appreciate that. The next speaker is Katy Talento from the Alliance of healthcare Sharing Ministries. Katy, you are up.

MS. TALENTO: Thank you. Good afternoon. My name is Katy Talento. I'm the executive director of the Alliance of healthcare Sharing Ministries. The Alliance is a nonprofit organization that coordinates collective action among most of the (inaudible) ministries. We are grateful to President Trump for his Executive Order of June 2019 which led to the proposed rule we're talking about today and very grateful to all the staff and career officials and at the IRS and the Department for working with us and for listening to us and holding this hearing. Thank you.

First, a word about what the ministries are and how we work. These ministries operate a little differently from each other but we're generally groups of like-minded people who share a common set of religious beliefs and agree to treat our bodies in a manner consistent with our faith; we're committed to healthy lifestyles, and we contribute monthly to share in the cost of other members' medical expenses.

There are currently 108 CMS certified ministries. The vast majority of them are small, local ministries with closed memberships. We work primarily with the majority of the nine large nationwide ministries with open membership which have about 1. 5 million members.

The Alliance supports in the strongest terms the proposed tax deductibility of ministry membership contributions under section 213(d) of the code. We have long advocated for equalized tax treatment of healthcare spending for religious Americans, and we will contend, indeed, that the current denial of such deductibility is an impermissible and unfair provision of a tax benefit to those who choose a nonreligious approach to paying for medical bills.

Religious Americans are used to doing things differently, whether it's homeschooling our kids or sending them to religious schools, watching faith-based movies or TV shows, observing dietary requirements, or contributing significantly to charities or our churches or synagogues, and we welcome the opportunity to do healthcare differently, too, in a way that reflects our faith.

The Alliance supports the availability of health insurance for those who want it and, also, public safety net programs which may subsidize insurance plans or insurance companies.

But some commentors on the proposed rule seem to have bought into the insurance industry's successful marketing that secular insurance is the only accessible or comprehensive approach to financing healthcare and that ideology disregards our country's rich heritage of religious community and burden sharing.

We would contend that any healthcare enterprise that artificially separates the physical from the spiritual is bound to leave many patients underserved. Indeed, the medical literature abounds on the demonstrable clinical benefits of prayer and communal religious practice.

As your proposed rule rightly recognizes, healthcare sharing ministries are defined explicitly in the ACA, which tasks CMS with certifying ministries that meet this definition. The Alliance strongly supports the proposed rule's use of the ACA definition for a number of reasons laid out in our written comments.

As I've described, there are some great elements of the proposed rule. However, the Alliance objects to the Department's treatment of ministry membership contributions as payments for insurance under section 213(b)(1)(d). Our ministries provide a healthcare solution that is fundamentally different from the top down bureaucratic and opaque insurance paradigm. Indeed, 30 states have recognized in their insurance codes that these ministries are not insurance. And here are some of the reasons why.

Unlike insurance, there's no shifting of risk from members to the ministry or other members, so no claims can be made against such risk. Unlike most of the biggest insurance companies, our ministries are 501(1)(c)(3) organizations which do not accrue profit and do not have a fiduciary duty to put shareholders before enrollees.

Unlike parties to an insurance policy, members of a ministry are bound by a moral but not a legal obligation to one another.

The sharing guidelines that govern the eligibility of expenses that may be shared are developed with member participation, sometimes even with a member vote. This is in stark contrast to insurance policies where enrollees have no voice. Unlike an insurance policy, the sharing policies are deeply shaped by the religious beliefs of the members in terms of how we treat our bodies, what sort of behaviors we avoid, which sorts of services are eligible for sharing.

Finally, unlike insurance companies which strictly limit benefits to people who are enrolled in their plans, most ministries have programs to help nonmembers with financial needs.

Given these distinctions, the Alliance supports an alternative approach to arriving at the 213(d) tax deductibility than merely calling us insurance. Ministry membership is similar to three different provisions of 213(d)(1), not merely 213(d)(1)(b) for insurance.

For instance, the payments are similar to payments for medical care as described in (d)(1)(a) in a number of ways. Ministries do provide certain direct services, such as health coaching. We also facilitate the provision of transportation services described in (d)(1)(b). And though we're not insurance described in (d)(1)(b), members do join to obtain a result similar to the result in insurance in that they create a means to provide for medical treatment for themselves and their families, albeit without an insurance contract.

In sum, our membership fees can neither be excluded from nor exclusively confined to any one of the three described paragraphs in 213(d)(1) or the associated red text. But there is still statutory support for our deductibility contained in all of them — (d)(1)(a), (b), and (d).

Treating our membership payments as merely insurance is both legally incorrect and could contribute to unnecessary consumer confusion. So we've provided a suggested way forward; adding a new paragraph five to the regulations to address our membership payments.

Next, I'd like to address some of the comments submitted during the comment period that relate to healthcare sharing ministries. Some commentors asserted that because ministries don't facilitate payment of the sticker price for medical bills, that they somehow contribute to medical debt and other financial hardships for patients. Medical debt and predatory collections of widespread problems due to corrupt pricing and billing practices by profiteering and private equity owned providers, as well as predatory collections practices by mostly tax exempt, so-called charity hospitals, the vast majority of Americans have health insurance and still, unaffordability and medical debt are huge problems. Most people with high deductible plans have less in savings than their deductible. A third of Americans with private insurance received a surprise bill during the past few years. One in five Americans has been in medical collections and half of all collections are medical collections.

Clearly, insurance itself is hardly a silver bullet. Pricing secrecy and gauging, undisclosed conflicts of interest in the healthcare supply chain and perverse incentives throughout the system are stealing the American dream from the middle class. The tiny sliver of a population that has voluntarily opted out of this broken status quo for a value-based member-to-member alternative is hardly the cause of our crisis. If anything, the innovative and rigorous approaches that our ministries take in scrutinizing bills for fraud and errors and negotiating lower prices help reduce costs for patients and hold corporate hospital systems accountable for predatory billing practices.

Some critics argue that exempting ministry members from the ACA individual mandate destabilized enrollment and drove premiums up for those remaining on the exchanges. If it were true that exemptions from the mandate reduce enrollment, then Congress zeroing out the mandate penalty for all Americans should have caused enrollment to plummet as premiums (inaudible) but the opposite has proven true. Effectuated enrollment today in the ACA marketplace is the same as it was the last year the mandate penalty was in place, and premiums actually dropped for the first time in 2019, the first year without the penalty, and continued dropping in 2020.

The truth is that marketplace enrollment was unstable and premiums rose for most of ACA history due to many factors besides the few religious Americans who objected or who couldn't afford to purchase insurance.

Some commentors on the proposed regulations suggested that ministries create consumer confusion or even commit fraud in the healthcare market. Legitimate ministries are upset with consumers about how they are not insured. The Alliance condemns any and all fraudulent or misleading tactics in the marketplace, including any carried out by for-profit entities masquerading as ministries.

When concerned consumers or stakeholders ask us how they can identify a trusted healthcare sharing ministry, I urge them to start with the ACA definition, the same approach the department has rightly taken in the proposed regulations.

Finally, I'd like to thank the department and the IRS for the opportunity to testify today. I very much appreciate your consideration of the views of the Alliance and all the members, of our members, as you determine whether and how to finalize the proposed rule. Thank you.

MR. TACKNEY: Can I ask a quick question? Stephen Tackney from the panel.

MS. TALENTO: Sure.

MR. TACKNEY: You talked about not wanting to be classified as insurance due to avoid confusion. Is that the only — would that be the only result that you're looking for or is there any other results you are — is confusion the only concern you have about classification as insurance for 213(d) purposes, since they're all (inaudible) deductible, so.

MS. TALENTO: I think we would have additional — I think we'd have additional concerns, especially with respect to potential use of health savings accounts — health savings accounts if legislation never changes around health savings accounts and 220(3)(c).

MR. TACKNEY: Okay. So employees' benefit treatment (phonetic) is not just confusion. It is actually other reasons, this issue?

MS. TALENTO: I think so. Yes. I'd like to consult counsel after this and maybe get back to you with a final answer on that.

MR. TACKNEY: That would be great. Thank you.

MR. MORIARTY: Thank you, Katy. I appreciate the comments and the input.

Our next speaker is Jay Keese. Jay, it's your turn. Hello, Jay. Are you on mute? This is John Moriarty. I'm looking for Jay Keese. Okay. We will skip over Mr. Keese and move on to our fourth speaker, Joel Noble. Joel, sorry to put you on the hot spot.

MR. NOBLE: Completely understandable. Before I begin, I just got a message from speaker 19, Congressman Ted Budd. Based on the queue, he is not going to be able to make it and he just wanted me to let you all know that ahead of time so you can take number 19, Congressman Budd off, so.

So, good afternoon.

MR. MORIARTY: Thank you.

MR. NOBLE: Okay. Go ahead.

MR. MORIARTY: No, please.

MR. NOBLE: Okay. Good afternoon. My name is Joel Noble, and I am the public policy director for Samaritan Ministries International. I've not only worked for Samaritan for the last 19 years but our family has also chosen Samaritan in place of insurance to meet our healthcare needs for the last 19 years.

Samaritan Ministries is a 501(c)(3) nonprofit which among other charitable activities serves its members through a healthcare sharing ministry. Samaritan Ministries meets the definition of a healthcare sharing ministry in the ACA and is recognized by a certification letter issued by CMS.

Previously, I was enrolled in insurance. I had what would probably be considered Cadillac insurance through my parents. My father worked for a Fortune 500 company and we always had very good insurance, but at the same time we were always very health conscious and very conscious of even using that insurance.

And what actually drew me to Samaritan so many years ago was many reasons but chief among them was it was an extension of my Christian faith. Samaritan Ministries allows me to choose a healthcare solution that is consistent with those beliefs.

When healthcare costs are paid by someone other than the person receiving care, typically an insurance company or the government, the biblical model of carrying each other's burdens can be undermined. We believe many of the current problems with the healthcare system are a direct result of restricting personal freedom and responsibility through dependence on third-party payers.

Samaritan Ministries was designed to allow Christians to help one another while still maintaining personal responsibility. Also, many insurance companies pay for procedures that are considered morally objectionable. Samaritan Ministries gives me and other Christians the option to use their healthcare dollars in a way consistent with these values. Additionally, I prefer the more personal community-oriented approach over the impersonal feel of corporate insurance. Lastly, myself and other members have often been priced out of the insurance market or simply can't afford an insurance plan that continues to raise at a rate exceeding that of inflation.

I support the proposed tax deductibility of ministry membership contributions under section 213(d) in the proposed rule because members of Samaritan Ministries financially assist fellow members with medical expenses rendering a result usually provided by health insurance. However, currently their costs do not have tax equality with health insurance premiums in the Tax Code.

Samaritan members are not given equal treatment with health insurance even though our members send gifts that go towards assisting fellow members with medical expenses similar to payments made by health insurance policyholders.

I want to thank President Trump and the IRS at his direction for seeking to right this injustice towards faith-based Americans who currently are discriminated against in the Tax Code compared to Americans who choose insurance. However, the proposed IRS regulation absolutely should not provide the solution by deeming Samaritan Ministry membership the same as health insurance.

Insurance involves a contract whereby one party agrees to be legally responsible for and accept another party's risk of loss in exchange for a payment called a premium. Additionally, they reduce the uncertainty of risk via pooling. Insurance also uses actuaries to predict the future so they can access premiums.

In contrast, Samaritan Ministries is an arrangement whereby Christians assist one another with medical expenses through voluntary giving. Our ministry is not licensed, certified or registered by any insurance board or department because they are not practicing the business of insurance, nor does Samaritan Ministry use any insurance agents, agencies, or brokers.

Neither the ministry nor the participants are assuming financial liability for each other participants' risk, nor do we pool funds. We do not use actuaries because our members assist each other with actual medical events that have already occurred.

Thirty states have explicitly recognized that healthcare sharing ministries, like Samaritan, are not insurance and specifically exempted these ministries from their insurance codes.

healthcare sharing ministries operate on a completely voluntary basis and are regulated as charities in their home states under each state's charity laws and each state's attorney general and as 501(c)(3) charities by the Internal Revenue Service. We believe it is of utmost importance that our members understand that we are not insurance and that when participating in Samaritan Ministries, no one has taken on the legal obligation of assuming their health cost risk, but rather that we voluntarily assist one another in the time of need.

For this reason, the proposed regulation should do all it can to avoid creating confusion on that issue. Therefore, Samaritan proposes, as we did in our written comments, that if the Treasury determines to adopt the proposed regulation with healthcare sharing ministries still referenced under section 1. 213-1(3)(4)(i)(a)(2), that the language be amended to read as follows:

(2) healthcare sharing ministries. Amounts paid for membership in a healthcare sharing ministry that shares expenses for medical care without assuming risk or indemnifying members as defined in section 213(d)(1)(a) or payments for medical insurance under section 213(b)(1)(b) without regard to their noninsurance status under state law or any other Federal law or regulation, a healthcare sharing ministry (inaudible) . . . "

Finally, I'd like to thank the department for the opportunity to testify today, and we very much appreciate your consideration as you determine whether and how to finalize the proposed rule. Thank you.

MR. MORIARTY: Thank you, Joel. Appreciate the thoughtful input and certainly will consider it going forward.

Our next speaker is Kevin McBride. Kevin, are you on and ready to go?

MR. MCBRIDE: Yes, sir. Mr. Moriarty, Mr. Gano, Ms. Koch, and additional panel members, thank you for this opportunity. Before I proceed to my prepared comments I want to make a brief — I think I want to briefly endorse Mr. Noble's added language that would help define a healthcare sharing ministry. I've never heard it before. This is the first time so perhaps this is a risky maneuver on my part but I think Joel was stating things that we could and would agree to subject to further evaluation.

I am — when I say "we," I'm legal counsel to Sharable LLC. Sharable is a technology services provider to the healthcare sharing industry. We provide services to competent healthcare sharing ministries, several of whom are presenting today.

Sharable is also on the forefront of expanding healthcare sharing into non-Christian and nonreligious groups who share common ethics and otherwise fit the definition of a healthcare sharing organization.

Now, the proposed rules that bring us together today included a request for comments on the definition of a healthcare sharing ministry. In response of my client, Sharable LLC, has submitted two comment letters. The first comment letter is dated July 1st. A supplemental comment letter is dated July 29th. Together, these comment letters propose three changes to the definition of a healthcare sharing ministry, three amendments, if you will. The precise language changes I'm not going to read into the record today. They're included in our two comment letters. I'm going to give an overview of those three proposed changes in summary fashion.

First, (inaudible) could delete the 1999 date requirement. That would be paragraph four in the current definition. This restriction on access to healthcare sharing violates the establishment clause of the 1st Amendment as fully analyzed in our July 1st comment letter. As the current definition stands, only 97 Mennonite communities and 7 or 9, depending on the correct count, other Christian organizations would benefit from the section 215 deduction.

Under the Sharable proposed change, both non-Christian and nonreligious organizations that otherwise meet the definition of a healthcare sharing organization would also benefit from this income tax deduction. That is as it should be. This is not just a Christian benefit. It is a benefit that should accrue to all people who otherwise fit the definition.

Now, we want to make it clear that we fully support the majority of the traditional Christian ministries operating today, including all of those speaking today. They're, as far as we're concerned, doing a great job in the industry and we support them. But it is time to expand this opportunity to non-Christians and nonreligious people who otherwise fit within the definition of a healthcare sharing organization, and importantly, share common ethics and bonds.

So that's our first request, to change the definition of a healthcare sharing ministry, and that is to delete the 1999 date requirement.

Our second requested change is to add a monthly reporting requirement to the definition. Now, we're doing this to try to bring greater transparency to healthcare sharing. Under Sharable's proposal, a monthly financial snapshot should be presented to each healthcare sharing member that accounts for three things.

Number one, the total dollar amount of medical bills submitted by members and approved for sharing for that month.

Number two, all sources and uses of funds brought into the healthcare sharing organization or ministry for the month.

Number three, the total administrative expenses expended for the month. Number three is a very important matter that we've all butted up against in recent issues in the healthcare sharing industry. One particular bad actor I think we all agree was paying a very small percentage toward actual medical expenses and a very large percentage to administrative expenses. Well, if the administrative expenses need to be fully disclosed, that's not going to happen or it's unlikely to happen, and if it does it's unlikely to continue for very long. So this proposed addition to the definition of a healthcare sharing ministry or organization will bring transparency to the healthcare sharing area is a goal I believe shared by all on this particular call.

The third change we ask for is we ask for participant-to-participant payments. We ask that that requirement also be added to the definition of a healthcare sharing organization. Participant-to-participant payments make healthcare sharing very different from insurance and here's why. As touched upon by earlier commentors, a health insurance company pools funds paid by its insureds. It then pays expenses from that pool of funds. That's what the insurance company does.

A healthcare sharing ministry is different. A properly constructed healthcare sharing ministry facilitates distributed payments member to member of medical expenses. Now, this is an important distinction between insurance and healthcare sharing. It's the difference between simple control of funds by a monolithic insurance company and distributed voluntary control of funds among healthcare sharing participants and their own community. Healthcare consumers should have the choice — do they want to participate in and be insured under a large insurance company or do they want their healthcare needs to be met through community-based sharing arrangements to pay medical expenses? That consumer choice should be made. We believe that this additional definitional term that we asked to be added to the definition of a healthcare sharing ministry helps clarify that and furthers that goal.

Now, with these proposed changes to the definition of a healthcare sharing ministry, Sharable supports the proposed regulation.

I want to emphasize Sharable fully supports the proposed regulation if we only drop the 1999 date requirement. That is all Sharable requires to support the proposed regulation. We do think though that the two additional definitional terms are beneficial to all concerned and should be added but Sharable will support the proposed regulation even if the two additional terms are not added so long as the 1999 date requirement is dropped.

Now, a word to those who are objecting to the use of the term "insurance," we remind everyone, and particularly the panel of lawyers at the IRS will be very familiar with this concept, we remind all that under the Chevron Deference Framework, and that's the framework for statutory interpretation that comes from Chevron USA versus Natural Resource Defense Counsel, a 1984 Supreme Court decision, under Chevron, when the application of a statute is ambiguous or is subject to more than one interpretation, agencies fill the statutory gap in regulations giving a more precise application of the statute according to its intended purpose.

Now, when the agency fills the regulatory gaps under the Chevron framework, it does so with the context and purpose of the statute that it is interpreting. Now, in this process, an agency's interpretation is given strong deference. That's the Chevron test that all lawyers on this panel will be very familiar with. In this particular instance, insurance is a narrowly defined term in section 213, so its use is statutorily ambiguous. The context and purpose of section 213, however, is very clear. That is it allows tax deductions or medical expenses. That's it. The focus is not on the word "insurance. "The focus is on allowance of tax deductions. So there's no reasonable rationale to confuse the terms "insurance" as defined under the laws of the 50 states with the term "insurance" as defined by IRS and Treasury for the purposes of this deduction. These are different terms with different uses. They do not and need not mean the same things.

