Underwriters Object to Characterization of Direct Primary Care Fees

August 10, 2020

Steven Mnuchin
Secretary
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

RE: REG–109755–19

Dear Secretary Mnuchin and Commissioner Rettig:

I am writing on behalf of the National Association of Health Underwriters (NAHU), a professional association representing over 100,000 licensed health insurance agents, brokers, general agents, consultants and employee benefits specialists. We are pleased to have the opportunity to respond to the interim final rule titled "Certain Medical Care Arrangements,” published in the Federal Register on June 10, 2020.

The members of NAHU work daily to help millions of individuals and employers of all sizes purchase, administer and utilize health insurance coverage. Our expertise lies in the technicalities of health-plan administration and the real-world challenges employers face therein. NAHU members appreciate and support portions of the proposed rule since, in some instances, it will help American business owners and employees access direct primary care (DPC) more efficiently. However, our association also has some significant concerns about how this measure will effectively eliminate DPC access for the millions of Americans with Health Savings Accounts (HSAs). In reviewing this proposed rule, NAHU members have also identified some practical concerns for consumers and employers regarding the proposed treatment of healthcare sharing ministry shares as medical insurance through IRC §213.

Background

The proposed rule concerns medical expenses as defined in IRC §213(a)(1)A-D. One type of medical expense outlined in IRC §213(a)(1)(A) is “medical care” and another is “medical insurance,” specified in IRC §213(a)(1)(D). The proposed rule classifies DPC fees as either medical care or medical insurance, depending on facts and circumstances. Healthcare sharing ministry (HCSM) shares are deemed medical insurance, according to IRC §213(a)(1)(D). Premiums for various government-sponsored health insurance programs also would be considered medical insurance per IRC §213(a)(1)(D).

By classifying different healthcare programs as medical insurance or medical care, or both, the proposed rule would allow employers to reimburse employees for the cost of DPC arrangement fees and HCSM shares under certain circumstances, mainly through Health Reimbursement Arrangements (HRAs). Also, the rule allows individuals to deduct DPC fees, HCSM shares and specific government-sponsored healthcare program costs medical expenses via their tax returns.

Brokers who work exclusively with the type of employers most likely to be affected by the proposal have contributed their insights about how it will impact the clients they serve. NAHU hopes this information will be helpful to you as you craft final rules. For organizational purposes, we divided our comments on this proposed rule into two main sections: One section addresses the treatment of DPC arrangements and the other covers HCSMs. We appreciate your consideration of our point of view and your willingness to solicit opinions from all stakeholders.

Section One: Direct Primary Care Arrangements

The Value of DPC Arrangements

Effective primary care is well-known to be one of the critical components of overall personal wellness. The DPC model has gained popularity over the past 10 years with both individual patients and employers interested in helping employees gain access to higher quality-care and a patient experience that exceeds what is typically available through traditional primary care practices. Since DPC providers maintain a much smaller patient load than the average primary care practice and have a much lower administrative burden due to the elimination of third-party reimbursement, they can spend more time on patient relationships and service. DPC providers focus on each person's comprehensive health so they can often eliminate the need for unnecessary tests and better target the need for specialty care and services. Patients in DPC practices typically have better overall healthcare utilization rates and less frequently use the emergency room or experience inpatient hospital admissions.

The Trump Administration clearly understands the value that access to DPC arrangements brings to American healthcare consumers. The impetus for this proposed rule comes directly from President Trump, who just over a year ago issued an executive order instructing the Treasury Department to:

“propose regulations to treat expenses related to certain types of arrangements, potentially including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses under section 213(d) of title 26, United States Code.”

That is why NAHU members cannot believe that it is the true intent of the Trump Administration to prevent all people who have either group or individual HDHP coverage paired with an HSA to access DPC arrangements. However, as we outline in our comments below, the proposed rule does just that, and has the potential to hamper people who no longer have an active HDHP policy but are still Health Savings Account-holders. To remedy this fatal flaw in the proposed rule, we urge you, to simply specify any final regulation that DPC fees are never to be treated as payment for medical insurance as described in IRC §213(d)(1)(D). Instead, they should only ever be considered only as a payment for medical care, as defined in IRC §213(d)(1)(A).