With that, with those clarifying comments, I yield the few seconds that may be remaining, Mr. Moriarty, or am available for any questions that you have.

MR. MORIARTY: Thank you very much, Kevin. We appreciate your thoughts and input.

And at this point we'll turn to Elissa English-O'Brien, speaker number six.

Elissa, it's yours. Elissa, are you ready? One more attempt. This is John Moriarty. We are ready for speaker number six this afternoon, Elissa English-O'Brien. I say that with apologies to those on the West Coast where it's still morning.

Okay. If Elissa English-O'Brien is not ready, we will move on to Joel Allumbaugh, speaker number seven.

Joel?

MR. ALLUMBAUGH: Thank you. And excellent pronunciation, I might add.

My name is Joel Allumbaugh, and I am testifying in behalf of Opportunity Solutions Project, a nonpartisan advocacy group supporting free enterprise and work over welfare. We strongly support the goals of this proposed rule to allow for more flexibility for patients to access the healthcare they want. Our comments are directed at furthering the aims of the proposed rule and are focused on a few specific areas.

I serve as a visiting Fellow for Opportunity Solutions Project, focusing on healthcare policy. But I've also owned and operated an employee benefits agency for over 20 years, working with employers to provide access to healthcare for their employees. So, while our written comments largely focused on the legal arguments for our recommended changes for the proposed rule, I want to focus my verbal testimony on the practical reasons for our recommendations.

Quality healthcare starts with access to primary care. The Society of Actuaries published a report in May of 2020, authored by the Actuary firm Milliman, titled Direct Primary Care: Evaluating a New Model of Delivery in Financing, in which they associate direct primary care with a 13 percent reduction in overall demand for healthcare, a 41 percent reduction in emergency department usage, and a 20 percent in hospital admission rates.

But direct primary care is more than just access to primary care. It's an important innovation in healthcare financing. The direct primary care model provides a predictable cost for the employers and individuals paying for membership and removes cost barriers to care once membership is established. According to data from the federal medical expenditure panel survey in the CBC (phonetic), half of employed individuals with private insurance don't get the recommended preventative care that they need and don't go to the doctor due to cost.

Direct primary care is a healthcare delivery model that aligns incentives in a fundamental way to increase access to affordably quality care. We encourage several modifications to the proposed rule related to direct primary care arrangements, as a result. First, and I know an earlier speaker referenced this as well, we would recommend expanding the definition of direct primary care, not to just include non-physician primary care providers like Nurse Practitioners and Physician's Assistants, but also to allow other healthcare providers to adopt similar payment models. We encourage using the final rule to define direct care arrangements to keep the door open for other healthcare providers such as specialists, to experiment with direct-pay models.

Second, we encourage the departments to reconsider the broad rejection of an employer paid direct primary care arrangement, in the context of an individual's ability to contribute to an HSA. Employers continue to struggle to afford healthcare for their employees and fixed predictable costs are exactly what they need. Rather than a broad rejection, the departments could proactively consider solutions such as creating safe harbors for direct primary care arrangements that provide primarily preventative care. The same approach could be utilized to enable contributions to an HSA concurrent with direct primary care membership.

And now I will shift my comments to the subject of health sharing arrangements. Health sharing arrangements have seen significant growth and innovation, and especially since the passage of the Affordable Care Act. For well over a million Americans, these arrangements provide an affordable backstop to protect unforeseen large medical bills and increasingly, we are seeing health sharing arrangements included in employer health benefit strategies.

In my own employment benefits agency, I have seen multiple employers just in the past year, face the hard choice of dropping group health insurance plans in the face of large premium increases. Utilizing alternative strategies incorporating health sharing arrangements, these employers have been able to continue providing important access to healthcare for their employees. These affordable options matter and can mean the difference between providing access to care for employees or not. But none of these employers could have utilized these programs, had they not had secular options.

This gets to the importance of the final regulations removing the requirement that sharing arrangements have been in existence since December 31, 1999. Not only does this requirement stifle innovation, it all but eliminates the opportunity for employers to utilize these arrangements to provide affordable access to care for their employees. As nearly all arrangements in existence since 1999 require a common religious affiliation. Very few employers have a common religious belief across their entire workforce and a benefit program that favors a specific religious belief is both undesirable and discriminatory for the vast majority of employers.

We do want to acknowledge the proposed rules' definitions of allowance for ethically based sharing arrangements however, we believe the allowance is moot and ineffectual because seemingly, all of the healthcare sharing ministries in existence in 1999, were religious organizations. Thus, the proposed regulations inadvertently perpetuated a favoritism for religious organizations over their secular equivalent. We are deeply concerned that this favoritism violates the Establishment Clause of the U.S. Constitution.

It is also important to recognize that employers incorporate multiple tools when developing healthcare strategies for employees. So, for the ability for these arrangements to work in tandem is important. The proposed rule states that an individual in a sharing arrangement cannot contribute to an HSA. However, there's no distinction made between sharing arrangement structures. For example, some sharing arrangements offer membership with initial cost-sharing requirements for members in excess of the minimum HSA deductible.

Participation in sharing arrangements should not disqualify an individual from contributing to an HSA if it does not provide first dollar reimbursement for non-preventive expenses and does not reimburse medical expenses before the member meets an initial out-of-pocket responsibility equal to or greater than the HSA minimum deductible.

As a final note, we encourage the departments to issue the final regulations as soon as possible, ideally by November 1st of 2020. Employers are already developing their healthcare strategies for 2021 and need as much lead time as possible to incorporate these changes. For some these affordable options and increased flexibility will literally mean the difference between providing access to care for their employees, or not.

Thank you for your consideration and the opportunity to provide testimony today.

MR. MORIARTY: Thank you very much, Joel. Now, we —

MS. ENGLISH-O'BRIEN: Oh, hi, good afternoon. My name is Elissa English-O'Brien, and I was meant to go right before Joel and was having technical issues. I was wondering if I could go now?

MR. MORIARTY: Thank you for checking in, Elissa —

MS. ENGLISH-O'BRIEN: Sure.

MR. MORIARTY: — but we do because we don't have, when we have to skip over a speaker because they are not ready, is we move them to the back of the line, so —

MS. ENGLISH-O'BRIEN: Oh, Okay.

MR. MORIARTY: — we'll be getting to you in a little bit.

MS. ENGLISH-O'BRIEN: Okay, great, thank you.

MR. MORIARTY: Thank you. Shanneé Tracey, are you available?

MS. TRACEY: Yes.

MR. MORIARTY: And I apologize if I mispronounced your first name.

MS. TRACEY: It's Shanneé Tracey, no problem.

MR. MORIARTY: Okay. Please proceed.

MS. TRACEY: Thank you. My name is Shanneé Tracey, and I am the Director of Government Affairs for My Christian Care Industry with systems in place for healthcare sharing for for MediShare members. I would like to thank the Department of Treasury for giving me this opportunity to testify today.

Christian Care Ministry would like to thank the executive administration for recognizing the positive impact of healthcare sharing industry. For millions of American citizens, healthcare ministry fills a very special need for the myriad of Americans whose religious convictions are the primary driver in their search for healthcare options. These American have often felt marginalized by the lack of religious options in the healthcare space which unfairly distributes benefits to citizens that choose traditional healthcare coverage.

However, this proposed rule is a great leap forward from the Department of Treasury in bringing parity in the tax treatment of those Americans, and the elimination of unnecessary bias. However, Christian Care Ministry has some serious concerns regarding this whole scene. The proposed regulations categorize deductions for medical care under section 213 (d)(1)(a) and the debts for the healthcare sharing industry payments by billed for medical insurance under section 213 (d)(1)(d). This is plainly, healthcare sharing ministries are not insurance companies. The contrast between the two categories are so extreme, that any regulation that lumps healthcare sharing ministries in with insurance companies, either intentionally or unintentionally, is flawed and must be corrected to eliminate some of the confusion aligned with the safe harbor laws in 30 states, which distinctly clarify that healthcare sharing ministries are not insurance, and create a very clear distinction between the two.

In U.S. Code 816(a)(2), the IRS code defines an insurance company as any company more than half the business of which during the taxable years is the issuing of insurance, or an annuity contract, or the reinsuring of writ, underwritten by insurance companies. It is simply not possible to shoehorn a scenario where healthcare sharing ministries will fit this definition.

The tax code incentive fitting in line with healthcare sharing ministries, in 2016 U.S. Code 5000 (a)(b)(2)(d)(2) has faded in the proposed regulation. The fact that Congress though to define and draw a distinction between healthcare sharing ministries and health insurance companies, cannot be understated. Had Congress not seen clearly the glaring differences between healthcare sharing ministries and health insurance companies, they would have not had the authority or the effort to make the distinction.

The Department of Treasury must take similar efforts to ensure that the intent of the law is strictly complied with. More importantly, it is impossible to characterize healthcare sharing ministry members as distributing risk among the membership, because healthcare sharing members receive no guarantee or assurances that other members will share their expenses. In fact, the current info you find in managerial marketing materials and membership guidelines, that any characterization of healthcare sharing industry and insurance is an obvious mistake. The proposed regulations say healthcare sharing ministries, unlike direct primary care arrangements do not themselves provide any medical treatment or services that would qualify as medical care under 213 (d)(1)(a). This statement is inaccurate and should be reconsidered. The proposed regulations go on to state that deductions for that paid for medical care, under section 213 (d)(1)(a), are confined strictly to (inaudible) and heard primarily for the prevention or alleviation of physical or mental defect, or illness, and for operations or treatments affecting any portion of the body. The prevention and alleviation of mental and physical illness is the primary emphasis of healthcare sharing ministries. For your medical, at MediShare we provide a medical care to members through telehealth solutions, tele mental health, health coaching, and most importantly, spiritual care and chaplain care.

In 2012, the Department of Medicine and Psychiatry at Duke University Medical Center conducted a study on the religion, spirituality, and health through research and clinical expectation and found that religion, spiritual belief, and practices are commonly used by both medical and psychiatric patients to cope with illness and other stressful life changes. A large value of research shows that people who are more religious, more spiritual have better mental health and adapt more quickly to health problems compared to those who are not religious or spiritual. These possible benefits mental health and wellbeing have physiological components that impact physical health, affect the risk of disease and influence response to treatment.

There are several research studies that attribute religion and spiritual care to being supported by a religion, and being supported by a religious community, some positive medical and mental outcomes. Therefore, after the measure, by the measure by the Department and the proposed regulations, it is plain to see that healthcare sharing ministries are more aligned with medical care, than with insurance and therefore, it follows that healthcare sharing ministries should be categorized as medical care under section 213 (d)(1)(a).

The proposed regulation acknowledges the deeply religious nature of the healthcare sharing industry. For this reason, these ministries are carefully sought out by members as their only viable healthcare option. The religious belief of healthcare sharing ministry members might be in contrast sharply with many of the policies of health insurance companies. The proposed regulations state that this proposal under section 213, has no bearing on whether a healthcare sharing ministry is considered an insurance company. Insurance benefits, or insurance organization, health insurance insurer, or other — for other purposes they're also called a red flag and called all healthcare back. On any other event, I would say it was a loss however, this clause, which is relegated in the Preamble, in order to preserve the distinctions between the healthcare sharing industry, and health insurance providers in unacceptable for such distinctions to be limited to the Preamble of the regulations.

Therefore, clear language should be invented to the regulation stating that healthcare sharing ministries are not to be considered insurance. This distinction must appear in the body of the regulation, so it is abundantly clear that healthcare sharing ministries are not to be considered insurance companies under the tax code. This distinction is very important MediShare and that's it, it's of the upmost importance that it be abundantly clear in the regulation.

In closing, healthcare sharing ministries like MediShare would like to qualify as medical care under 213 (d)(1)(a), and have clear language added to the body of the regulation stating that healthcare sharing ministries are not to be considered insurance.

I would like to thank to Department of Treasury for allowing me to testify today and look forward to the outcome.

MR. TACKNEY: Yeah, this is Stephen Tackney, to ask a quick question on your first point about whether or not it's insurance or medical care.

MS. TRACEY: Yeah.

MR. TACKNEY: Given that it remains deductible regardless of classification, is it again, is it merely confusion? Or do you think other results would flow from that?

MS. TRACEY: Yeah, well, we're members of the alliance too, so we need to get back to our legal team. But again, definitely with consumer confusion, and our legal team will have to kind of get back with us on the additional measures. So, I'll defer to Katy in terms of our response to that. That question. Katy's on here too.

MR. MORIARTY: Thank you very much, Shanneé . Shanneé ?

MS. TRACEY: Shanneé , no problem.

MR. MORIARTY: Oh, okay. Katy Johnson, American Benefits Council, it's your turn.

MS. JOHNSON: Great, thank you,so much. Good afternoon, everyone, and thanks to Treasury for the whole thing, today's hearing. Hope you all are well. By way of introduction, I am Katy Johnson, I am the Senior Counsel for Health Policy for the American Benefits Council. The American Benefits Council is a Washington, D.C., based and played benefits public policy organization which advocates for employers on employee benefits issues. Council members include over 220 of the world's largest corporations and collectively either directly sponsor or administer health and retirement benefits for virtually all Americans covered by employer-sponsored plans.

While the proposed regulations that we are discussing today cover a number of topics, as discussed by the other presenters, and from that we gained some info, interesting to listen to. My comments are going to focus on direct primary care arrangements and the interaction of those arrangements with account based health plans, as those are the most significant issues for council members under the proposed regulation.

I wanted to start by explaining why DPC arrangements are important to employers, which some of the prior speakers have touched on. First off, for context more Americans are covered by employer provided healthcare than any other source of health insurance. As of 2019, we just got some recent census data, it looks like in 2019, over 183,000,000 Americans had employer-sponsored coverage. So, due to the central role of employer-sponsored coverage, and the role of employers and providing health coverage, employers are constantly innovating to increase value and reduce healthcare costs in the coverage that they offer. And these effort emphasize high value, lower cost care and in particular, effective management of chronic conditions.

Relevant to today's discussion, we have seen the DPC arrangements become a meaningful part of these efforts for some employers. The value of these DPC arrangements relates to the importance of access to high value primary care for individuals both to manage chronic conditions and to maintain general health. And as a result, to reduce healthcare costs.

What we have seen is that a number of employers that offer what I will call traditional healthcare coverage to their employees are paying some or all of the cost of a DPC arrangement as a supplemental feature of the traditional coverage being offered. So, employers do this in order to address various healthcare challenges including for example, limited availability of care in a geographic location.

So, for example where an employer has a smaller presence and it's hard to build a network. Where an employee population have a high incidence of chronic condition, and also where there are cost issues for lower income employees so that those who struggle to pay for out-of-pocket costs for visits.

What we've heard from employers is that DPC arrangements have been a valued benefit for employees when they have been offered in these circumstances. Including because they encourage long term relationships with primary care providers and address behavioral health needs. In addition, these arrangements have the potential to lower healthcare costs by prioritizing primary and preventive care by reducing emergency care and in-patient hospitalization.

In terms of our comments on the proposed regulation that issue today, let me start by saying that we commend the administration's efforts to support DPC arrangements. We understand that you all have worked very hard to do what you can within the regulatory parameters to support DPC arrangement, and we are very appreciative of that. We also support the clarification in the proposed regulation that amount to pay a tribute to DPC arrangements may be reimbursed by health reimbursement arrangements.

However, notwithstanding the proposed regulations, a significant impediment to the use of DPC arrangements remains — as some of the other speakers have mentioned today, in that currently under the regulation center to a few captions that I'll just stop in a minute — coverage by a DPC renders an individual ineligible for contributing to an HSA. The effect is that employers that have had success in making DPC arrangements available in connection with the tradition health plans they offer, are unable to extend the same benefits who are covered by an HSA eligible HGHD (phonetic). And for an employer who only offers an HGHD, they are unable to consider offering an DPC arrangement as a supplement.

To quantify the issue, I wanted to note that the population of American workers eligible for coverage by an HGHD is substantial. Mercer's national survey for 2019 shows that 59 percent of employers with over 500 employees offer an HGHD. And over 67 percent of employers with over 200,000 employees offer an HGHD. And a number of those employers have chosen a full HGHD replacement model. So, given the significant number of Americans enrolled in HAS eligible HGHDs, in order for DPC arrangements to be a meaningful option for employees and employers, the HSA barrier needs to be removed.

Accordingly, as we note in our comment letter, we are continuing our effort to encourage Congress to address this issue, including by passing legislation along the lines of the Primary Care Enhancement Act of 2019. And we also encourage the administration to support legislative efforts to affirm the ability of individuals to be covered by a DPC arrangement and remain HSA eligible. While we recognize the constraints you all are dealing with on the regulatory side, we do encourage Treasury to continue to consider the extent to which it would be possible on the regulatory side of things to utilize at least a bit of financial authority to define a health plan to not encompass DPC arrangements.

And we are here to provide any support that would be helpful as a part of those efforts. We know a lot of work has been put into that.

I also wanted to address a few key areas where clarification is needed under the proposed regulation, again regarding the interaction of DPC arrangements and account based plans.

So, the proposed regulations outline two circumstances and I'm referring to the Preamble here, but in the Preamble outlines two circumstances in which an individual covered by a DPC arrangement would not be precluded from contributing to an HSA. In the first circumstance, the DPC arrangement was totally provide coverage which otherwise doesn't preclude an individual from contributing to an HSA, under the normal HSA rules. So, just regarding coverage, just regarding insurance preventive care, that aspect of the rule is clear.

The second circumstance is when an individual is covered by a direct primary care arrangement that does not provide coverage under a health plan or insurance. And the example that is given is an arrangement that totally provides for any anticipated course of specified treatment of an identified condition. This aspect of the rule is less clear to us at least. As noted in more detail in our comment letter, we're requesting additional clarity regarding the circumstances in which a DPC arrangement does not constitute a health plan or insurance, so that the HSA interaction role can be applied with consistency and with certainty.

Of course, the Preamble describes the general concept which is that DPC arrangements are varied and in some limited cases, they will not be considered to be a health plan or insurance. But it was difficult to discern the HSA rule being applied that resulted and the final example being permissible and so that led to a number of questions being raised. Both internally at the council, and with some of our employer members including does the extent of the employer involvement matter? And does it matter if the employee pays the full cost? Does it matter if the DPC arrangements consider it insurance under state law? Does the extent of the risk shifting come into play? Those were some of the questions we were kicking around to try and figure out exactly what the rule meant and what its parameters were.