Definition of Direct Primary Care

The proposed regulations define a "direct primary care arrangement" as a contract between an individual and one or more primary care physicians under which the physician or physicians agree to provide medical care (as defined in §213(d)(1)(A)) for a fixed annual or periodic fee without billing a third party.

From NAHU's perspective, the definition of “direct primary care arrangement" proposed in the regulation does not truly represent DPC arrangements as they exist today. Currently, there are three basic models that American healthcare consumers who choose to build a long-term relationship with a primary care provider use to access care. One is a traditional primary care provider whose main source of revenue is third-party reimbursement billed through each patient's health insurance issuer. Another is a "concierge provider," who bills a patient's health insurance issuer for payment for services rendered too. However, concierge doctors also charge patients an annual fee (typically in the $2,000 to$3,000 range) for expedited access to the provider. Finally, the DPC model involves a fully independent provider who does not accept any type of third-party reimbursement. Instead, DPC payments all come directly from individual patients or families.

In many cases, a DPC provider charges patients a monthly fee based on their ages and the number of people to be served. Some DPC providers charge patients directly on a fee-for-service basis. DPC providers often use telemedicine and other electronic services, in addition to direct medical care to maintain their patient's overall individual health.

NAHU members believe that this regulation intends to classify the third type of primary care model we describe above as a direct primary care arrangement. Thirty-two states currently regulate such arrangements by using a model law and defining DPC virtually identically. For consistency purposes, NAHU members suggest that the IRS and Treasury Department use the same definition that all of these states all use:

"Direct primary care agreement" means a contract between a primary care provider and an individual patient or his or her legal representative in which the health care provider agrees to provide primary care services to the individual patient for an agreed-upon fee and period of time. A “direct primary care” practice: (1) charges a periodic fee for services, (2) does not bill any third parties on a fee for service basis, and (3) any per visit charge must be less than the monthly equivalent of the periodic fee. A medical direct primary care agreement is not insurance and is not subject to the state insurance code. A primary care provider or agent of a healthcare provider is not required to obtain a certificate of authority or license under this act to market, sell, or offer to sell a direct primary care agreement. (4) To be considered a direct primary care agreement for the purposes of this section, the agreement must meet all of the following requirements: (a) Be in writing; (b) Be signed by the primary care provider or agent of the primary care provider and the individual patient or his or her legal representative; (c) Allow either party to terminate the agreement on written notice to the other party; (d) Describe the scope of primary care services that are covered by the periodic fee; (e) Specify the periodic fee and any additional fees outside of the periodic fee for ongoing care under the agreement; (f) Specify the duration of the agreement, any automatic renewal periods, and require that no more than twelve months of the periodic fee be paid in advance. Upon discontinuing the agreement all unearned funds are returned to the patient; (g) Prominently state in writing that the agreement is not health insurance. (5) Acceptance or discontinuance of patients: Direct primary care practices may not decline to accept new direct primary care patients or discontinue care to existing patients solely because of the patient's health status. A direct practice may decline to accept a patient if the practice has reached its maximum capacity, or if the patient's medical condition is such that the provider is unable to provide the appropriate level and type of primary care services the patient requires. So long as the direct primary care practice provides the patient notice and opportunity to obtain care from another physician, the direct primary care practice may discontinue care for direct primary care patients if: (a) the patient fails to pay the periodic fee, (b) the patient has performed an act of fraud, (c) the patient repeatedly fails to adhere to the recommended treatment plan, (d) the patient is abusive and presents an emotional or physical danger to the staff or other patients of the direct practice, or (e) the direct primary care practice discontinues operation as a direct primary care practice.

In the proposed rule, the Treasury Department and the IRS note that they understand that other types of medical arrangements between health practitioners and individuals exist that do not fall within the definition of direct primary care. For example, an agreement between a dentist and a patient to provide dental care or an agreement between a physician and a patient to provide specialty care would not be a direct primary care arrangement but might be medical care under §213(d). However, NAHU members do not believe that such arrangements as described above are common today. We suggest a definition flexible enough to remain evergreen as the marketplace grows and changes. The definition referenced above, used in the vast majority of states today, would meet this standard.