And so in the interest of consistency, predictability, and fairness for taxpayers we have asked in our comment letter, and reiterate today, for additional clarity on that aspect of the discussion would be really helpful with regard to when a DPC arrangement does and does not constitute a health plan including a statement out of the rule, an explanation of the example that was provided in the proposed rule would be helpful. And as always, more examples are helpful if possible.

To switch gears a bit, I have been talking about what type of coverage one can have and also be eligible to contribute to an HSA. But I wanted to note that questions also arose regarding when an account-based plan can reimburse the cost of a DPC arrangement. That is to say, additional clarity is needed regarding the extent to which DPC arrangements are considered a premium for insurance, because health FSAs, accepting benefit HRAs, and HSAs generally cannot reimburse health insurance premiums or amounts paid for health coverage. So, it's imperative that individuals and employers be able to determine with certainty, and ideally with these, whether a given DPC arrangement constitutes medical insurance. Or instead, whether it's non-insurance medical care. Otherwise, the only course of action for employers might be to include plan language in these account-based plans like FSAs and some of the benefit HRAs that include DPC arrangements' costs from the reimbursement from the account-based plans.

Our view is that this result would be unfortunate as it could prevent employees and their families from accessing the high quality, low-cost care that can be received from a DPC arrangement. And so, we are requesting that Treasury and IRS consider providing that amounts paid for DPC arrangements are not treated as amounts paid for medical insurance for purposes of the rules that determine which expenses may be reimbursed from health FSAs and accepted benefits HRAs, and if possible, HSAs.

Lastly, in the interest of time, I wanted to direct the panel to our comment letter, which we filed on August 10, which addresses a number of other technical issues including some definition related comments, and some comments on the stand alone on the DPC arrangements.

I know we have a lot to get through today, but I wanted to note if anyone had any questions about our comment letter and of other topics, of course I'm happy to discuss and follow up as needed.

In closing, I want to thank Treasury and IRS for giving us the opportunity to provide comments and for taking the — what is pretty much an extensive amount of time today, to listen to all the panelists. And for your continued efforts to support DPC arrangements. We always appreciate the chance to work with you all with the goal of improving the quality and lowering the cost of healthcare and appreciate the time and effort you put into this rulemaking.

Thank you very much.

MR. TACKNEY: This is Stephen Tackney. I just want to remind folks that — and get your reaction — this is a 213(d), whether an expense is deductible and it's —

(crosstalk)

MS. JOHNSON: Right.

MR. TACKNEY: — comment go to in section 223, or other sections of the Code, do you think we really — given the scope of this particular — would this be the appropriate place to address all of the issues that you raise?

MS. JOHNSON: I see what you're saying. Hi, Stephen, hope you're doing well. Point taken. I think, first of all, as you can see from our comment letter, we are primarily emphasizing the need for Congress to act on this (inaudible) and HSAs, on the interaction there. So I think that this provided us a good opportunity to reemphasize the importance of addressing that issue for our members and we'll take any chance that we can get.

I agree with you that many of our comments related more to the Agency interaction, but we do have some specifically on the definition of CPC (phonetic) arrangement under the 213 rule, but more so trying to make a general, conceptual clause for the importance of CPC arrangements and how important it is that we reconcile, hopefully, with Congress, the ability to offer those with an HSN (phonetic).

MR. TACKNEY: Thank you.

MS. JOHNSON: Thanks.

MR. MORIARTY: Indeed, thank you very much, Katy. Jay?

MR. KEESE: John, this is Jay Keese, from DPC Coalition. Can you hear me?

MR. MORIARTY: I can.

MR. KEESE: Thank you. I apologize. We had some problems with our code earlier. But if you're ready for me, I'm happy to go, or get back in the queue, whichever you say.

MR. MORIARTY: The general way in which we run public hearings is if, for whatever reason the speaker is not available, we circle back to them at the end. So if you will hold on, we will get to you a little bit later.

MR. KEESE: Thank you, sir.

MR. MORIARTY: Jamie Lagarde, are you ready?

MR. LAGARDE: I am, Mr. Moriarty, thank you.

MR. MORIARTY: No, thank you for taking the time to join us today, look forward to hearing what you have to say.

MR. LAGARDE: Thank you. My name is Jamie Lagarde, and I'm the CEO of Sedera. Sedera offers a technology platform to facilitate medical cost-sharing in a transparent, secure, and innovative fashion.

I'm testifying today to urge the Treasury Department and IRS to remove paragraph 4 of the proposed regulation definition of healthcare-sharing ministry, which would limit the rules' recognition of HCSMs to only those that have been in existence and sharing medical expenses since at least December 31, 1999, including this 1999 restriction in the final regulation will undermine the very purpose of the rule and will harm American healthcare consumers instead of protecting them.

I also urge the Treasury Department and IRS to consider changing the term "Healthcare-Sharing Ministry" to "Medical Cost-Sharing Organization" when finalizing this regulation. The phrase "Medical Cost-Sharing Organization" better reflects the diverse nature of these entities like the Sedera medical cost-sharing community, which serves a community united by ethical beliefs.

We know our healthcare system is broken and overly complex. The price of care has risen dramatically and is often unknown to patients. There is a severe lack of options for consumers, particularly those who do not receive healthcare directly from their employer. And doctors are busy with paperwork and administrative burdens instead of being able to focus on spending time with patients.

Our healthcare system has moved away from what really matters: quality, personalized, and affordable care. And it was previously mentioned employers and families need fixed predictable costs. And we believe that membership-based care models like medical cost-sharing and the EPCs, provide just that.

Membership-based care models like Sedera give employers and families another healthcare option, empowering and educating healthcare consumers to take control of their health and well-being, encouraging price transparency, emphasizing the doctor-patient relationship, and feeing individuals from an employer-based healthcare model.

Alongside medical cost-sharing, direct primary care is becoming a more and more popular method for families to get high-quality primary care at a reasonable price, while allowing for more facetime between doctor and patient and, again, removing administrative burden.

Our healthcare problem does not have a one-size-fits-all solution. One option that may work for one family may not work or be attractive for another. At the end of the day, the more options and more market competition there is, the better it will be for consumers and the healthcare system as a whole.

In his executive order directing the IRS to enact this rule, President Trump recognized this important fact by proclaiming that the only way to improve our healthcare system is to enhance the ability of patients to choose the healthcare that is best for them and empower patients to become more engaged in their healthcare decision-making.

Sedera is playing an important role in transforming the American healthcare system. Sedera was inspired by the long history of traditional HCSMs that were focused on serving a specific denomination. Unlike these ministries, we were formed as a community of individuals bound by ethical principles, focused on a commitment to caring for one another and bearing each other's medical burdens.

Sedera serves a community of more than 25,000 individuals nationwide. Since Sedera was founded, community members have shared millions of dollars in medical expenses with each other and have the freedom to see the provider of their choice.

And Sedera takes great pride in an innovative and technology focused approach to healthcare sharing that empowers our community to be active, savvy participants in their healthcare and help transform our healthcare system.

To that end, we invested serious time and resources into building a fintech enabled direct member-to-member sharing platform that increases transparency, security, and accountability.

Our commitment to transparency and accountability is also demonstrated through the efforts we take to ensure that our members understand how sharing works and how it differs from insurance.

We do not have networks, issue ID cards, indemnify community members, pool funds, have premiums or deductibles. We don't require the preauthorization of medical procedures or engage in claims adjudication.

Sedera plays an important role in the medical cost-sharing ecosystem, as insurance doesn't work for everyone, and the legacy HCSMs are not a good fit for large parts of the population.

We're also helping advance a free market healthcare system by encouraging price transparency and empowering our members to take control over their healthcare-making decisions.

While the concept of healthcare cost-sharing is not new, Sedera is relatively new. We were founded in 2014. Even though we were created in the last 10 years, Sedera meets the statutory definition of an HCSM in many of the states that define HCSMs.

Sedera also meets the proposed regulation HCSM definition but for the provision that requires an HCSM to have been created before and continually sharing medical expenses since at least December 31st of 1999.

Some may argue that this 1999 restriction protects consumers from bad actors but that's simply not the case. Unlike the other elements of the definition, the 1999 requirement is not an operational requirement to protect consumers or increased transparency. And it has not, and will not, keep bad actors out of the market.

There are reputable HCSMs that were created before and after 1999. And there are also HCSMSs that claim to satisfy the pre-1999 restriction that have been accused of not meeting their commitments to their members or have run afoul of regulators.

The day the community was formed does not tell you anything about its commitment to its members or the integrity of its leadership. The 1999 restriction is especially meaningless as any arbor of quality, as there is widely adopted workaround that many HCSMs have taken advantage of to meet the 1999 requirement.

Many HCSMs that claim to meet the 1999 requirement were created within the last 20 years, but have acquired or merged with obscure or near dormant HCSMs that were actually formed before 1999. In fact, four of the seven major HCSMs that claim to meet the 1999 requirement were formed after 1999, but have taken advantage of this loophole.

This also includes the recent announcement that an HCSM that has run afoul of a number of regulators is now claiming pre-1999 status due to its alleged partnership with an HCSM that meets that requirement.

If the IRS is truly interested in protecting consumers, as we know they are, we recommend that it consider adopting additional operational requirements like direct member-to-member sharing and additional transparency requirements as suggested by Mr. McBride, on behalf of Sharable.

Instead of keeping out bad actors, the 1999 requirement will primarily serve as a constraint on competition and innovation and undermine the very purpose of the proposed regulation.

By including the 1999 provision, the regulation will stymie HCSMs serving new communities from forming and will leave many healthcare consumers without any healthcare-sharing option, as all of the HCSMs that claim pre-1999 status limit their membership to individuals who follow the tenets of a handful of Christian denominations.

This is an ironic result, especially as the proposed rule intends to increase the attraction of HCSMs to a broad range of Americans throughout their integration with health reimbursement accounts.

In addition to constraining choice and undermining the purpose of the rule, the 1999 restriction arbitrarily puts a thumb on the scale of certain HCSMs and discriminates against newer HCSMs that serve a broader and more diverse population without any policy justification.

Including the 1999 requirement in the proposed rule, (inaudible) will also continue to artificially distort the HCSM ecosystem and incentivize economically irrational behavior, the merger of newer HCSMs with those that meet the 1999 requirement, while doing nothing to prevent bad actors from operating in this space or otherwise protecting consumers.

In conclusion, removing the 1999 provision from the definition will have zero impact on existing ministries that claim to meet the definition today. Its removal will advance the purpose of the rule by increasing options for consumers, expanding the population of individuals who may join an HCSM, promoting competition and innovation in the sharing ecosystem, and spurring growth in this important sector by permitting other innovative and new organizations to form and be recognized as HCSMs.

As I mentioned earlier, I also urge that you consider changing the term "Healthcare-Sharing Ministry" to "Medical Cost-Sharing Organization" to better reflect the diverse array of sharing organizations that serve religious and ethical communities.

I want to thank the Treasury Department for their time and attention to this important matter. Thank you very much.

MR. MORIARTY: Thank you very much, Jamie, appreciate the thoughtful input. Our next speaker is Debbie Harrison. Debbie, are you ready to go?

MS. HARRISON: Yes, I'm here. Can you hear me all right?

MR. MORIARTY: Can hear you just fine, please proceed.

MS. HARRISON: Great. Great. Thank you so much. Thank you to the IRS and Treasury for holding today's hearing. We certainly appreciate the opportunity to comment.

My name is Debbie Harrison. I am director of Regulatory and Compliance at the Business Group on Health. We represent 430-some large employers, including 72 with the Fortune 100, so tends to be the very, very large size of employers, as well as (inaudible) that they sponsor.

Today, my comments are primarily going to focus on two issues: the definition of direct primary care; and I will also touch on the interaction between direct primary care and HAS high-deductible plan arrangement.

As an initial matter, I want to just lay out a little bit of background. I think it's important to emphasize that for the large employers, and small ones, I assume — although our organization does not claim to represent small employers — that a lot of the trends that you're hearing, a lot of the comments you're probably hearing today really derive from two forces that are coming about at the same time.

One is the ever-escalating costs, overall costs, of healthcare. Our members in our most recent data, expect a — somewhere between 5 and 6 percent increase in healthcare costs. That is consistent with our data going back to 2016. So every year you're going to see somewhere between a 3 to 6 percent increase in costs. And, of course, that is an unsustainable trend and also put enormous pressure on wage rates for employees.

Just to give some numbers to that background, this year, for 2020, our members are estimating that a per-employee cost of coverage is $14,769, a little over $4,000 of that — yeah — about $4,500 of that is actually going to be borne by the employee through premium contributions or out-of-pocket costs.

And, again, that is just to emphasize the drive to direct primary care is a response to costs, but it's also a response to the issue of health outcome. Despite these 5 to 6 percent increases that we have seen year over year, we have not seen better health outcomes in the employee populations.

So these twin movements are largely driving employers to explore direct primary care. So we do have a health innovation forum, as well as our own employer membership to draw from, as well as a lot of professionals who focus on value purchasing, who's collaborated to develop essentially a primary care checklist.

And, essentially, if the primary care system were to operate at peak performance with the latest evidence-based solutions incorporated, what would that look like?

And, as you might expect, you would expect to see certain pieces of that, such as, we would like to see a movement away from the fee-for-service system. We would like to see quality metrics built into primary care. We would like simplicity to be built into primary care. I cannot emphasize enough, you know, the importance of simplicity when it comes to individuals navigating the healthcare system.

A lot of what you're seeing in direct primary care actually does address the — our wish list of what happens in primary care and what our members think would be effective in driving down the cost of care and improving health outcomes.

We view direct primary care, the key piece of direct primary care, as a model that does not accept fee-for-service payments. That, to us, is the most important part of the definition. And, of course, we would hope that would carry over into the 213(d) definition.

You know, direct primary care physicians, as well as their practices, are usually paid by our members and attributed member-per-month fee to manage the total population. There is no earned income from driving utilization as a result.

And this payment structure, we feel, gives providers a lot of freedom to get away from a fee-for-service mindset and a little bit of freedom to innovate in how they address population health.

I will say that, you know, a large portion of our comments is going to be about flexibility. Our estimate for 2022 and 2023 is that about 17 percent of our surveyed employers are looking to the direct primary care model; that's 17 percent over 9 percent for 2021. So you'll see that adoption is actually increasing quite a bit. So there is a lot of interest in the direct primary care model. But we do think that this model will evolve over time. A lot of the direct primary care providers in the market are new and they are still working on their product and adapting their product to the needs of specific employee population.

Similarly, employers are doing the same. They are looking at direct primary care providers and figuring out whether they work for their populations — ways to, you know, lower costs, make care simpler, more efficient, and better coordinated.

So with that in mind, certainly, physicians should be included in the definition of direct primary care, as proposed in section 213(d). However, we do encourage and support expansion of that definition to include other professionals such as: Nurse practitioners, physician assistances, and others.

We would also encourage inclusion of mental healthcare; that mental healthcare be into that definition as well. That is because we have — our members have determined that, of course, managing chronic conditions, managing high-cost conditions, and just the overall cost of care is inextricably linked with, not only those paraprofessionals that I — these other professionals that I mentioned, but also the mental healthcare system.

So, separating those I think largely would defeat a large part of the preventive part of the direct primary care model. So that is just my overall comment, on behalf of our members, to the extent possible under 213(d), to allow some room for flexibility and innovation in the future, not only for today, but in the future.

The next part of my comments focuses on the — how this overlaps with the issues of HAS high-deductible health plan issues under 223 of the Code. Now, of course, I — Stephen, I heard your comment that we are focusing primarily today on 213(d).

But in the eyes of the employer community, I really cannot overlook the fact that these two issues really are just impossible to separate in the eyes of employers. Currently, based on our most recent survey data, over 80 percent of our membership is offering an HAS paired with a high-deductible health plan.

And for 22 percent, the HAS paired with a high-deductible plan is — just over 20 percent — is the only option that employers have — that employer offers to its employee — pardon me. That means that to an employer who is looking at the direct primary care model as a potential solution, there is an enormous hurdle to adoption.

A sizeable proportion of your population is going to be excluded. Because, effectively, those current interpretation of 223 will preclude offering a direct primary care model alongside an HSA paired with a high-deductible plan.

I will echo Katy's commentary that, to the extent the service thinks there is a way to offer direct primary care with an HAS paired with a high-deductible plan, it would be helpful to have examples of how that would work. At this point, it is a little bit murky how that might happen.

So a lot of employers, I think, are holding back on adoption of this model that does hold a lot of promise for delivering better care at lower costs because of the 223 interpretation today.

I would like to suggest, to the extent the service is considering it for the future, that there be adoption of perhaps a more flexible definition of preventive care. You know, the medical community, the group health plan community, has certainly evolved, and, likewise, moved away from fee-for-service. And emphasis on preventive care that focuses on individual treatments, individual medications, individual physician visits I think, unfortunately, reinforces the fee-for-service system.

We believe that the direct primary care model actually does a better job of focusing on prevention in that it looks holistically at a system that addresses things like mental health, along with things like regular well visits. It looks like issues like transportation.

That folds into medication adherence, of course. So the way employers view prevention these days is certainly much more amorphous; and, of course, that makes interpretation of the Code more difficult.

But I do think that this more expansive definition of prevention certainly will fulfill a lot of the promise of the HAS high-deductible model, which is that it would push (phonetic) to drive better utilization, more effective utilization, and I think that those two can be reconciled if there is a more flexible definition of prevention, which would, of course, allow direct primary care to be offered alongside an HSA with a high-deductible plan.

With that, I will return my time. And if anyone has questions, I'm happy to answer them.

MR. MORIARTY: Thank you very much.

MR. TACKNEY: Are there any limits on what a primary care physician could provide as far as actual treatment of actual conditions that you would say wouldn't be due to the model preventive?

MS. HARRISON: Well, I say that the way they're currently structured there is a limit.

You know, generally speaking in a direct primary care model — and perhaps J. T. can correct me on this if I'm wrong — generally speaking, the primary care physicians that you would see there are very aware of the limitations of what they do. There is a referral structure built into the direct primary care model, so, that anything that they view is beyond the purview of their primary care would then be referred out of the system and then —

MR. TACKNEY: So, I'm just saying you think we can take a position that every service that a primary care physician can provide and viewed as a whole can be viewed as preventive?

MS. HARRISON: No.

MR. TACKNEY: Okay. So, what would be the limit we would put on then that a direct primary care could provide and still be considered preventative under your standard of a concept of direct primary care providing preventive services?

MS. HARRISON: That's a good question and I knew you were going to ask it. I mean I think that certainly everything that falls within the current ACA definition I think would, of course, fit within that. But I think what we're looking for is something akin to the standard that was articulated for chronic condition management in the most recent IRS guidance.

You know, to the extent that this definition could be expanded to include chronic condition management, I think that would certainly in the eyes of the medical and the group health plan community would be considered preventive.

MR. TACKNEY: But then it wouldn't allow a (inaudible) that for instance trained or treated a sprained ankle. So, if you can think that one through that would be helpful for us. Thanks.

MS. HARRISON: Yes.

MR. MORIARTY: Thank you very much, Debbie. Thomas Connors Liberty Health Share. Are you ready?

MR. CONNORS: I am here. Can you hear me?

MR. MORIARTY: I can, thank you for joining us today and I'm interested in hearing what you have to say.

MR. CONNORS: Great. All right, first let me introduce myself. I'm counsel for Liberty Health Share and Liberty Health Share is a healthcare sharing ministry based in Canton, Ohio. And I wanted to start first by saying Liberty Health Share does support the concept of the 213(d) deduction for healthcare sharing ministry membership payments.

But we think that there can be a better explanation made that would reflect a statutory basis for that. And to get there, I would suggest that you look at section 105 and I do believe that 105 is integrated with 213. In fact, I think the 105(b) makes its exclusion dependent on qualifying for the 213(d) exemption.

So, there is a reason why the two should be interpreted consistently or in carry materiad (phonetic) if you would. And if we look at 105, there's a provision in there that would help regarding this distinction that everyone is concerned about in the healthcare sharing community regarding being declared as insurance.

In 105, there is a category described as an accident and health plan. And the Treasury regulation says that an accident and health plan does not have to be insured. And a healthcare sharing ministry could qualify to be part of or the basis of an accident and health plan.

And so, assuming that point, then we would also look to the point that in 105, accident and health plans are specifically stated to be treated as insurance for purposes of an exclusion from gross income. Now they're not saying that an accident and health plan is the same thing as insurance, they're merely saying that it should be excluded from gross income just like insurance is.

So, we're not really saying that two are somehow equivalent but merely categorizing both of them as available for an exclusion from gross income. So, now assuming that, let's look back at 213 and that has what the four categories that would permit a deduction. I guess A is for medical care and then D is for insurance for medical care.

The phrase insurance here should be interpreted in the way consistent with 105 and that is that insurance and arrangements, though they're not insurance, are available to be treated for exclusion from gross income should be the way that that is interpreted to remain consistent with 105. So, that's my essential point and I believe this would provide a statutory basis for the exemption and also would serve the purpose of making this very important distinction regarding between insurance and that which is not insurance.

And Steve, you've asked the question, is there a reason other than confusion that healthcare sharing ministries have a concern about that? And that term, well, confusion could be a number of categories. I guess we want to avoid consumer confusion. We make every effort to make sure that those who are members are aware that this is not a form of insurance.

But also, the regulators, the state regulators are very interested and concerned about treating us as insurance. And they have not been successful. There's many years of litigation and other ways of dealing with this whereby we have made clear that we are not a form of insurance for regulatory purposes.

But we are concerned that the explanation that is made here to justify the provision of this 213(d) deduction make very clear that a healthcare sharing ministry is not insurance in the sense of the, you know, regulatory definition. I do think that if your explanation focuses on the fact that this healthcare sharing ministry could be part of an accident and health plan which we all know is not insurance. That would help with regard to that distinction and also could still permit the 213(d) deduction, which at this point we don't have. So, you know, accomplishing that in regulatory terms, I guess, it would fit under 213(d).

MR. TACKNEY: I guess to kind of step back, this is Stephen, 105 has to do with employer payment only and it's referring to payment and typically we refer to that as self-insured arrangements. But we do refer to them as insured; they're just self-insured. The employer is actually paying those payments directly.

The problem becomes that 213 refers to either insurance or payments from medical expenses and it doesn't have this concept of payment forms for accident or health plans. But the concept of 105 is a little somewhat apples and oranges so I can see where you might try to go is that an employer, by providing a self-insured health plan or for instance paying benefits under an FSA is not, you know, that may not necessarily be classified as insurance under an FSA or an HSA.

But it's excludable because it's paying for medical expenses — sorry not an HSA — I meant an HRA there's so many letters. But it's a direct payment by an employer for a medical expense through an arrangement through their "plan".

So, I think the struggle that folks have been having with 213 is just the language on 213 is different. And do you actually need to fit into one of the categories as a medical expense or insurance to actually, this is what 213 has, to actually be within 213 or do you have another idea? But we in our world normally think of coverage under an accident or health plan as providing the insured coverage or proving you coverage.

MR. CONNORS: I appreciate your point and this word insurance is used. However, I would suggest to you that it is not necessarily defined absolutely. So, that when you look at 105, I do think you need to look at the accident and health plan regulation that the, the Treasury regulation. And it specifically describes what could be an accident and health plan. And it specifically says it does not have to be insured, doesn't even have to be in writing.

So, it may not be a major focus but it is there and it's available for the analysis. And so, when we tried to define what insurance means in 213(b), I think it is permissible to say that it would be consistent with how it's described in 105. I recognize that 105 is talking about it from the perspective of employer.

But nonetheless, for the purpose that I'm, you know, raising this point, it does have interaction with 213(d) very closely tied. And if you interpret 213(d) differently and say insurance can only be insurance, you're going to exclude it from the possibility of being considered part of an accident and health plan which is statutorily permitted in 105. So anyway, that's my thought.

MR. MORIARTY: Thank you.

MR. CONNORS: You're welcome.

MS. HANDLER: Okay I believe, this is Elizabeth Handler. I believe John Moriarty had to drop off the call. We just heard from, was that Mr. Connors?

MR. CONNORS: Yes, that was me.

MR. HANDLER: So, thank you very much for your comments. And then we can move on next to Jennifer Mooney.

MS. MOONEY: Hello. Can you hear me?

MS. HANDLER: Yes, we can.

MS. MOONEY: Thank you. I appreciate everybody's comments up to this point and I agree with most things. And I'm changing the focus a bit, my name is Jennifer Mooney. And I'm a master prepared family nurse practitioner. I'm certified through the American Nurses Credentialing Center and currently licensed in the State of Colorado. I've been licensed in Tennessee where I received my master of science in nursing and also in Kansas. And I've been working as family nurse practitioner for over 30 years in a variety of settings but always in primary care.

I've worked in indigent care clinics, federally qualified health centers, state public health departments, rural private health practices and metro private practices. Recently I, for a number of reasons and after these experiences, I have chosen to open up my own practice with the support of the physicians and other practitioners who know me personally and know my work.

I am creating a hybrid practice. In other words, I am accepting insurances as I am able for those who have appropriate coverage, allow cash pay option but also offer a DPC membership for those who have high deductible plans who are utilizing a medical cost-sharing program. This is an important alternative and cost effective way for individuals to receive their primary care services as well as coverage for their larger healthcare costs.

I'm here to testify on two aspects of the proposed regulation. First, the definition of the direct primary care arrangement must also include nurse practitioners so that patients have the freedom to choose the primary provider of their choice, physicians or others who are licensed to provide the same services. I also like the ideas that others had brought up about expanding it to certain specialty groups who may be amendable to this kind of a practice.

Secondly, patients who choose to be in a direct primary care practice in a cost-sharing community must be offered the freedom to contribute to their health savings account and to utilize their personal health savings account funds for direct primary care and high deductible plans eligible medical expenses. This is fundamental to the concept of individual freedom of choice and patient-centered care.

Nursing education has philosophically always advocated a comprehensive holistic assessment of an individual or family's healthcare needs in order to create a care plan. We have been taught that context, communication, caring for the whole person and family is vital to providing quality care across the life span.

Nursing has always had a patient-centered focus for providing optimal and quality care. As a family nurse practitioner, I have additional academic and clinical education in providing primary care. Nurse practitioners, like physician assistants, work collaboratively with physician colleagues as well as independently.

We provide preventive care services, manage all variety of acute illnesses and assess and treat chronic medical conditions including cardiovascular, pulmonary, gastroenterologic, gynecologic, and endocrine disorders. We do this while keeping in mind the foundational sources of well-being — nutrition, exercise, psychological, spiritual, social factors, and stress management.

We refer as appropriate to specialists and other healthcare providers just like our primary care physician colleagues. Nurse practitioners have been at the forefront of providing quality primary care collaboratively with our colleagues for decades. Nurse practitioners must absolutely be included in the definition of the DPC. Patients often choose to see us preferentially because we look at them as whole and spend time to educate with a participatory and collaborative approach.

We often are called to advocate for an individual's care across all settings. This is ideally what the DPC concept is all about. A personalized and relational healthcare model. As independently licensed health providers, nurse practitioners must be included as direct primary care providers in addition to our MD, DO colleagues within a DPC model. There are numerous studies that support the high quality of care and communication skills and cost effectiveness that nurse practitioners bring to their patients.

Our patients should have the freedom to choose us no matter where we practice. I personally have a loyal following and word of mouth referrals that continue to grow my small primary care practice. I have superb collegial relationships with primary care physicians, PA's and NP's as well as multiple specialists and ancillary care providers. Patients should have the ability and freedom to choose between all primary care providers, including nurse practitioners, no matter how or where they choose to practice.

In addition, secondly, it is imperative that individuals and families have the freedom to choose to contribute to their HAS no matter how they choose to receive their primary care services or unreimbursed medical costs. They also deserve the freedom to have utilized — these forms for medical expenses which qualified for tax purposes.

Individuals and families should be permitted to use their HSA or FSA funds for their choice of primary care services including DPC costs and high deductible health plan expenses. Health savings account dollars are not specifically tied to an employer necessarily or insurance. They're transportable as individuals may lose or change jobs. It is their money to be used for their own healthcare.

It allows them portability and a cushion between jobs as they search for the best insurance or healthcare option for them uniquely. The whole purpose of health savings accounts is to have the capacity to save tax free dollars to spend on personal choices to optimize health. If someone chooses a nontraditional approach to meeting their primary care needs such as participating in a direct primary care practice and/or cost-sharing community for the unexpected higher cost of specialty or emergency services, they should have the freedom to use their tax exempt dollars for these legitimate healthcare expenses at their discretion.

Recent studies have revealed the significant cost savings of these services actually to provide for many individuals and families. Thank you for your time and dedication and efforts and for listening to what I have to say and considering it in the future. Thank you.

MR. MORIARTY: Thank you very much, Jennifer. This is John Moriarty again. I apologize for any interruption earlier. Somehow, I was kicked off the line but I'm back. And our next speaker, I believe, is Dr. Robert Greenlee.

DR. GREENLEE: Yes, I'm here. Welcome back, Mr. Moriarty.

MR. MORIARTY: Thank you.

DR. GREENLEE: I guess I'll get started. Good afternoon.

MR. MORIARTY: Okay.

DR. GREENLEE: Thank you. My name is Dr. Robert Greenlee. I'm speaking on my own behalf. I have a doctorate from the University of Chicago Divinity School, in the history of religions, and a JD from the University of Chicago Law School. I currently serve as Senior Consultant to Tusk Ventures, a venture capital fund with numerous investments in the healthcare sector, where I offer advice on the interaction between governmental regulation and religion.

I wish to reiterate the gratitude that other speakers have acknowledged to the IRS and Treasury staff, for their hard and important work in crafting a rule that would offer significant opportunities to so many. I also wish to acknowledge Mr. McBride's written testimony, which is, in part, consistent with my testimony on the establishment clause issues, but which does not address the free exercise issues that I will discuss.

I offer testimony today on the limited question of the constitutional implications of the proposed regulation's definition of healthcare sharing ministry, which would require both that organizations limit their membership to individuals with shared ethical and religious beliefs, and, pursuant to subparagraph 4, limit the proposed rules recognition to only those organizations which have been in existence in sharing medical expenses since December, at least December 31, 1999. I wish to suggest that the imposition of subparagraph 4 creates impermissible establishment of religion, and an impermissible restraint on the free exercised religion.

The definition of healthcare sharing ministries requires that the members of the community share ethical and religious beliefs, and as such, facially demands that the proposed rule must be measured by the rubric of strict scrutiny. As noted in Everson v. Board of Education, a general welfare legislation cannot hamper its citizens in the free exercise of their own religion. Consequently, it cannot exclude individual Catholics, Lutherans, Mohammedans (inaudible), Jews, Methodists, non-believers, Presbyterians, or the members of any other faith because of their faith or lack of it from receiving the benefits public welfare legislation. Everson further provides that, under the establishment clause, the government cannot pass laws which aid one religion, aid all religions, or prefer one religion over another.

Further, in Larson v. Valente, the court made clear that even facially neutral laws that inherently have primary effect of advancing the preferred rel — advancing preferred religions and inhibiting non-preferred religions are impermissible under the establishment clause in the absence of a compelling justification.

Such a religious classification can occur both when a general welfare law prefers a particular religion expressly, or it is the core found in Larson, when a general welfare law distinguishes between religions based upon identifiable characteristics. The date of organization of an healthcare shared ministry under the proposed rule, particularly as it is set in the past, and in (inaudible) entirely immutable, represents just such an identifiable characteristic. I wish to suggest that the proposed rule is public welfare legislation in the service of a noble cause. The further the ability of individuals to make decisions that are in the best interest for themselves, their families, or their employees, in terms of the payment of healthcare expenses.

As the Supreme Court found in Everson, in the case of bussing for public and parochial schools, and even more similarly to the present situation, last year, in Espinoza v. The Board — Montana Board of Education, in the case of tax vouchers. There is no violation of the establishment clause, merely because religious organizations are offered the same benefits that nonreligious organizations receive, under such legislation.

However, in order not to violate the establishment clause, if religious organizations and nonreligious organizations may participate, the rubric of strict scrutiny must apply to explain why one group is favored over another, and in order not to violate the free exercise clause, if an individual's religious beliefs preclude him from the benefits of such public welfare legislation, strict scrutiny must apply to explain this preclusion.

Paragraph 4, the 1999 requirement that's been discussed before, would create a circumstance where a small set of religious groups are favored over other religious or ethically based communities. This provision has a disparate impact between different religious communities because, as other speakers have mentioned, only a small number of Christian denominations were actively sharing medical expenses before December 31, 1999.

As Mr. Allumbaugh pointed out in testimony earlier, all of these groups were organized on shared religious principles and none shared ethical principles. Although some Anabaptist groups and some Evangelical Christian organizations did actively practice sharing, many religious organizations that share a common religious belief in rel — in sharing healthcare expenses had not organized in the same way, as of this time. Many of these groups have subsequently begun to share or have expressed desires to share it but would still be precluded from enjoying the same benefits as these other religious groups.

To cite just three examples, as Mr. McBride in his written testimony acknowledged, members of Hindu (inaudible) have identified their (inaudible) religious commitment to sharing expenses. Similarly, (inaudible) Nakita has identified that a number of Buddhist organizations have a 300-year history of sharing healthcare expenses among each other. The proposed definition with us favor Anabaptist and Christian Evangelical groups that organize healthcare sharing ministries in the forms outlined in subparagraph 4, over these groups that share ethical and religious beliefs about sharing that had not organized in the structure as of this time.

At the same time, the definition improperly picks winners among certain religious groups. Individuals who believe in religions that did not organize as HCSM's Private 1999, and many others, would have their ability to exercise religion freely hindered by subparagraph 4. If only members of the pre-1999 organizations are allowed to enjoy the economic benefits of the proposed rule, then individuals who do not believe in the tenets of these small number of sects would be restricted by their beliefs from benefitting in healthcare sharing ministries. This is exactly the type of rel — exercise of religious freedom that was protected last year in Espinoza, where people who contributed to nonreligious private schools could receive a tax credit, while the people who contributed to denominational schools were restricted from doing so. For the same reason, the 1999 provision also violates the RFRA, the Religious Freedom Restoration Action of 1993, in which the Supreme Court has referenced and has recognized, provide very broad protection for religious liberties.

So, under both the establishment and free exercises clauses, and under RFRA, the IRS would need to meet strict scrutiny to show why subparagraph 4 directly furthers a compelling governmental interest. As drafted, the IRS cannot meet this burden. There's no reason why three 1999 organizations can or should offer sharing in a way that is different or better than another organization. Should the IRS seek to meet the policy goals of greater organizational transparency or stability, there are other nonreligiously discriminatory ways to pursue these objectives.

The 1999 provision cannot meet strict scrutiny in either case and should be eliminated from the final rule. I wish to emphasize, however, that once the 1999 provision has been removed from the proposed rule, I believe that there are no further constitutional defects in the rule. I will save my remaining time, and I wish to thank the IRS and Treasury, again, for the opportunity to provide testimony and for your hard work in this matter.

MR. MORIARTY: Thank you very much, Dr. Greenlee. Before we proceed to our next speaker, I'd like to take a moment to alert the panelists that we have had minor technical difficulties, and our timekeeper, who is an independent contractor, has been apparently unable to access us. So, going forward, Richard Gano will give a two-minute warning, and then let people know, verbally, when they reach the 10-minute mark. With that, Emma Will, I believe you are the next speaker.

MS. WILL: Hello, can you hear me?

MR. MORIARTY: I can hear you just fine. Please, proceed.

MS. WILL: Wonderful, thank you. My name is Emma Will, and I'm with the American Lung Association. I'd like to start by thanking you for the opportunity to provide testimony on the Internal Revenue Service proposed rule on certain medical care arrangements.

The American Lung Association is the oldest voluntary public health association in the United States, representing the millions of Americans living with lung diseases, including Chronic Obstructive Pulmonary Disease, Lung Cancer, Asthma, Cystic Fibrosis, and Pulmonary Fibrosis. The Lung Association is the leading organization working to save lives by improving lung health and preventing lung disease through research, education, and advocacy.

Adequate affordable health insurance is critical for people who have and are at risk for a lung disease to maintain their health and well-being. The American Lung Association has serious concerns that the proposed rule would promote coverage that does not include the benefits and services our patients need and would create confusion among patients looking to purchase quality affordable coverage. As we expressed in comments submitted with 17 other patient organizations in August, The American Lung Association urges that the proposed rule not be finalized.

The proposed IRS regulations would treat payments to healthcare sharing ministries and to direct primary care arrangements of medical expenses, under section 213 of the Internal Revenue Code. This would give the payments the same tax status as health insurance premiums, so that they could be deducted as medical expenses from personal income taxes or reimbursed using funds from health reimbursement arrangements.

The American Lung Association strongly opposes giving preferential tax status for membership in a healthcare sharing ministry. These entities do not provide the same guaranteed financial protection as health insurance and are not regulated as insurance by any state. This means that these plans are not subject to oversight by state insurance commissioners and there are no patient protections. The Lung Association also expresses our concern that the proposed rule may encourage enrollment in healthcare sharing ministries as a substitute for comprehensive coverage. Healthcare sharing ministries confuse consumers, drive enrollment in non-comprehensive coverage, and invite fraud.