Definition of Primary Care Physician

The proposed regulations define "primary care physician" as an individual who is a physician (as described in §1861(r)(1) of the Social Security Act (SSA)) who has a primary specialty designation of family medicine, internal medicine, geriatric medicine or pediatric medicine. The Treasury Department and the IRS requested comment on the appropriateness of this definition. You also ask if expansion is warranted to include other types of providers, such as licensed nurse practitioners.

NAHU members support a broader definition of primary care providers to encapsulate providers such as physician's assistants, nurse-midwives, OB-GYNs and nurse practitioners. However, for practical purposes, the most crucial consideration is what each state considers a "primary care physician" for licensing purposes. No matter how expansive a federal definition might be, if the state licensing board does not find a practitioner to be a "primary care physician" or "primary care provider," then patients in that state cannot access their services through any DPC arrangement. Rather than crafting a federal definition that will be meaningless in many jurisdictions, NAHU members suggest that the rule reference each state-level definition of a primary care provider.

Classification of DPC Arrangement Fees as Either Medical Care or Medical Insurance

According to the preamble of the proposed rule, the Treasury Department and the IRS believe that direct primary care arrangements, as defined in the proposed regulations, may encompass a broad range of facts. The proposed rule notes that “depending on the facts, a payment for a direct primary care arrangement may be a payment for medical care under §213(d)(1)(A) or, as discussed below, may be a payment for medical insurance under §213(d)(1)(D).”

NAHU members believe this assessment is inaccurate and that it is never appropriate to deem DPC fees as payment for medical insurance under IRC §213(d)(1)(D). The suggestion that DPC arrangements encompass a broad range of varying facts that would warrant different classifications based on circumstances is erroneous and in no way reflects the way DPC practices work today. In the current healthcare marketplace, most people find and join DPC arrangements entirely independently. Others learn of DPC practices through their workplace. Some employers want to ensure that all employees (regardless of group health plan eligibility) and their families enjoy optimal overall health, so they connect employees with various DPC practices in their area. At their discretion, employees may independently contract with a DPC provider as a source of medical care. If they do, the employer might provide some type of taxable reimbursement or incentive to the employee. Medical care through the DPC practice might supplement any other medical care a person might receive through third-party medical insurance, or it might not. It all depends on the person. However, in every DPC arrangement, any contract is made directly by an individual patient or family, paid for and controlled by the patient, and never involves any type of risk-sharing. Therefore, DPC membership fees or payments for services rendered never meet the standard of “medical insurance.”

As the preamble of the proposed rule notes, IRC §213(d)(1)(D) does not even define the term "insurance." However, when a federal statute uses a word without an accompanying definition, its meaning must be determined from the ordinary use of the term, in conjunction with any guidance found in the relevant statute and its legislative history. The legal history and supporting law related to IRC §213(d) never contemplated DPC arrangements, particularly as they exist today. However, the ordinary use of both the term insurance and the ordinary and prevailing view that DPC arrangements are not medical insurance is evident. NAHU members submit:

• The very essence of medical insurance coverage is to mitigate a patient's financial risk in the event of a severe health event. However, DPC arrangements never involve any transfer of risk between any party. DPC providers simply offer patients medical care services for a monthly, direct-pay membership fee or on a fee-for-service basis.

• Merriam-Webster's Dictionary defines insurance as: “1.a: coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril; b: the business of insuring persons or property; c: the sum for which something is insured. 2: a means of guaranteeing protection or safety.” A DPC membership arrangement involves absolutely no indemnification, risk-sharing or guarantees.

• The proposed definition of a DPC arrangement in this draft regulation acknowledges that there is no third-party reimbursement or risk-sharing involved, but merely medical care. It labels a DPC arrangement as "a contract between an individual and one or more primary care physicians under which the physician or physicians agree to provide medical care (as defined in §213(d)(1)(A)) for a fixed annual or periodic fee without billing a third party.”