I would like to share a story about Renee, a woman in Kansas, who belonged to a healthcare sharing ministry. Renee had a car accident, and while she was being examined for injuries related to the crash, she found out that she had Stage 4 Lung Cancer. Her healthcare sharing ministry would not cover the cost of her car accident and would not cover cancer treatment until after she had been enrolled for a year. If she had waited a year to begin treatment, she would not have survived.

Renee received $60,000 in medical bills before she was able to enroll in comprehensive coverage on healthcare. gov. When she had comprehensive coverage, she would be able to begin treatment for her lung cancer, but she was still on the hook for $60,000. Renee's story illustrates a major risk of the proposed rule. Individuals who belong to a healthcare sharing ministry may believe that they have a traditional health insurance, only to realize that they do not, in the wake of a health emergency.

Healthcare sharing ministries may have futures that closely resemble those of insurance, including cost share requirements that function just like an insurance plan deductible, coverage tiers, based on medal levels, monthly costs that vary by age, and defined covered services. Yet because they do not assume responsibility for paying claims, healthcare sharing ministries have long argued and assert repeatedly on their website that they are not health insurance and should not be regulated as such. These website disclosures are, in fact, legally required by most states.

This IRS role ignores how healthcare sharing ministries classify themselves and blurs the lines between healthcare sharing ministries and insurance, which will make it harder for consumers, like Renee, to understand the benefits and risks of their coverage options. This puts patients, like Renee and many others, at risk. While Renee was able to financially recover from her medical bills, many more are not.

The Lung Association is also concerned that the proposed rule will drive enrollment in non-comprehensive coverage. In order for healthcare sharing ministry fees to be eligible for the proposed tax benefits, the healthcare sharing ministries must meet a definition that is the same as the definition used in the Affordable Care Act exemption from the individual mandate penalty for qualifying healthcare sharing ministry members.

This means that brokers selling memberships for healthcare sharing ministries will likely use this Federal recognition and tax benefit to market memberships and drive enrollment. The proposed rule also invites fraud. Recent stories of healthcare sharing ministries refusing to pay claims have prompted regulators in multiple states to take action, including issuing consumer warnings and imposing new requirements on brokers who sell these skimpy plans. Thirty states specifically exempt healthcare sharing ministries from insurance regulation and no state regulates them.

Given the lack of regulation of healthcare sharing ministries, it is particularly concerning that the IRS is proposing tax benefits for enrollment fees for healthcare sharing ministries, which is likely to give new life to fraudsters during a pandemic, when tens of millions of newly uninsured may be searching for coverage that advertises low upfront costs. Yet, comprehensive healthcare coverage is more important now than ever.

The American Lung Association believes that the proposed rule should not be finalized. Additionally, we believe that the IRS must improve the transparency around healthcare ministry — healthcare sharing ministry enforcement. The proposed rule designs healthcare sharing ministries using the same definition as the ACA. Yet, the process for considering healthcare sharing ministries for approval for the ACA exemption and the list of healthcare sharing ministries that met the ACA criteria was never made public.

While the American Lung Association urges the opposite, if the rule is finalized, the IRS must implement a transparent process for considering healthcare sharing ministry requests for recognition, publish the list of approved healthcare sharing ministries, and require healthcare sharing ministries to annually demonstrate compliance with the definition and provide enrollment data and other information about their operations to assist in IRS oversight attack filings.

Again, the American Lung Association urges you to protect patients with lung disease and other preexisting conditions and not finalize the proposed rule. Thank you for the opportunity to submit feedback.

MR. MORIARTY: Thank you very much, Emma. Our next speaker is Mark Gaunya.

MR. GAUNYA: Mark Gaunya, yes. Can you hear me?

MR. MORIARTY: Yeah. I can hear you. Thank you very much.

MR. GAUNYA: Great, thank you very —

MR. MORIARTY: I appreciate your being here today, and please proceed.

MR. GAUNYA: Okay, thank you. My name is Mark Gaunya. I am the co-owner of an employee benefits brokerage and consulting firm in the Greater Boston, New England, area. I'm also the Vice Chair of the Legislative Council of the National Association of Health Underwriters. Collectively, we work tirelessly helping millions of individuals and employers of all sizes purchase, administer, and utilize health insurance coverage for healthcare services. Our expertise lies in the details of health plan administration and the real-world challenges individuals and employers face. Thank you to the IRS and the Treasury for the opportunity to share my perspectives on this important healthcare regulatory matter.

It is my honor to speak with you today on behalf of so many people who care deeply about this issue. Words matter, and they are often misinterpreted. My testimony will focus your attention on definitions, with the intent of helping remove the barriers for people to access high quality affordable primary care. As an advisor to hundreds of employers who employ thousands of people in New England and all over the country, I see firsthand, every day, how challenging it is for employers and their employees to access primary care, and it's just not okay.

Generally speaking, there are three categories of primary care: traditional primary care, concierge primary care, and direct primary care, and the real differences lie in the way that they are compensated for their services. Most primary care practices provide care to 3,000-5,000 people, and oftentime rely on nurses, physician's assistants, and et cetera, to deliver the care to their patients. Primary care physicians accept insurance on a discounted fee for service basis as compensation for their services.

Concierge primary care works similarly, except they charge a fee, an annual fee, to be part — to help that patient be prioritized in the line relative to the 3,000 or 5,000 people that that physician may be taking care of. Direct primary care doesn't set accept insurance as its form of payment, and instead charges the patient a set fee for the time period that they agreed on between themselves to deliver the primary and preventive care. There is no transfer of risk or insurance in this arrangement between the doctor and the patient, and the healthcare experience is often better because the direct primary care doctor only has 500-700 patients instead of 3,000-5,000 to take care of.

Sadly, in my experience as a benefits advisor and seeing thousands of employers, employees, all over the country, over 50 percent of people enrolled in their company's health insurance plan do not have a relationship with a primary care physician, other than selecting one out of a network directory, and shockingly, when asked, "Do you have a relationship with a primary care doctor, millennials?" those are aged 39 and younger, will often make up 50 percent of the workforce today and will be 75 percent of the workforce in 2025, respond yes, I have a primary care physician, it's my urgent care facility. Urgent care is not basic — urgent care provides basic medical level care. It does not — it is not a representation of a relationship with a primary care physician. We must do something about this lack of education and engagement with primary care, where we think the consequences of a generation of healthcare costs challenge is even worse than the ones we face today.

IRS Code 223 and 213, without all the little letters and numbers, are — create a regulatory barrier to access direct primary care as a form of primary care because they classify direct primary as both medical care and medical insurance. The unintended impact of this regulation affects over 25 million Americans who own a health savings account and would not be permitted to pay for direct primary care through their health savings account.

Prior to the pandemic, and unfortunately accelerated by it, employers are increasingly interested in helping connect their employees with primary care because they feel that that's a big challenge for them, and they'd like to help their employees and their families pay for the costs associated with that care by using the three forms of healthcare accounts that exist within the code today, that is, HOAs, FSAs, and health savings accounts, and the current regulations do not allow direct primary care to be paid out of the health savings account because it's deemed to be both medical expense and medical insurance.

Medical care through a DPC might supplement any other medical care a person might receive through a third-party medical insurance, or it might not. It depends — it all depends on the person. However, in every DPC arrangement, the contract is between the patient and the doctor themselves, and it never involves any type of risk sharing. It's clear to us, and to me, that the Trump Administration understands the value, and act — that providing access to DPC would provide to the American consumer.

In fact, according an executive order, the proposed regulation should treat expenses related to certain types of arrangements, potentially including direct primary care arrangements in healthcare sharing ministries. That's eligible of medical expenses under 213 of the United States Code. It is with this in mind that we are respectfully asking you to consider defining DPC as a medical expense, rather than a health insurance plan. Thank you for your time. I appreciate the opportunity to provide comment.

MR. NOBLE: Can I ask a quick question?

MR. GAUNYA: Sure.

MR. NOBLE: How do they price the membership if there's no risk transfer?

MR. GAUNYA: They price the —

MR. NOBLE: (overtalking)

MR. GAUNYA: I can't — go ahead, sorry.

MR. NOBLE: I thought it was based on predicted average expenses and in some they go over that, and some they go under that.

MR. GAUNYA: I think it were — I think the answer to that question lies in the structure of the medical facility, itself. In other words, the — what do they need to operate their business and care for the patients that are looking in a patient panel. And the answer to that question is very different, based on the size and sophistication of that practice, but in no way, shape, or form is there ever a transfer of liability between the individual and that physician's practice.

MR. NOBLE: Right, but I'm just saying if I pay $100 a month, and everybody pays $100 a month, I can actually (inaudible) are in itself $100 a month, correct?

MR. GAUNYA: Again, remember, this is for primary care and for basic preventive care, and anything that would be complicated or expensive typically is referred out to a specialist, to a facility. So, I'd — I'm not sure I could agree with that statement.

MR. NOBLE: Okay, so, you're saying that in direct primary care, almost everybody is going to get — going to have the same amount of expenses, so that's — that's the way they'll price it?

MR. GAUNYA: No, I think it's highly dependent on the individuals of the doctors' fees. So, as an example, if somebody's healthy, and I am, my doctor sees me, and I'm going to knock on wood for that because I am superstitious. My doctor sees me once a year for a checkup, for a preventive care visit, and I really don't use the physician all that much. There are other people who have the need to go see a physician more frequently to check on — to check on matters of their health. So, it really does depend on the individual.

MR. NOBLE: So, but both of you, if you signed up for the same DPC, would pay the same membership fee?

MR. GAUNYA: Well, no, I believe the way your primary care physician relationships work is they charge a set fee, and I — I'm not privy to the way that they decide what those fees are. I do know that they're set in advance and they're not typically based on any indicator of usage of services or not. They're based on a classification of person, whether you're a single, two-party family, as an example.

MR. NOBLE: Right, so, you're two single people, you and another — let's just assume we're single. If you both apply, and that person has a number of chronic conditions, and you don't, you will both pay the same fee, correct?

MR. GAUNYA: It could work that way. It would depend on how that direct primary care physician's practice was established. I'm not a direct primary care physician.

MR. NOBLE: Oh.

MR. GAUNYA: So, I — I can't answer that question for you.

MR. NOBLE: Okay. Okay, because that would be helpful because it would seem, in that case, that both people, you know, the doctor could be taking a risk of the usage rates of his own — of the people to whom he is providing the same membership fee.

MR. GAUNYA: Yeah, and I think that the — the service would be — would be well-taken, to talk to a direct primary care physician, specifically, maybe take a look at how they structure their pricing.

MR. NOBLE: Yes.

MR. GAUNYA: I don't feel like I'm equipped to answer that question for you.

MR. NOBLE: Well, that's — when we did, that's how they (overtalking).

MR. MORIARTY: Thanks very much, Mark. We appreciate your input and thoughts today. At this point —

MR. GAUNYA: Thank you.

MR. MORIARTY: — we'd like to move onto Jeremy Schupbach, our next speaker.

MR. SCHUPBACH: Good afternoon. Can you hear me?

MR. MORIARTY: I can hear you just fine.

MR. SCHUPBACH: Great, thank you.

MR. MORIARTY: Welcome, Jeremy. Please, proceed.

MR. SCHUPBACH: You know, and thank you for the opportunity to testify today. I really appreciate the opportunity, and in respect to the committee and the time of everybody on this phone call, I just want to make a few points in support of the letter we submitted, and I'm happy to field any questions I can and return the balance of my time.

So, very quickly, I represent Proactive MD. We're an advanced primary care company that practices all over the country. We work both with employer groups and individuals in direct primary care situations, and we support three things within this rule. We would like to see the classification of all payments for DPC memberships and services as payments for medical care and not payments for medical insurance, so, drawing that distinction very clearly. We'd also like to see the removal of the 1999 requirement for the proposed rules definition of healthcare sharing ministries. We're in support of some of our partners that we work with on the medical sharing side, that feel that's an important thing. So, we'd like to support them in that request. And, then, finally, we'd like to expand the definition of DPC arrangements to include health administered by nurse practitioners, clinical nurse specialists, and physical — physician assistants. So, we've got three very simple requests to improve the rule. We feel that makes the work of this, this effort and this regulation, much stronger, and we feel that's a step in the right direction, and with that, I thank the committee for its time and happy to try to answer a few questions or yield the balance of my time. Thank you.

MR. MORIARTY: Thank you, Jeremy. Any questions? Okay, then why don't we move onto Franklin Harrington, our next speaker.

MR. HARRINGTON: Thank you very much. I'm Franklin Harrington, representing the American Association of Nurse Practitioners. I want to thank the panel for the opportunity to provide comment today and also thank the other commenters for their support of the inclusion of nurse practitioners in the definition of direct primary care arrangements.

The American Association of Nurse Practitioners is the largest full-scale association representing the interest of the 290,000 nurse practitioners that are practicing across the country. NPs provide a substantial portion of the high-quality primary care in this country, and their inclusion in a majority of state laws regarding DPC arrangements and other primary care focused delivery models.

Accordingly, we urge the IRS to include contracts between NPs and their patients in the definition of DPC arrangements to improve patient access to direct primary care. As you know, NPs are advanced practice registered nurses who were prepared at the master's or doctoral level to provide care to patients of all ages and walks of life. NPs practice in nearly every primary care setting, and daily practice includes assessment, ordering, performing, supervising, interpreting diagnostic and laboratory tests, making diagnoses, initiating and managing treatment, including prescribing medication and non-pharmacologic treatments, coordinating care, counseling, and educating patients and their families in communities.

NPs hold prescriptive authority in all 50 states and the District of Columbia and complete more than one billion patient visits annually. The importance of NPs in the delivery of primary care has been recognized by independent entities and government agencies, including the American Enterprise Institute, The Brookings Institution, The Federal Trade Commission, The U.S. Department of Health and Human Services, and the links to these reports can be found in our formal comments to the IRS.

As learned previously, the IRS (inaudible) the feedback and whether contracts between NPs and their patients should be included in definition of DPC and arrangement. The IRS also requested comment on whether the definition of primary care services, in Section 1833X2B, was appropriate when provided by a non-positioned practitioner.

First, regarding the definition of DPC arrangement, as mentioned before, we strongly urge the IRS to include NPs and their patients in the definition of DPC arrangement. This is consistent with the definition of primary care practitioner in Section 1833X of the Social Security Act, which serves as the basis for the definition of primary care in this proposed rule.

Second, the definition of primary care services should be consistent whether provided by an NP or a physician. Excluding NPs and their patients from DPC arrangements would unnecessarily limit access to DPC, treat patients differently for tax purposes, based on their healthcare provider of choice, and conflict with state laws.

The importance of NPs to the primary care workforce also supports the inclusion in the definition of DPC arrangement. NPs have long been recognized for providing high-quality cost-effective primary care in their communities. Approximately 70 percent of all NP graduates deliver primary care, and NPs comprise approximately 25 percent of our primary care workforce, with that percentage growing annually. That's a percentage of patients receiving primary care from NPs. It is also higher in rural communities.

The reliance of the primary care system on NPs has been recognized across all payers. As of 2018, over one-third of Medicare beneficiaries were receiving care from a nurse practitioner. Based on data from the Healthcare Cost Institute, patients with employer-sponsored insurance are also receiving an increasing number of primary care services from NPs, and an overview of states that have enacted DPC legislation shows that over two-thirds of states that have active DPC legislation have included nurse practitioners in that definition of primary care provider, or a similar term.

Other agencies and primary care models have also recognized the value of NP-led primary care. For example, NPs are recognized as primary care providers in the Medicare and Medicaid Programs. They are authorized to lead primary care teams in centers for Medicare and Medicaid innovation models, such as the Primary Care First models and the comprehensive primary care cost demonstration. They are also recognized as primary care models in characterization models, such as the shared savings program. In the next generation, you see a demonstration.

In 2019, Centers for Medicare and Medicaid Services amended the definition of primary care provider, and they pasted an interdisciplinary team to include nurse practitioners. The payees' population is primarily composed of dual eligible beneficiaries with multiple comorbidities, who require comprehensive and complex primary care. In the final rule, CMS stated that commenters strongly supported this change, and that CMS believed it would enable payees' organizations to expand their programs while maintaining the same quality of care and appease the primary care authority with the Indian Health Service and the Veterans' Health Administration, and they are also recognized by the joint commission in the role of primary care clinicians for patient-centered medical homes.

To summarize, NPs are providing a substantial portion of the high-quality primary care that our country requires. This is reflected in policies established by government agencies, advanced primary care payment models, state DPC laws, and, most importantly, by the millions of patients who choose NPs as their primary care providers. For the reasons mentioned, we, again, strongly encourage the IRS to include NPs and their patients in the definition of DPC arrangements and to not unnecessarily restrict services they're authorized to provide.

Again, we reiterate there should be no difference in which primary care services are considered, including in a DPC arrangement, based on whether the provider is a nurse practitioner or a physician. Including NPs in the definition of DPC arrangement will increase the ability of patients to enter DPC arrangements with their healthcare provider of choice. Again, we thank the IRS for the opportunity to provide comment at this hearing. Our members are committed to providing the highest quality primary to their patients and communities, and we look forward to further work with the IRS on this important issue. So, thank you very much, and I give back the remainder of my time.

MR. MORIARTY: Thank you very much, Franklin. Our next speaker on the schedule is Ted Budd, U.S. Representative for North Carolina. I understand that Mr. Budd may not be joining us, but just in case the schedule changed, I thought I'd offer him a chance. Okay, in that case, William Short, are you ready to go? Hello? Hello? William Short? In that case, our next scheduled speaker in line is Keith Hopkins. Keith, I —

MR. HOPKINSON: Good afternoon, Mr. Moriarty. My name is Keith Hopkinson, and I have represented Christian Healthcare Ministries since 2001 as their outside counsel. We greatly appreciate the opportunity that the Department of Treasury is providing for comments on the rule. By reference, I'd like to incorporate the August 10, 2020, letter submitted by Craig Brown, CEO of the Ministry, as part of the comments here this afternoon.

There's already been a lot said about why sharing should not be included as a definition of insurance for purposes of this rule. We deeply share those concerns, but we feel we've adequately addressed those in our letter of August 10th. So, we'll move onto, really, what we think is a core issue that doesn't seem to be getting touched on, and that is that CHM generally agrees that there is a shortfall in the treatment of our members and the tax code for a number of the concepts, including HSAs, that are being addressed in the proposed rule, and we're greatly appreciative of the President and the Department's desire to address these shortfalls.

However, CHM must note that the current tax code section that was relied on for the authority for this rule does not provide any express recognitions of sharing ministries. For this reason, CHM believes that a permanent enforceable solution can only be accomplished through Congressional action, which recognizes healthcare sharing ministries as it did under the Affordable Care Act.

Under the proposed rule, 213A, which already exists, clearly spells out that expenses that have been incurred by the taxpayer to meet the medical care of the taxpayer, their spouse, and or their dependents are eligible for a deduction on their taxes. The current rule and its underlying statutory authority are consistent in this respect, bottom line, the deductibility of expenses incurred for the direct medical benefit of the taxpayer. Sharing differs substantially at its most core fundamental level in regard to that concept.

In sharing, such as Christian Healthcare Ministries, the taxpayer members are voluntarily submitting gifts, purely for the express benefit of other taxpayer members' medical care. There is no expectation of any benefit to the medical care of the taxpayer submitting their gift. CHM is deeply concerned that the proposed rule would represent an unacceptable fundamental change to the very core of the relationship between a healthcare sharing ministry and its members.

Our members cannot have an expectation that their voluntary gift, submitted for the medical care of other taxpayer members of the ministry, somehow creates an obligation of medical care for the taxpayer that has made the gift in order to meet the basic tenet of the rule and authorizing statutes. It is for this reason that CHM continues to reiterate its request that sharing not be included in the rule. We do support the concepts that are attempted to be addressed by the rule, particularly with regard to HSAs. We're just deeply concerned that the rule's not the appropriate vehicle by which to accomplish this, and we do think it requires direct Congressional action to get ministries where, and their members, where they need to be.

Finally, in closing, CHM believes that there's clear statutory constraints on what the Department can accomplish by rule, and we suspect that this includes the Department's inability to unilaterally eliminate or rewrite existing statutory provisions, as has been suggested by other commenters, and with that, I'll conclude my testimony and yield my time.

MR. MORIARTY: Okay. Thank you very much. I appreciate your thoughts. Our next speaker, James Lansberry. James, are you present and ready to proceed?

MR. LANSBERRY: I am. Thank you very much for holding this hearing and for the discussion of this important issue. My name is James Lansberry of Peoria, Illinois. I joined Samaritan Ministries, a healthcare sharing ministry, in 1996 with my family right after the birth of my oldest child. I've been a member for almost 25 years.

My family has had several needs shared of various sizes before 2013, when my youngest child was born amidst some trauma and complications and spent 11 days in the NICU. He's healthy, active seven-year old now, in case you're concerned.

The total bills for that were over $200,000. We got notes and cards from several hundred families from 42 different states, and the gifts were enough to not only pay all our medical bills, but also to send some funds on to another family after we secured a significant discount from the inflated charge master prices that we were billed.

I joined Samaritan Ministries with my family because we wanted a faith-based healthcare option. I turned down insurance offered by my employer in order to choose this community approach to healthcare. We knew in 1996, and have known this entire time, that it is not insurance, and that the sharing of our medical bills was never guaranteed.

As faith-based nature what we do, added in with the direct sharing model, every month I give those directly to another family that I pray for as we support them in their time of need. We also appreciate the member-directed nature of Samaritan's elected board and complete freedom to choose our providers and our treatments by membership, because it is not based in a state or with an employer, it's completely portable when I change jobs or move to another location. As my adult children have left home they have also been able to continue their membership without any enrollment confusion, and Samaritan members have helped with the costs related to the birth of my two granddaughters.

Even when offered insurance from my employer, I have chosen to stay with Samaritan Ministries because I believe that this community approach is integral to the practice of my Christian faith. Additionally Samaritan Ministries has always been completely transparent about where my shares are going and what they do with administrative funds, and they have a decades-long track record of this transparency in addition to being accountable to an elected board of members like me who serve on the board without pay.

Transparency and member-directed nature is a stark contrast to the broad brusque picture painted by Ms. Wills of the American Lung Association about an unnamed sharing ministry. And to set the record straight on that, a quick Google search while I was waiting for my turn shows that this woman enrolled in a short-term duration health plan, not a healthcare sharing ministry.

I am aware of the accusations of fraud among alleged sharing ministries, and the lack of insurance designation has not stopped states from rightly pursuing fraud charges nor shutting down the operations of those committing fraud.

I appreciate President Trump and the IRS seeking to pursue a more equitable treatment of healthcare expenses in the tax code. There is great disparity for how healthcare expenses are treated in the tax code, both with employer versus private health insurance plans and with cash payment of expenses versus through insurance and faith-based versus secular solutions.

I urge the IRS and the Executive Branch to change the treatment of healthcare expenses, including the faith-based options like Samaritan Ministries, to be the same under the tax code, while retaining the ministerial non-insurance character of faith-based sharing ministries.

I support both the language offered by Samaritan Ministries and that from the allied health-care shared ministries, either to protect this ministerial non-insurance approach to allow me to use the healthcare choice that I've made with a faith-based sharing ministry.

I am happy to take questions from the panel about my experience and desire, but otherwise I yield the balance of my time.

MR. MORIARTY: Questions anyone? Okay. In that case why don't we proceed on to Bradley Hahn. Bradley, are you with us and prepared to talk?

MR. HAHN: Yes, I am. Thank you, Mr. Moriarty. I am Bradley Hahn, the CEO of Solidarity Health Share. Members are drawn to Solidarity first and foremost because of our beliefs and desire to live those beliefs by sharing in the medical expenses of other members in a manner that does not violate our consciences by forcing us to pay into a program that would in turn use those dollars to pay for morally objectionable medical services.

We also offer an approach that is consistent with the larger push towards a value-driven healthcare system by helping our members receive discounts for the care they receive and by encouraging consumers' directed healthcare decision making.

I will say at the outset of my comments that Solidarity is a healthcare ministry and is not a health insurance. We take tremendous pains to ensure our members' development materials do not suggest otherwise, and to carefully train all of our in-house member relations teams to act accordingly.

I will also note that Solidarity does not use any outside insurance agents or brokers to promote our programs; it does not provide any sales commissions.

Solidarity strongly supports the core intention of the Department of Treasury and Internal Revenue Service had proposed under the proposed regulation that would, among other things, allow for payments to healthcare sharing ministries to be eligible for a deduction under section 213 of the tax code.

At its core this proposal, if finalized, will provide an element of tax relief to those Americans, estimated to be around one million nationally, who belong to healthcare sharing ministries by allowing them to deduct the costs of these expenditures from their federal income taxes.

While Solidarity strongly supports the core of what is being proposed, I would like to reiterate the points I submitted in writing to make the proposal stronger. In making these points I'll emphasize what I said earlier, Solidarity and other healthcare sharing ministries are not insurance. We take great strides and pains to make this point very clear, including by complying with various state statutes pertaining to sharing ministries, that include actions that we must take to avoid being regulated as insurance.

I appreciate the service has recognized this in the preamble of the proposed rule, including a detailed summary of the long-legislative history and intent under Penny how this service has broadly interpreted the term "insurance" over the years.

I also appreciate that the preamble states that the proposal "has no bearing on whether healthcare sharing ministries are considered an insurance company under any other federal or state law. " While I believe this text and history are very helpful, I would like to request that the department and the service strengthen the proposal further to include this or similar non-insurance statement within the text of the finalized regulation.

Taking this action would be consistent with the position contained in the preamble and would provide further clarity by placing a tent into the code of federal regulation.

Additionally, while Solidary Health Share and I are firstly comfortable with the proposed approach that reads the term "insurance" very broadly for the sole purposes of section 213, I would also be supportive of actions that could cleanly and squarely address sharing ministries, if such a route is possible.

In considering these issues initially, Solidarity spent much time evaluating the medical and insurance pathways currently available under section 213. It was our conclusion that the options currently available under 213d, Solidarity most clearly fit under the insurance pathway, which is reflected in the proposed rule.

While Solidarity is comfortable with this approach, particularly if the final rule could be strengthened to further show the non-insurance language is included in the regulatory text, I would also be supportive if another pathway should one be available under the current authorities. Specifically, if the department and the service believe that you have the authority to establish a defined category for sharing ministries under 213g1, I would encourage you to pursue this option. However, I would not want to pursue this pathway if it is clear that the statutory authority does not exist, exposing the rule to legal challenges and jeopardizing ability to provide tax relief for the sharing ministry members.

Finally, I want to note that Solidarity supports the service's decision to use the current definition of healthcare sharing ministries within the Internal Revenue Code that was created under the Affordable Care Act for the purposes of defining sharing ministries under section 213. Under this definition is appropriate because it is the only definition of sharing ministries found in federal law and because failing to limit healthcare sharing ministries to the single definition would cause great confusion.

In conclusion, I am thankful for the service for the consideration amount of time it has committed to promulgate the proposed rule and to review the many comments received and to convene today's public hearing. Solidarity Health Share supports the core of what is being proposed to provide our members and members of other sharing ministries with the needed tax relief. And I encourage you to strengthen the rule further by including the non-insurance language in the final regulation and to move promptly to issue a final rule.

And I thank you for the opportunity to testify today.

MR. MORIARTY: Thank you, Bradley, appreciate your testimony and you taking part in this important process.

Stephanie Krenrich?

MS. KRENRICH: Hi, can you hear me?

MR. MORIARTY: I can hear you just fine. Your turn.

MS. KRENRICH: Perfect. Thank you so much. Good afternoon. I am Stephanie Krenrich, Director of Federal Relations to the American Cancer Society Cancer Action Network, or ACS CAN.

ACS CAN is making cancer a top priority for public officials and candidates at the federal, state, and local levels. ACS CAN empowers advocates across the country to make their voices heard and influence evidence-based public policy change as well as legislative and regulatory solutions that will reduce the cancer burden.

As the American Cancer Society's non-profit, non-partisan SPC affiliates, ACS CAN is critical to the fight for a world without cancer.

I appreciate the opportunity to testify today on behalf of cancer patients, survivors, and their families. Cancer is unpredictable and can strike at any time. Being enrolled in comprehensive and affordable health insurance coverage is a key determinate to surviving cancer. Research from the American Cancer Society shows that uninsured individuals are less likely to get screened for cancer and thus are more likely to have their cancer diagnosed at an advanced stage when survival is less likely and the cost of care more expensive. This not only impacts the 1. 8 million Americans who will be diagnosed with cancer this year, but also the 16. 9 million Americans living today who have a history of cancer.

In June, 2020, the IRS issued a proposed rule that would treat payments consumers make to healthcare sharing ministries and direct primary care arrangements as medical expenses for purposes of the Internal Revenue Code, thus allowing these payments to be deducted as medical expenses from personal income taxes or distributions from a health reimbursement arrangement. ACS CAN is very concerned about the proposed rule.

ACS CAN submitted written testimony jointly with a number of other national non-partisan, non-profit patient advocacy organizations to express our strong concerns with the proposed rule. We urged the agency not to finalize it.

As you know, healthcare sharing ministries are programs under which members pay a monthly fee to cover the expenses of other members. As noted in the preamble, healthcare sharing ministries do not themselves provide any medical treatment or services that would quality as medical care under section 213b of the IRS Code.

Healthcare sharing ministries are largely not regulated by states, and, in fact, many cases are specifically exempt from states' insurance codes.

As a non-partisan, National Association of Insurance Commissioners noted in their comments on this proposed rule, healthcare sharing ministries claim to be exempt in regulation as insurance. They should not be permitted to at once maintain exemption from the laws that regulate insurance and at the same time derive benefits from an IRS classification that can place them with insurance.

We are concerned that classifying payments made to healthcare sharing ministries as a medical expense for purposes of IRS rules will encourage the proliferation of these programs. This is problematic for a number of reasons.

First, healthcare sharing ministries often exclude important consumer protections that cancer patients need, such as coverage of the Affordable Care Act's essential health benefits or EHB and prohibition on the imposition of lifetime and annual limits on EHB coverage.

Some healthcare sharing ministries impose dollar limits on care, ranging from $125,000 to $250,000 per instance, which can be significantly less than the cost of treating an individual's cancer.

Healthcare sharing ministries often require members to pay their healthcare claims up front with the promise that the program will provide reimbursement for qualified expenses. However, this practice leaves individuals vulnerable to incurring significant medical debt if the entity refuses to reimburse the individual for healthcare claims.

One resident in Connecticut faced over $300,000 in unpaid claims, prompting the state to issue a cease and desist order against the company. These entities can also apply pre-existing condition exclusions. There are also many stories where some have refused to pay for cancer-related treatments. One resident from Washington State was left with $81,000 in just one month of medical bills for his throat cancer when his healthcare sharing ministry refused to pay for his care.

In addition, healthcare sharing ministry programs often mimic health insurance in the way they are marketed to consumers. The marketing materials used by these programs often mirror the language and practices of insurance companies, using terms like deductibles and provider network. A common well-funded study of faith insurance regulators found regulators expressed concern that many healthcare sharing ministries use features that are very similar to insurance, and may therefore mislead consumers into thinking they are enrolling in coverage that guarantees payment for covered claims.

Furthermore healthcare sharing ministries have the potential for fraud. Since the beginning of 2020, five states, Colorado, Connecticut, New Hampshire, Texas, and Washington, have taken legal action against one healthcare sharing ministry over deceptive marketing practices and fraudulent activities.

The National Association of Health Insurance Commissioners and at least 15 states have also issued warnings about the potential for fraudulent activities by these programs.

Once again, the American Cancer Society Cancer Action Network strongly advises that the IRS not finalize this rule and that healthcare sharing ministries not be considered insurance for the purpose of IRS regulation.

I will now talk a little bit about direct primary care arrangements, another subject of this proposed regulation.

As you know, direct primary care arrangements are contracts between an individual and one or more physicians in which the physician agrees to provide medical care to the individual for a fixed fee without going through a third party like an insurer.

While direct primary care arrangements can be used as a supplement to comprehensive health insurance policies, the proposed rule would not limit the definition of the medical expense only to those direct primary care arrangements that are supplementary to comprehensive policies.

We are concerned that individuals purchasing direct primary care arrangements without a supplemental comprehensive policy may be vulnerable to significant out of pocket costs later if later diagnosed with a serious ailment such as cancer. If the IRS finalizes this rule we urge that the tax benefits of direct primary care arrangements, for example the deductibility from personal income tax or the reimbursement from an HRA, be limited only to individuals who can demonstrate that they are otherwise enrolled in a health insurance policy that meets the IRS definition of minimum essential coverage under the Affordable Care Act.

Thank you for this opportunity to share our concerns regarding the proposed rule. I'll be happy to answer any questions.

MR. MORIARTY: Questions from the panel?

SPEAKER 4: I have a quick question about your last point on the — what would be our statutory authority if, you know, if an EBD is itself a medical expense, what would be our statutory authority to say it's only a medical expense if you have other coverage?

MS. KRENRICH: Let me — if you don't mind, I'm going to check with our counsel on that and get back to you. Is that okay?

SPEAKER 4: Yes, thank you very much.

MS. KRENRICH: Thank you.

MR. MORIARTY: Thank you, Stephanie.

MR. SHORT: I'm on mute. I'm almost finished, I'm not, I'm just listening to a couple more and then I want to go get another chocolate bar, or just get out, do something.

SPEAKER: Whoever is on mute talking about chocolate bars should go back on mute briefly. Thank you.

MR. SHORT: And I'm sorry, this is William Short. I finally got the technical stuff figure out and I'd be happy to go at the end of your time. Sorry about that.

MR. MORIARTY: It's okay. Guys that are here, you can join in, a few more people to go and then we'll circle back to those who weren't able to join us as scheduled.

So, Kathryn Dreger from Georgetown University.

MS. DREGER: Good afternoon, can you hear me?

MR. MORIARTY: Good afternoon (inaudible).

MS. DREGER: Okay, perfect, all right, so, thank you so much for allowing me to speak today. We talked a lot about money and taxes and the law, and I would like to talk about something slightly different, and that is, what are we buying, what are we paying for? And I'd like to talk about what I do, which is I'm a doctor, right. So, I'm an internal medicine physician. I trained at Georgetown. I'm on the faculty there. I'm also vice chief of the Department of Medicine at Virginia Hospital Center in Northern Virginia for those of you who are in the city in Arlington. And I have been practicing internal medicine or primary care for nearly 20 years. What became clear to me about 5 years ago, is that the current system doesn't really allow me to pursue my job (inaudible) carefully about how to take care of patients. I think that the way the system is constructed makes doctors rush through care. Our job is not just designating where people go, but also treating them and, in that treatment, we actually prevent a great deal of disease, and this gets to a question somebody had asked before about the limits of what we do as primary care physicians. I'm hopeful that these two stories will kind of answer that. There are three kinds of primary care physicians in the country: pediatricians, family medicine doctors, and internal medicine physicians. Family medicine physicians go through the 4 year medical and 3 years of training and take care of all age groups, from babies to the elderly. Pediatricians stop around 18 sometimes, somewhere in college, and then internists do adult care. What we are trained to do is basically, you know, jack of all trades, master of none. I want to tell you about one woman, her name was Ann. She came to see me as a new patient for chronic cough. She'd been on multiple rounds of antibiotics. She'd gone repeatedly to the emergency room and nothing had helped her. I actually diagnosed her with severe asthma. We got her on the correct medications and she stopped going to the emergency room. She's been much more functional and much better. As I was treating her I was checking her labs, one of her tiny lab results was just a little bit unusual. In my old practice I would not have had time to sit with that number and kind of stare at it for a little while, but I did, and I ordered some subsequent testing and we diagnosed her with a very rare blood cancer, basically a kind of multiple myeloma that can cause factures and kidney failure and hospitalization. We found it before it ever caused a problem. So, to the point of prevention of disease, yes, we do prevention of heart attacks with simple things like hypertension and high cholesterol, but we also prevent a massively expensive last minute care by diagnosing things early when they are less expensive. I think a lot of people want to have their own physicians. One of the reasons we don't have a lot of physicians in this country is because it's not paid well. It's paid (inaudible) with other fields of medicine. Direct primary care affords an ability for primary care physicians to not be tied to volume, to spend time with their patients and for about 40 percent of Americans they can't afford direct primary care on top of the Health Savings Account. So, if they are allowed to use their Health Savings Account dollars, to spend $75. 00 a month to have a doctor they can see anytime and not have to pay for those visits when they go, they will get better care. They'll get preventive care or get compassionate care and I think they will get care that is much more affordable. So, I would encourage you to make these changes to the law. I would also encourage that we focus for now just on physicians. I think that nurse practitioners and PAs are fantastic, but are not as well trained as primary care physicians. I think that for now we just stick to having physicians do this important work because I think that will increase the number of doctors who come into the field. I'm happy to answer any questions and I yield the rest of my time. Thank you so much.