• Thirty-two states consider DPC to be a medical service rather than a health plan or any iteration of medical insurance. These states specifically exempt DPC practices from state-based insurance regulations. The other states are silent on the issue, and therefore do not consider DPC arrangements to be medical insurance either.

• The federal Department of Health and Human Services shares the view expressed by the majority of states, noting in the March 12, 2012, final exchange rule that “direct primary care medical homes are not insurance.”

• In the HRA section of this proposed measure, your Department and Agency make it clear that when it comes to health insurance for HRA-integration purposes, a DPC membership is not proof of other comprehensive health insurance. To qualify as an HRA, an employer will have to offer a traditional group health insurance plan and can simply use HRA funds to reimburse DPC fees as a qualified medical care expense as provided in §IRC 213(d)(1)(A).

Based on all of these ordinary and current uses of both the term "insurance" and "DPC arrangement," NAHU members urge the Treasury Department and the IRS to amend the proposed treatment of DPC fees. In the final rule, simply specify that, for this regulation, a payment for a direct primary care arrangement will be considered a payment for medical care under §213(d)(1)(A).

Health Reimbursement Arrangements

An HRA, including a qualified small employer HRA, an HRA integrated with a traditional group health plan, an HRA integrated with individual health insurance coverage or Medicare (individual coverage HRA) and an excepted benefit HRA, generally may reimburse expenses for medical care, as defined under §213(d)(1)(A). In the proposed rule, the IRS concludes HRAs may provide reimbursements for DPC membership fees.

NAHU strongly supports how the proposed rule explicitly allows employers to use HRA funds to reimburse employees for DPC fees as qualified medical expenses. DPC is a very cost-effective way to improve the quality of an individual's primary care experience. For the employer group plans that can handle the administrative issues associated with offering HRA coverage and want to utilize that plan design, the rule provides an excellent new care option.

Existing rules establish that HRAs must integrate with another type of comprehensive health coverage or, for an excepted benefit HRA, with an excepted benefit plan. The proposed rule indicates that as a medical care expense, DPC alone is insufficient for this purpose. Therefore, traditional group coverage (or, in the case of a qualified small employer HRA or individual coverage HRA, individual major medical coverage) must be in place as well. NAHU strongly supports this contention.

As we have noted, DPC memberships are not considered health insurance by any state's group or individual health insurance exchange marketplace. Furthermore, 32 states specifically delineate via their laws that DPC may not be regulated as health insurance in their jurisdictions. Instead, DPC arrangements are individually owned membership contracts for medical care services, as described in IRC §213(d)(1)(A), that involve no transfer of risk. As such, they are not sufficient to integrate with an HRA to create comprehensive health insurance coverage.

The IRS's viewpoint regarding DPC fees and HRA integration is consistent with the HHS treatment of DPC as a potential qualified health plan benefit, but not in any way qualified health plan coverage on its own. The preamble of the proposed rules on affordable healthcare exchanges issued by HHS on July 15, 2011, clearly states that "direct primary care medical homes are not insurance." Furthermore, CFR §156.245, titled "Treatment of direct primary care medical homes," explicitly describes DPC arrangements as a potential QHP medical care benefit, coordinated through the risk-bearing QHP rather than a standalone health insurance arrangement.

Health Savings Accounts

Unlike with HRAs, for this rule, the IRS considers DPC to be medical insurance when it comes to qualified high deductible health plans (HDHPs) and HSAs. NAHU members have significant concerns about this characterization of a direct primary care arrangement as medical insurance under §213(d)(1)(D). This classification conflicts with the laws of the majority of the states, existing HHS policies, and traditional marketplace practices nationwide. It also creates an unfair and unlevel playing field between HRAs and HAS-qualified HDHPs. The blatant favoring this regulation creates between two common account-based plans will have perilous implications for the more than 26 million Americans who have HSAs under IRC §223.

The IRS's contention that DPC is medical insurance when it comes to IRC §223 and HSA integration is very unfortunate. The concept of DPC pairs quite well with the cost-saving and personal responsibility components of qualified HDHP coverage combined with an HSA. Many business owners who want to promote consumerism and overall wellness through their health coverage offerings prefer HSA-compatible plans to HRAs. Since HRA funds are purely owned and controlled by the employer, there are no tax advantages or cost savings for employees who make responsible medical choices. Perhaps that's why recent research from the Employee Benefits Research Institute that examined data from 6 million Americans continuously enrolled in health coverage offered through the same employer between 2013 and 2018 found that group HDHP/HSA enrollment more than doubled during that period. Meanwhile, the number of people covered through an HRA has remained level since 2014.

Specifying that DPC memberships and fees are medical insurance as per IRC §213(d)(1)(D) creates several significant issues for otherwise HSA-eligible individuals. This classification would render a person HSA-ineligible. According to IRC §223, to qualify to contribute to an HSA in any month, a person must be covered under an HDHP as of the first day the month. They also must not, while covered under an HDHP, be covered by any other health plan that provides coverage for any benefit covered by the HDHP. By labeling DPC membership or fees as medical insurance coverage rather than just a medical care expense, your Agency and Department would render all people with a DPC relationship HSA-ineligible according to the second qualification standard. If, in a final rule, you simply categorize membership feels as a payment for medical care under §213(d)(1)(A), it would no longer be an issue.

Also in the proposed rule, the Treasury Department and IRS raise issues with the stipulation in IRC §223(c)(2)(C), which provides that an HDHP may provide only preventive care before the minimum annual deductible for an HDHP is met. You conclude in this draft regulation that DPC arrangements typically offer an array of primary-care services and items, such as physical examinations, vaccinations, urgent care, laboratory testing, and the diagnosis and treatment of sickness or injuries. Since your Department and Agency also conclude that DPC arrangements are medical insurance, the rule stipulates that they constitute a health plan or insurance that provides coverage before the minimum annual deductible that is not disregarded coverage or preventive care. Therefore, the proposed rule determines that an individual generally will not be eligible to contribute to an HSA if that individual also has a relationship with a DPC arrangement.

NAHU members find the Department and agency's interpretation that HSAs and DPC memberships are incompatible striking because the Coronavirus Aid, Relief and Economic Security (CARES) Act specifically allows HDHP to consider telemedicine charges before the application of the deductible through December 31, 2021. DPC providers are routinely paid for telehealth services by HDHP issuers on behalf of HSA contributors. How is the IRS permitting this practice (which ensures that millions of Americans have access to quality primary care during the global pandemic) yet disallowing DPC membership in concert with HSAs in this rule?

It is also surprising to NAHU members that the IRS would reject access to a proven means of chronic care management for over 26 million Americans with this proposed rule. The DPC model of preventive care and coordination of care for the whole person allows for better management of chronic conditions. This pathway of care is directly aligned with the principles outlined in Notice 2019-45, which established new preventive care guidelines for qualified high-deductible health plans. It seems strange that the Administration took an entirely different point of view with this measure.

If the IRS and Treasury Department are concerned about how a DPC membership might allow people access to medical care services beyond the definition of preventive care, there is a simple solution. The Medicare Modernization Act of 2003 expressly authorizes the secretary of the Treasury to specify other preventive care services that HDHPs can cover before applying a deductible. Therefore, it would be entirely possible for you to make further amendments to the preventive care definition that applies to HDHPs to include DPC medical care services, as you did in last year's notice.

Alternatively, by merely classifying DPC memberships as only medical care as outlined in IRC §213(d)(1)(A), DPC arrangements could operate as telemedicine services did before the implementation of the CARES Act. In earlier days, employers that facilitated telemedicine service access for employees simply verified individuals covered by an HDHP who contributed to an HSA paid fair-market value for any telemedicine visit until the account holder met their qualified HDHP deductible for the year. When paired with the appropriate classification of a DPC membership, either solution would ensure that over 26 million Americans retain the ability to access quality medical care offered through DPC services.