MR. MORIARTY: Thank you very much. Members, any questions? Hearing none, let's move on to our next speaker, Dr. Joel Bessmer.

MR. BESSMER: Good afternoon everybody and thank you very much for taking the time to let us comment on this very important issue. First of all, let me start with, you've heard a number of strong opinions today, great opinions today and the opinions you are going to hear from me, they might be somewhat different, but I absolutely agree with Dr. Kathryn Dreger's last statements. So, I also am a physician. I'm a recovering program director in internal medicine, meaning I started my career as an academic physician at the University of Nebraska Medical Center where I spent my first 13 years running an internal medicine residency program and training medical students and primary care physicians in an area where many of the residents we would train would enter through primary care as opposed to going on to become specialists. Today I run Strada Healthcare which is a direct primary care company in the state of Nebraska. Yet, my goals at the end of the day are exactly what they were when I was in academic medicine, and that is, I am here to help fix and help primary care from a perspective of delivering better care for our patients. I really think that direct primary care is a mechanism to do that, but the way that the IRS has interpreted some of the rules I think puts us at a distinct disadvantage. So, I was a big part of leading through the state of Nebraska LB 817 back in 2016, and it is a very simple bill that just defines what truly direct primary care is. Following that I went back to the legislature the next year and we let through a bill to allow the state of Nebraska to do a study of offering direct primary care to state employees to try and figure out is this truly better care for the state of Nebraska employees from a standpoint of some of the medical results we see, but also some of the financial results we see. Most importantly, in none of this is direct care defined as a medical plan because it truly is a great mechanism to deliver fantastic primary care and most importantly, preventive medicine care. So, many of the blood tests that we do through Strada Healthcare we do on our patients every year. You heard Dr. Dreger commenting a bit on using some of those labs to find things early. So, to better understand how we believe this as prevention, we at Strada Healthcare pay for those labs for outpatients. Now, you can say that it comes out of their monthly membership fee, but yet we don't increase the charge monthly to do those. So, every year every patient in Strada Healthcare should get a complete blood count, a complete metabolic panel, their thyroid tested. We pay for inflammatory looks into the body with an HFCRP to see if there is something early going on that we should be looking for. We pay for a cholesterol panel. We also pay for a Vitamin D level because we believe it is one of the most important hormones in our body that is neglected in many parts of health. If you are not aware today, Vitamin D is probably the major predictor of how you are going to do with a COVID infection should you come down with COVID. Those with very good Vitamin D levels, if you look at risk in groups, do much better than those with low Vitamin D levels. So, we look at these things each and every year in each one of our patients. A little bit of data that we have on some of our clients that we work with, so a small plumbing company here in Omaha, Nebraska, Burton Plumbing, decided that they would enroll in Strada Healthcare and that allowed us to look at those who enrolled versus those who did not enroll and look at their healthcare results. I just want to give you a few stats of what we found with those. We found that we decreased emergency room visits per 1,000 members from 17. 4 to 9. 2. We decreased urgent care visits per 1,000 members from 1. 3 to 0. 7. We decreased specialists visits from 387. 4 to 271. 3. Once again, all of this is just through a great delivery mechanism of offering great primary care. I think the IRS proposal puts unnecessary burden on our employers and our patients by calling direct primary a plan, it does not allow them to use HSA, but more importantly, then, for a company such as Physicians Mutual here in Omaha, would love to have all of their employees signed up with Strada. The problem is that they are very invested in using HSAs with their employees and therefore they can't do that and cover the direct primary care charge, or they are then sponsoring two plans. So because of that, they are very limited then in being able to participate in this. So, we would strongly oppose this. I tried that was all outlined in the letter that I submitted and I am happy to take any questions you would have.

MR. MORIARTY: Thank you very much. Questions from the panelists? Okay, and we will move on to Kathryn Berge.

MS. BERGE: Yes, that is me. Thank you so much.

MR. MORIARTY: Thank you for being here today.

MS. BERGE: Good afternoon and thank you for the opportunity to participate in today's public hearing on the IRS proposed bill regarding certain medical care arrangements, including healthcare sharing ministries and direct primary care arrangements. My name is Katy Berge and I service the federal government (inaudible) for the Leukemia & Lymphoma Society focusing on access to care issues. LLS is the world's largest voluntary health agency organization dedicated to the needs of blood cancer patients. Each year over 150,000 Americans are newly diagnosed with a blood cancer, which is approximately 10 percent of all new cancer diagnoses across the United States. Today there are more than 1. 4 million people living with blood cancer. The LLS mission is to cure Hodgkin's lymphoma, leukemia, and myeloma to improve the quality of life for our patients and their families. To that end, LLS provides blood cancer research, provides free information and support services to our patients, and advocates for public policies that address the needs of those that we represent with blood cancer. I join today to the call today in service to our commitment to speak out against policies that have the potential to hurt blood cancer patients or anyone who is, or may become sick in the future. LLS is deeply concerned that the rule proposed by the IRS would, if finalized, encourage enrollment in substandard products that fail to cover affordable comprehensive care. We therefore join you today to express our strong opposition to the proposed rule and urge the IRS to withdraw it. In the draft rule IRS proposes to define fees to healthcare sharing ministries for payment for medical care or medical insurance making those fees tax deductible as qualified medical expenses. However, as we have heard over and over today by a variety of different participants in the call, healthcare sharing ministries are not insurance and as such, they offer no guarantee of payment and have the ability to cap coverage at amounts that would not sufficiently shield patients with serious diagnoses, such as blood cancer, from financial harm. Because these products are not insurance, they are frequently not subject to state or federal regulations. The number of individual enrollments is poorly understood.

However, we do understand through self-reporting to other avenues, including some of the associations that have testified here today, that existing enrollment is approximately 1. 5 million individuals across the country. This is compared to fewer than 200,000 less than a decade ago. This causes particularly concern to LLS because healthcare sharing ministries state plainly that they do not offer health insurance, and thus no guarantee of high quality affordable coverage. Furthermore, healthcare sharing ministries consumers have often struggled to access and receive the coverage for the benefits that they have been promised. Ministries have been subject to numerous complaints since their inception in the 1990s, most relating to the lack of coverage in health services, non-payment of covered benefits and financial fraud. Designating healthcare sharing ministries as insurance as the IRS proposes, while not regulating them as such, would give a false sense of security to consumers and exacerbate confusion. Many companies selling healthcare sharing ministries employ models that closely mimic the structure of traditional insurance products, including references, as Stephanie mentioned in her comments, like provider networks, levels of coverage, preauthorizations, and claims processing. These types of terms are confusing for consumers who many not be aware that they are signing up for a product that is not in fact health coverage and is not, therefore, comprehensive. For example, Christian Healthcare Ministries, a company that sells healthcare sharing ministries, ask members to pay monthly shares and based on their chosen participation level, plans vary and use metal tiers like gold, silver, and bronze. These range from $78. 00 a month for an individual on a bronze plan to $515. 00 for a family on a gold plan. These shares effectively amount to premiums. Members will also pay for un-sharable amounts that are attend to deductibles and by identifying the products by a metallic level, this organization mimics the Affordable Care Act, creating consumer confusion. These similarities can lead and confuse consumers causing (inaudible) products that do not offer similar patient protections as those offered on the ACA market places. These unregulated products are also not subject to keeping consumer protections, or state or federal oversight, as we have already mentioned. This results in two primary consequences. The plans are fully committed legally in practices that threaten the financial well-being of patients and consumers and when individuals are enrolled and then attempt to access the benefits, patients and consumers often have no avenue for legal recourse. Consumers are left to hope that authorities in their states will take action on behalf of a broad group of consumers. In fact, just last month, the Iowa Division of Insurance filed charges in connection with two healthcare sharing ministries that were operating in the state as unauthorized issuers. The release noted that both companies are under investigation for utilizing unfair methods of competition and deceptive marketing practices during the operation and sell of their products. Most importantly, the Iowa Insurance Division spokesperson noted that "products offered by healthcare sharing ministries are not insurance and there is no guarantee that medical costs will be paid. " Given the record of healthcare sharing ministries in failing to meet the needs of patients, their self-description that they are not insurance, the history of fraud, and their use of confusing or misleading marketing packets, all that strongly urges the IRS to withdraw its proposal to subsidize healthcare sharing ministries with federal tax deductions and instead pursue other opportunities to provide affordable high value coverage to patients. Thank you so much for this time today. I appreciate any questions you have.

MR. MORIARTY: Thank you. Any questions for Katy Berge from the Panel? Then let's move on to Kent Flanagan, our next speaker. Kent, are you here? Okay, in that case, you will circle back to a couple of speakers we missed originally. Jay Keese are you ready?

MR. KEESE: Yes, can you hear me John?

MR. MORIARTY: I can hear you just fine. Glad you hung around.

MR. KEESE: Yes, thank you very much and it is kind to bat cleanup because hopefully we can answer some of the questions that have been raised here. But I want to start by thanking you for the opportunity to testify and for all the hard work that went into this hearing and the proposed rule.

As I said, Jay Keese, Executive Director of the Direct Primary Care Coalition. And the coalition was created by the founders of the DPC practice model. Primary care physicians, associations, employers, and patients who support the advancement of policies to give Americans better access to high functioning, affordable, preventative and primary care services.

These are delivered by a trusted physician who actually knows the patient who can be that persons guide through the rest of the complicated and expensive healthcare system. And we really appreciate the administration's efforts to propose rules to treat expenses related to direct primary care or DPC agreements or arrangements as eligible medical expenses under 213(d). Pursuant to the President's executive order, of course.

However, there are some issues we have with the definitions for direct primary care used by IRS in the proposed rule. We feel that they are incorrect and still treat most DPC agreements today as coverage like a group health plan, insurance or other coverage. And this obviously makes an individual ineligible to fund a health savings account or HSA.

A DPC agreement is not coverage or insurance. It's an agreement to provide good prevention and basic primary care services. And a DPC agreement is outside of coverage by design. As such, to address the executive order's intent to expand DPC to individuals with HSAs, the rule really needs to further address the key regulatory barrier keeping individuals with HSAs from having a DPC agreement which is the HSA eligibility rules we've been discussing under 223(c).

And I would point out that the executive order doesn't directly point to this but I think it's clear that the two as has been testified earlier are intimately linked both in the rule through the narrative in the rule and in the law. 223(c) pointing back to 213(d).

So, we believe IRS needs to take a look at the states for an appropriate definition of DPC and other federal statutes. So, over 30 state laws and regulations define DPC agreements as contracts to provide medical services for prevention and primary care, not health insurance or a health plan. And therefore are not subject to state regulations under as health insurance or health coverage but they are regulated like any other provision of primary care by state boards of medicine.

DPC agreements are defined in three main parts in most state laws. One, as I said, DPC agreements are contracts for medical services and not regulated as insurance products or health coverage. Two, compensation for these services is by the way of a periodic fee paid for by an individual, an employer or another payor paying for that benefit on behalf of an individual and it's paid for outside of insurance coverage. And three, no third parties are ever able to be billed for any medical services that are already provided under the terms of the DPC agreement, so no double dipping.

The Affordable Care Act also correctly defines DPC. In the rules promulgated by HHS under section 1301(a)(3) of the ACA, HHS defines direct primary care as providers not insurance companies consistent with the Washington State Direct Practice Act. This is an appropriate definition for DPC agreements.

DPC agreements are not high deductible health plans nor do they provide a service covered by any high deductible health plan. HDHPs cover a very minimal set of primary care screening services. They do not cover advanced primary care aimed at preventing more complicated diseases like DPC.

DPC agreements provide care in a patient's choice of a virtual setting, by phone or internet or a physical setting. They offer same and next day appointments, much better access to primary care. And HDHPs do not provide first dollar coverage for treatments for diagnoses made in the primary care setting which are ultimately aimed at further preventing disease and more complicated conditions.

DPC agreements by their very nature, by their very definition provide these services. And primary care but its very nature is preventative in nature to prevent the use of further conditions downstream in the healthcare system.

If you follow the DPC definition set in state laws in the ACA, you should conclude that DPC agreements do not provide coverage nor do they provide any coverage for services already covered by any HDHP. And clearly a DPC agreement is not an HDHP. DPC agreements are outside of insurance by design and, in fact, again are used to prevent or mitigate the need to use coverage by keeping patients in the primary care setting.

Perhaps industry and regulatory practices correctly define DPC as these contracts for prevention and primary care services. If IRS just follows current standards, IRS should find that DPC agreements are qualified as primary care expenses, health expenses under 213(d). And that DPC agreements do provide preventative services which are exempt from the current restrictions facing individuals who fund HSAs under section 223(c).

Now I point out that IRS has recently shown flexibility in their 223(c) definitions which is something we really appreciate. Notice 2020-15 demonstrates the IRS's authority to grant regulatory flexibility on 223(c). It allows that a high deductible health plan under 223(c) will not fail to be an HDHP if it provides COVID-19 treatment or testing with or without the deductibles.

This ensures individuals will still be eligible to fund an HSA if they have a benefit which provides this first dollar coverage of COVID testing or treatment and that taxpayers' contributions may still be made on behalf of these individuals by their employers. IRS should use the same authority it used to issue guidance clarifying that DPC agreements are not disqualifying coverage under 223(c).

MR. TACKNEY: Just to clarify, a lot of our COVID relief is exactly that, relief. So, I don't think the authority is necessarily the same. On that one point, I just wanted to point that out.

MR. KEESE: Yeah, sure. And —

MR. TACKNEY: And (crosstalk) for DPC.

MR. KEESE: Yeah. So, I mean, I think it shows both Congress's intent and the ability that the IRS has with an existing statute to show flexibility about definitions within 223(c) of what services are and that gets back to 213(d). But again, to point this out, section 3701 of the CARES Act creates this temporary exception which we hope becomes a permanent one under 223(c) for telemedicine services which DPC agreements already provide. And I think this provision in the CARES Act demonstrates congressional intent that IRS does have the flexibility to make some of these changes.

So, we're happy to have dialogue with you on that and appreciate your point of view. I've referred proposed rule request comments on whether non-physician providers may provide services in an eligible DPC agreement under these rules. I would say in most states they do and we do not think that the rule needs to address this issue.

Regardless of your point, of your opinion of whether, you know, doctors and mid-level providers are trained differently, this issue should clearly be left to state medical licensure laws or state. Both state and federal rules currently permit practitioners other than those licensed as MDs and DOs to provide primary care and prevention services. We urge IRS not to limit the tax treatment of DPC agreements just to MDs or to DOs but to follow the existing rules in the state and federal guidelines that are already there. Again, use current practice, use current standards and you'll find your way there and we're happy to provide more color on this later.

MR. MORIARTY: There are two minutes remaining.

MR. KEESE: Finally, I can't finish without saying how much we appreciate the clarification in the rule that DPC agreements are compatible with HRAs and FSAs. We need to complete the job and make sure that they're compatible with HSAs. We know that DPC agreements were not around when the statute was written and we do believe that IRS has the flexibility to adapt for change when the system has adapted for change to allow very, very good new practice model to thrive and grow. Which is currently being hampered by the inability to provide these great services to folks just because they happen to have an HSA.

You can get DPC through Medicare, even through Medicaid in some circumstances, through private health plans, on your own as individuals. The only class of people that are currently not able to do it are people who happen to have an HSA and that's fundamentally unfair.

We also would like to mention in closing that primary care services as you have defined them in the rule citing Social Security Act 1833(x)(2)(b) are appropriate and we believe they provide the appropriate definition for primary care providers. So, thank you very much and again, happy to take any further questions.

If I actually have a moment, some clarity in the question asked before about the nature of the fees, how we come up with the fees. You know, and some explanation that was given was spot on there but many DPC providers actually age band or age rate their fees. For example, $60 per month for people under 50, $75 per month for those between 50 and 65. Maybe $100 for those over 65.

It's a good practical measure to account for utilization and acuity.

So, rather than charging based on health status which many of the state laws don't allow and conscience would not permit, they simply upfront state what the fees are for different range of ages. But some just provide a flat fee for everybody because it's a low fee. And fundamentally, primary care when delivered outside of coverage like it is in DPC, is affordable and can be done at an affordable price that an employer or an individual can afford.

And again, we would like the HSA to be able to use for individuals to purchase these agreements as well if employers are not paying for them. So, thank you for your time and I look forward to any other questions.

MR. MORIARTY: Thank you very much.

MR. TACKNEY: This isn't really question as much as to make sure everybody understands. A reminder that this is a 213 and not a 223 regulation (inaudible). But more importantly is to stress that for me and all of my colleagues, we are working with whatever statutory boundaries we have. So, I don't want anyone interpreting anything about our particular views about the efficacy or potential for DPCs or healthcare sharing ministries or anything of that nature.

At least in my world with the HSAs and other aspects of employee benefit regime, you know, we are bound by the statute. We have to figure out how the statue pieces come together. So, I know we've had a lot of pros and cons in discussion but I just want to let folks know, none of it from us is intended to necessarily reflect views on that aspect of either of these arrangements. Thanks.

MR. KEESE: I'll just comment very quickly on that. We get that but and we understand that and are working to try to change that legislatively. But again, I think a simple review of your definitions within the law that apply to 213(d) would apply to 223(c) as they are linked in the rule that that you've proposed there. So, thank you for that clarification and we appreciate it.

MR. MORIARTY: Thank you very much. Our next speaker, Melissa English-O'Brien. Are you with us?

MS. ENGLISH-O'BRIEN: Yes, I am here, thank you. Can you all hear me okay?

MR. MORIARTY: I can and let me — well the phone has stopped ringing so I'm no longer the problem. Please proceed.

MS. ENGLISH-O'BRIEN: Oh good. Well, I'm hiding in my basement from my children right now so hopefully I don't get interrupted either. So, I am the regional relationship director of Northern Hospitality. We're a hospitality management company that's based in Portland, Maine. And I've been a newly — a new member of a healthcare sharing ministry for the past six months.

And before finalizing the proposed regulation, I urge the IRS to remove part four of the healthcare sharing ministry definition which only recognizes those HCSMs that were founded before the December 31, 1999 date. Which limits viable healthcare options for many individuals instead of expanding them.

My group, the Northern Hospitality Group, has traditionally provided health insurance to its employees over the past several years and we've experienced drastic premium increases as many have spoken about too on this call. Two years ago, we had increases of 18 percent, last year it was 24 and then this year we were faced with a 30 percent increase at our annual enrollment period.

And we found in our research that the marketplace really had few options for us to decrease that overhead. So, in addition to the usual carriers, we started exploring non-insurance alternatives, including the healthcare sharing ministries. However, what we found was that many of those more established were not a great fit for the diverse team that we have. There were some restrictions to memberships because of particular faith-based restrictions and some excluded people and their dependents based on them being in the LGBTQ community.