Beyond that, the proposed rule notes that only when an individual is covered by a DPC arrangement that does not provide coverage under a health plan or insurance or solely provides for disregarded coverage or preventive care would they not be precluded from making HSA contributions. Examples given in the proposed rule include DPC arrangements related to specified treatments of an identified condition or DPC memberships that only cover an annual physical examination. NAHU members want to make sure that the IRS and Treasury Department are aware that the type of DPC arrangements described simply do not exist in today's healthcare marketplace, nor are the kinds of DPC options described likely to ever become legitimate options in the future. So it is unrealistic to suggest that, as proposed, any HDHP policyholder with a DPC membership would be able to make HSA contributions.

Classifying DPC as medical insurance for HDHP and HSA purposes will affect an enormous number of people's ability to access all the medical home benefits that come with the DPC membership model of care. According to recent research from the Centers for Disease Control and Prevention's National Center for Health Statistics, enrollment in HSA-qualified HDHPs reached 47 percent of the commercially insured, pre-Medicare population in 2018. At least 26 million of those people opened HSAs, and millions more have the option to do so. Unfortunately, the proposed rule would make it virtually impossible for all of these millions of individuals with HDHP coverage to engage in DPC services and contribute to an HSA. Furthermore, IRC §223 prohibits individuals under age 65 from using existing HSA monies to pay for health insurance premiums. Therefore, the rule also seems to ban people who do not currently have HDHP coverage but do have funds in an existing HSA from using their HSA savings pay for DPC fees. NAHU members genuinely hope that the IRS and Department of the Treasury rectify this situation in any final rule. That way, no American needs to choose between the benefits of an HSA and the benefits of DPC.

ERISA Issues

The preamble of the proposed regulation makes it very clear that these rules do not address any issues under Title I of the Employee Retirement Income Security Act of 1974 (ERISA) within the interpretive and regulatory jurisdiction of the Department of Labor. For example, the proposed regulations do not address whether any particular arrangement or payment constitutes or is part of an employee welfare benefit plan within the meaning of ERISA §3(1). However, the preamble to the rule also notes that "the Department of Labor advised the Treasury Department and the IRS that an employer's funding of a benefit arrangement, in most circumstances, is sufficient to treat an arrangement that provides health benefits to employees as an ERISA-covered plan.”

These statements in the preamble reflect a disconnect between the IRS and Treasury Department as to how DPC memberships currently interface with employer-sponsored group benefit plans. Employers do not contract with DPC providers on behalf of their employees, nor do they select DPC providers for employees or condition DPC participation. Instead, it is an entirely optional employee benefit, unrelated to any group health plan-eligibility criteria. Employers simply connect all interested employees with DPC practices in their area and, in some cases, volunteer to reimburse fees, should an employee establish a relationship with a DPC practice. These fee reimbursements are made out of general employer funds, never group health plan assets. Since right now, DPC membership fees are not an eligible medical expense for tax purposes, employers provide reimbursement as taxable compensation.

NAHU members believe that the ambiguity regarding whether or not the DOL will now consider various types of DPC arrangements (both addressed in the proposed rule and those that operate in the marketplace currently) as independent group health plans for ERISA purposes is very problematic. For employers to feel comfortable facilitating DPC arrangements in concert with any group health benefit plan offering, they will need to understand their specific compliance obligations. Accordingly, NAHU members request that the DOL weigh in directly on this critical issue. That way, employer group health plan sponsors will have advance knowledge about the status of any medical care options they may contemplate offering as a benefit to employees. Understanding plan status is the only way a group plan sponsor can meet their fiduciary duties to both their plans and all beneficiaries.

Section Two: Health Care Sharing Ministries

Definition and Classification of HCSM Shares as Medical Insurance

For IRC §213, the proposed regulations define a HCSM as an organization: (1) Which is described in §501(c)(3) and is exempt from taxation under §501(a); (2) members of which share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the state in which a member resides or is employed; (3) members of which retain membership even after they develop a medical condition; (4) which (or a predecessor of which) has been in existence at all times since December 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least December 31, 1999; and (5) which conducts an annual audit which is performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and which is made available to the public upon request. NAHU members have no issue with this proposed definition.