And so, therefore we decided to offer our associates a health reimbursement account for those that wanted to maintain that traditional health insurance. And found that those that didn't when they were provided with the information and terms of what was available to them, they joined some of these newer HCSMs and especially those that were uniting its members based on ethical as opposed to religious principles and accepted those individuals with these diverse backgrounds and lifestyles.

And after learning how to become more actively engaged in their healthcare, our employees who chose that route have had a really positive experience with their membership. And since they are so reasonable, we've even had people, you know, because of the COVID crisis and having to do some furloughing and layoffs in our industry, they've maintained those memberships which I think further promotes that economic mobility.

This would have been really difficult to achieve had those employees been part of a traditional healthcare plan going into this crisis. And while I applaud the fact that the proposed rule would allow for the integration of qualified HCSMs with health reimbursement accounts allowing for the use of tax advantaged funds to pay for certain memberships, I urge the IRS to expand the definition to include those that were created after 1999.

Otherwise, that restriction would create an arbitrary but meaningful distinction amongst our employees based on the religious beliefs or other lifestyle status who could use that tax advantage dollars for their HCSM membership and who could not. And additionally, many of our employees who would not be able to take advantage of the tax advantage status, as many do not qualify to join an HCSM that claims to meet the '99 status. It would leave many employees without any of that relief.

We're moving that provision will give equal treatment to all HCSMs instead of granting preferential status to a few ministries and allow a broader range of individuals to benefit from favorable tax treatment of those entities. The '99 provision also restricts competition and limits the effectiveness of the free marketplace.

If the proposed rule is enacted as it is currently written the new healthcare sharing ministries will be decentivized from launching and will be disadvantaged if they do not enter the market. And given how satisfied I have been as well as many of our associates have been with our HCSM forms after '99, I'm confident that other similar organizations created in the future would have the potential to serve these diverse communities.

These organizations are a good solution for many of those in need of ways to address large medical expenses and the IRS should encourage the growth and innovation in this sector. This provision would provide a level playing field and ensure that the healthcare sharing ministry ecosystem can continue to innovate and expand medical cost-sharing as a feasible option for all Americans. Especially as healthcare concerns rise during this COVID-19 pandemic. And that's it and thank you so much for your time.

MR. MORIARTY: Thank you very much. I appreciate the —

MR. FLANIGAN: Hello, Clint Flannigan. Just letting you know that I'm available for the queue.

MR. MORIARTY: Excellent. I think you're the next one to go after William Short. William, are you with us?

MR. SHORT: I'm here, can you hear me?

MR. MORIARTY: Yes. Almost to the end. Thank you.

MR. SHORT: I had difficulty with that earlier, but thank you for the opportunity to provide testimony today regarding the proposed rule, "Certain Medical Care Arrangements." My name is William Short. I'm the CEO of Accresa, a company located in Texas. I'm a member of the Board of Director of the Health Savings Account Council at the American Bankers Association. The HSA Council represent approximately 94 percent of all health savings accounts in the U.S. And I'm testifying today as a representative the HSA Council.

Under the definitions proposed in the rule most direct primary care arrangements would be treated insurance, which would make individuals participating in such an arrangement ineligible to contribute to the health savings account. The HSA Council believes there is a regulatory pathway to change this and such a pathway lies in finding the appropriate definition of direct primary care arrangements.

The HSA Council recommends that direct primary care arrangements be considered preventative care under the HSA statute. There should be no disputing that physicians participating in direct primary care arrangements are providing medical care under section 213(d)(1)(A) of the Internal Revenue Code. For reasons discussed later in my testimony, the HSA Council believes direct primary care arrangements should not be considered medical insurance under section 213(d)(1)(D) of the Code.

The HSA Council agrees with your statement in the proposed rule that regardless of the characterization of and arrangement as medical care under 213(d)(1)(A) or medical insurance under 213(d)(1)(D), an amount paid for the arrangement will qualify as a medical expense under section 213. The HSA Council urges you to use your regulatory authority to expand the definition of preventative care under the agency statute, Section 223 of the Code, to include direct primary care arrangements.

After reviewing the list of preventative services on the Affordable Care Act and as described in the IRS Notices 2004-23, 2004-50, and 2019-45, virtually all of these services, such as annual examinations, well-person care, immunizations, and screening services are provided almost exclusively by primary care providers. These services also would be provided by primary care physicians participating in direct primary care arrangements.

(inaudible) direct primary care arrangements should also be considered permanent care services because by their nature, primary care services prevent unnecessary emergency room visits and hospitalizations, as well as visits to specialty care physicians by self-diagnosed patients. To the extent the primary care practitioners also treat sick patients, it is usually at the onset of an illness, disease, or a condition where the care is intended to prevent further progression or complications, similar to how specific additional services for individuals with chronic conditions are now recognized under IRS Notice 2019-45.

As mentioned in previous testimony, a recent well-known study for the Society of Actuaries shows that enrollment in direct primary care arrangements is associated with the reduction in overall demand for healthcare services outside primary care. No one found that direct primary care arrangements were associated with statistical significance; 12. 64 percent reduction in overall demand for healthcare services and a 40. 51 percent decrease in emergency department usage after controlling for differences in age, gender, and health status.

Direct primary care was also associated with a lower in-patient hospital administration rate of just under 20 percent, although the difference was not statistically significant due to the small number of admissions during the two years analyzed.

Including direct primary care arrangement in the definition of early care will alleviate the two major programs for health savings account that are not being resolved by the proposed rule. The first problem is that direct primary care arrangements are disqualified coverage for HSA eligibility. Because the rule considers direct primary care arrangements as medical insurance or coverage that does not apply minimum deductible equal to or exceeding the statutory minimum deductible for an HSA-qualified insurance plan. Any individual that participates in a direct primary care arrangement cannot be eligible to contribute to a health savings account even if they are otherwise covered by an HSA-qualified insurance plan.

Classifying direct primary care arrangements as medical insurance is also in direct conflict with more than 30 state laws and regulation that define direct primary care arrangements as contracts for medical services instead of insurance or group health plans. A common definition for direct primary care arrangements used by most state laws include three main tenets.

First, the direct primary care arrangements are for primary care medical services and are not regulated insurance.

Second, compensation for services provided in such an arrangement comes in the form of periodic, usually monthly fee paid for by an individual, an employer, or other payer.

Finally, no third parties billed, again, for any medical services already provided on the terms of the arrangement.

Likewise, the regulations promulgated under Section 1301(a)(3) of the Affordable Care Act by the U.S. Department of Health and Human Services state that direct primary care practices are providers, not insurance companies. Further treatment under direct primary medical homes (phonetic) under HHS regulations published in 2012 state that a direct primary care management is an arrangement where fees paid by an individual or on behalf of an individual directly related to medical home for primary care services consist with the program's status in Washington.

The second problem of health savings accounts is that the HSA funds may not be used tax-free to pay medical insurance premiums unless the individual is receiving federal or state unemployment compensation or has COBRA continuation coverage or the individual is paying premiums for Medicare coverage or long-term care insurance.

Another way a direct primary care arrangement is different from the insurance, the lack of third-party billing and claims processing. There are also no co-pays, deductibles, or co-insurance in which our other features are common with insurance. Essentially, direct primary care arrangements are prepayments for a limited set of services that include preventative care services and early intervention at the earliest stage of illness, diseases, or conditions.

As the payer world increases to look to bundle services and to groups associated with fixed payments to realign a sense to provide the best value, it would be extremely unfortunate if tax policy only recognized fee-for-service payments as medical care.

During the coronavirus pandemic it is more critical than ever to take into consideration the great public need to improve access to primary care and prioritizing personal health as an essential element in rebuilding the economy of our nation. The HSA Council urges you to embrace the spirit of flexibility recently demonstrated through Notice 2020-15 with quality efforts to extend this flexibility well in advance of the congressional actions on the CARES Act.

We hope that you will act in a timely fashion so that individuals enrolled in HSA-qualified health plans can take full benefit of the opportunity to have a personal relationship with a physician in this unique time of the pandemic.

We appreciate the IRS and the Treasury Department's considerations of these comments and stand ready to engage in further discussion to help improve this important regulation.

Thank you for the opportunity to comment today. Thank you.

MR. TACKNEY: I have a quick question because we've struggled with this, the 2020-15 that you repeatedly mentioned. If the idea of preventive is simply that a treatment is preventive if it stops a further, more expensive course of treatment, what medical treatment other than that preventing death wouldn't be preventive?

SPEAKER: Well, like in IRS, it's (inaudible).

MR. SHORT: Yeah. I think that it's excellent question. I think earlier the question around, you know, what about this broken ankle? And I'm definitely not a physician by any means, but — and the physicians could speak to this better than I can. But, you know, if you come in with a broken ankle and you don't treat it because it's not preventative or whatever it may be, you may be actually increasing the odds of a more serious condition, such as maybe a blood clot of some sort.

And so the definition of preventative or not-preventative in a primary care setting — you know, segment I think everyone would kind of agree that primary care in essence is preventative in all facets in terms of how it's delivering care versus a catastrophic event, such as cancer and (inaudible).

MR. TACKNEY: But other than that I'm not sure what medical treatment, again, under that concept, what medical treatment other than that which would prevent immediate death wouldn't be preventive? I mean, everything I get treated, whether it's in the primary care physician setting or a specialist, is either to prevent me from dying or to prevent some condition from morphing into a more expensive condition. So, we have struggled with that, that alone, what defines preventive or almost everything is preventive.

MR. SHORT: Well, it's almost —

MR. TACKNEY: If you want to provide us any more on that one, that would be great. I don't necessarily mean to put you on the spot.

MR. SHORT: No, it's a great question. Maybe the way that I think of it being a (inaudible) payment guy is how it's paid for, but also the difference between catastrophic and non-catastrophic. And, you know, I think everyone agrees that you wouldn't use car insurance to pay for gas or oil changes. And so when we talk about direct primary care I think we think of the same thing, how do we develop a payment mechanism sufficient for people to take care of their routine but it does fall into that (inaudible)?

MR. TACKNEY: Yeah, right, but is it apples and oranges? Because you also don't pay a monthly fee to a garage and say if I keep popping my tires and have wrecks, you'll repair it as long as it doesn't — you know, isn't a total situation. So, I don't think that it's necessarily comparing primary care physicians to routine maintenance when they, in fact, deal with also certain conditions, treatments, and things that will get worse is unnecessarily apples to apples.

I look forward to further discussions and, you know, just know that this is a particular issue we have struggled with for a very long time. When you actually have a condition, how is treating it preventive? And that's always — you know, we're open for further discussions. I just wanted to let you know what we've been struggling with.

MR. SHORT: I appreciate it. Good point.

MR. TACKNEY: Thank you.

MR. MORIARTY: Any further questions? If not, our last speaker scheduled for today is Clint Flanagan. Clint, are you ready to go?

DR. FLANAGAN: Thank you. Can you hear me okay?

MR. MORIARTY: Can hear you just fine.

DR. FLANAGAN: Great, I appreciate everyone's time. Good afternoon. I'm Dr. Clint Flanagan. I'm a family medicine physician here in Colorado and have been a family medicine doctor for nearly 20 years. And I am a retired emergency room doctor. And I guess I'll go right to that question that was discussed prior to my testimony with a gentleman from the IRS and William Short.

So, I think I could speak to what we do in primary care versus what is done in the emergency room or what is done in a catastrophic circumstance because I've been doing this for many years. And the short is, you know, as an ER doctor I'm pulling people out of the cliff, trying to help them, and primary care I'm the tour guide, helping people along the way could be a simple example.

The other example you could use is, you know, we're helping people with a fire in the emergency room and in primary care we're installing smoke alarms. So, everything we do in primary care is preventative.

And when you see that primary care doctor for whether it's a sore throat, a headache, whether it's diabetes management, whether it's obesity, depression, whether it's a knee injection for some osteoarthritis, you know, we're preventing things from happening. And when you see him or her it's so important because if you're not seeing him or her, you're eventually going to potentially be seeing me, the ER doctor. And when you see me, the ER doctor, it's much more expensive and it's a catastrophe. A simple urinary tract infection turns into pyelonephritis, which turns into sepsis, which turns into an ICU stay.

So, hopefully, that gives a little insight there. I'm happy to dive deeper. And I'll get into my testimony now, my further testimony that was planned, let's say.

So, I've been on the Steering Committee of the Direct Primary Care Coalition for many years. And as I mentioned, I've been here in Colorado for around 20 years as a physician. For over a decade I've owned and worked in fee-for-service primary care practices. And prior to that I was employed in fee-for-service primary care practices with a number of locations here in Colorado.

Over a decade ago, understanding all the barriers that patients had to access in the traditional fee-for-service primary care system, we created a company called Nextera Healthcare. The reason we named it Nextera is because we weren't happy with existing era.

At the time, I did not even know what direct primary care was. I just knew we had to do something different to get patients at proactive preventative care. So we said let's do it simple, charge a simple monthly membership fee like a gym membership, and start taking care of people, start taking care of employers. And we really believed that this would be a much simpler, easier healthcare solution for our patients.

This was Colorado's first direct primary care and this was at a time when there were only a few of — a handful of direct primary care physicians across the country. Now there are thousands. Initially, we had a few office locations here in Colorado. Now we have over 30 locations in Colorado, over 70 locations nationwide in our Nextera Healthcare community, and approximately 84 percent of our members — we don't call them patients, we call them members — are employers ranging from small employers of a couple, two or three, employees to school districts and municipalities, firefighters, policemen, to Fortune 500 companies with over 5,000 employees.

As is common in direct primary care practices across the United States, many of our patients currently have high deductible health plan HSAs paired with their direct primary care. Insurance is used for coverage, as we've discussed a bit today. So, it's used for hip surgeries and hospital stays, as it should be. Direct primary care is used for all patient care. And if my patient does need a hip surgery or has cancer or has a circumstance where they end up in the hospital, I'm still their primary care doctor.

And gosh, if they were in a scary circumstance like that, I sure would hope that they would have a primary care doctor to help guide them during one of the scariest times in their life.

We also have many patients and employers at Nextera Healthcare that have health shares. In fact, our company, Nextera, has direct primary care for our employees plus Sedera health share as coverage in case of something catastrophic. So, again, our employees in my company are using direct primary care for all their day-to-day care and then they have coverage in case of catastrophe.

Typically, if you look at that monthly fee for direct primary care, it's been talked a little bit about today, it's approximately $70, give or take, per member per month. So it's oftentimes less than 10 percent of the insurance premium. And as you heard earlier from Debbie Harrison from the Business Group on Health, that insurance premium, that cost for the employee or to the employer is significant: 14-some-thousand dollars per employee per year, which is impacting employers all over the country.

As a DPC physician, I take care of a little over thousand direct primary care members in my personal practice. Many of those members currently have an HSA and they use the HSA to pay for things like their medications. They use it to pay for things like behavioral health counseling. They use it to pay for physical therapy.

I can speak directly to the benefit of direct primary care for both patients and employers. First and foremost, patients have unparalleled access to their direct primary care physician or provider. This convenient access, both in office and through Telehealth, results in a relationship and trust.

And so people call us innovators. Many of us prefer the word restorers. We're restorers of the doctor-patient relationship, something that got lost in the tremendous administrative mess that we currently have in this dysfunctional healthcare ecosystem.

So, we're just restoring something that's pretty old-fashioned. We're just using a different business model that allows for that to happen.

Patients were able to spend 30 to 60 minutes with their doctor. They have unlimited visits and there's no cost per visit, and this allows for significant proactive, preventative care, so taking care of that urinary tract infection rather than it leading to a patient that has a high deductible and doesn't have a primary care doctor and ends up in the ER with sepsis.

So, we're able to focus on patients' lifestyle, talk about their sleep and their nutrition, talk about their exercise and mental health. And truthfully, this is what most doctors want to do. Unfortunately, there's a fee-for-service system getting in the way of that.

So, what us physicians did is we designed a system that works for both patients, but also works for physicians where we don't have to see 30 patients a day. You can see 10 patients a day and we can take care of half of them through Telehealth potentially, meeting them where they're at, whether it's in the workplace or at home with their kids.

If patients have just a high deductible health plan or a consumer-driven health plan, they typically get one preventative office visit per year for their checkup. One preventative visit. Okay? That the insurance plan pays for. Outside of that, they're out of pocket for expenses thereafter with their primary care doctor. So, if they have diabetes or high blood pressure, oftentimes they're not coming in because they know that there's a significant cost associated with that.

So, HDHPs serve as a deterrent to primary care. They're excellent potentially for cancer, so many of us have called them bankruptcy prevention policies, but they're not good for primary care. And there's significant amounts of data that shows that.

With direct primary care, patients have access without cost to preventative care every day of the year, not just one day a year, as you see with a traditional high deductible health plan alone. Patients can take care — I'm sorry, patients' primary care providers can take care of 90+ percent of a patient's healthcare needs.

And when patients have a direct primary care physician, studies show that they see typically 40 to 50 percent less Urgent Care and ER visits, 70 to 90 percent less inpatient hospital stays, 60 to 70 percent less outpatient specialty visits, and at least 50 percent less spent on pharmacy.

MR. MORIARTY: Two minutes remaining.

DR. FLANAGAN: As we like to say at Nextera Healthcare, we're able to take care of nearly all of the patients' needs and we like to keep them on the Nextera Healthcare ranch. Rarely do they have to go off the ranch. And if they do, we help guide them. We help quarterback that care.

As a result, direct primary care patients use their insurance less. So, when you total your car, you should have hopefully State Farm or Farmer's Insurance for that, right? When you have something that's a catastrophe, hopefully you have some type of coverage, be it insurance or be it a health share.

We also have data showing that our direct primary care patients are healthier compared to their counterparts that do not have DPC attached to their insurance plans. By updating the language of what HSAs can be used for, the IRS has the ability to positively impact hundreds of thousands of U.S. citizens and employers with direct primary care and eventually millions.

I sincerely thank you all for the opportunity and the time that I was able to spend today. And I'm happy to answer any questions.

MR. MORIARTY: Thank you very much. Panelists, questions?

Okay, hearing none, that concludes our last speaker and we will finish up for the day. I want to conclude by thanking everyone for taking the time and effort to talk with us today. We do appreciate your input. It is valuable and we will certainly think about it and take it from here.

This is an important process and thank you. So, without (inaudible) —

OPERATOR: That concludes today's teleconference.

MR. MORIARTY: — we are concluding, yes.

OPERATOR: Thank you for using Event Services. You may now disconnect.

(Whereupon, at 5:14 p m. , the PROCEEDINGS were adjourned.)

DOCUMENT ATTRIBUTES
Copy RID