Also, under these proposed regulations, the Treasury Department and IRS classify payments for membership in a HCSM that shares expenses for medical care (as defined in §213(d)(1)(A)) as payments for medical insurance under IRC §213(d)(1)(D). While HCSM membership does imply some degree of risk sharing, members do not have a real guarantee of financial protection in the advent of a catastrophic loss. Therefore, NAHU members do not believe that a HCSM meets the definition of insurance as per the ordinary use of the term. Consequently, we oppose its classification as medical insurance under IRC §213(d)(1)(D). NAHU members do not have a position on whether or not HCSM shares meet the threshold of a qualified medical expense, according to §213(d) generally. However, if the IRS and Treasury Department rule that they do, our members believe that perhaps the more appropriate classification would be under IRC §213(d)(1)(A) to never imply to a consumer that HCSM shares are insurance.

HRAs and HCSMs

According to these proposed regulations, an HRA, including an HRA integrated with a traditional group health plan, an individual coverage HRA, a QSEHRA or an excepted benefit HRA, may reimburse payments for membership in a health care sharing ministry due to their classification as medical care expense under IRC §213(d). While NAHU members do not agree with this classification, if HCSM shares are considered a qualified medical expense, then it would be technically possible for an employer group plan sponsor to include them on a list of qualified medical expenses reimbursement through an HRA. However, classification as an eligible medical expense is not the only legal consideration HRA sponsors have when it comes to establishing what types of expenditures qualify for reimbursement through their plans. HRAs are inherently self-funded group health plans, and employer plan sponsors have a fiduciary duty established by ERISA. They also must comply with many other state and federal laws and regulations. For various reasons, NAHU members believe that if a group health plan sponsor allowed HCSM as a qualified medical expense for HRA reimbursement, then the group plan would violate numerous ERISA and Public Health Services Act (PHSA) requirements.

A compliant group health plan sponsor could not allow HCSM shares as a reimbursable HRA expense for insurance due to several legal complications. HCSMs often discriminate based on health status. For example, HCSM members often sign attestations acknowledging the exclusion of various substance abuse and mental health conditions, out-of-wedlock pregnancies, and conditions stemming from "unhealthy lifestyles," which would make the plan discriminatory and in violation of the ACA and HIPAA. Similarly, not every person would be eligible to purchase HCSM plan shares, since they generally require a commitment to Christian principles. By offering a tax-subsidized health plan reimbursement for a product with a religious component, an employer would violate HIPAA and PHSA nondiscrimination requirements.

Group health plan sponsors also have an ERISA fiduciary duty to their plan and all plan beneficiaries. HCSMs do not have to abide by any solvency requirements, nor do state guarantee funds provide enrollees with any financial protections. Enrollees have no real assurance that their medical cost needs will be covered, and numerous state regulators raise consumer-protection concerns. Beyond all of the discrimination issues that HRA reimbursement of HCSM shares would cause, funding group health plan participant costs for financially risky ventures could surely be construed as an ERISA fiduciary breach.

Employer group plan sponsors are not the only entity that would subject themselves to significant legal liability should a company wish to use their HRA to reimburse HCSM share expenses. HRAs are self-funded health plans, and employers do not establish and administer those in a vacuum. Instead, licensed health insurance producers and third-party administrators (TPAs), which comprise much of NAHU's membership, are always involved. State-licensed and regulated producers and third-party administrators have legal obligations to assist their group benefit plan clients in a legally compliant manner. In many states, HCSMs are expressly excluded from insurance regulation but are considered unlicensed products. There are many group health plans and consumer protection issues associated with allowing group health plan sponsors to consider allowing HCSM shares to part of their list of qualified medical expenses that the group plan considers eligible for HRA reimbursement. As a means of resolving these issues, NAHU members request that the DOL and the Federal Trade Commission comment on the legality of this proposed practice.

Thank you for the opportunity to express our views about the proposed changes to qualified medical expenses under IRC §213. If you have any questions about our comments or if NAHU can be of assistance as you move forward, please do not hesitate to contact me at either (202) 595-0787 or jtrautwein@nahu.org.

Sincerely,

Janet Stokes Trautwein
Chief Executive Officer
National Association of Health Underwriters
Washington, DC