Episode Transcript
[00:00:00] Speaker A: Proactivemd.
[00:00:09] Speaker A: From ProactiveMD, this is healthcare Explained. I'm Jeremy Vanderknive.
[00:00:13] Speaker B: And I'm Vinay Patel.
[00:00:15] Speaker A: Right, Vinay, we've got a fun one today. It's fun not only because it actually changes the landscape of value based care potentially moving into the new year, but also fun because, do you remember we made New Year's predictions at the beginning of the year?
[00:00:33] Speaker B: That's right.
[00:00:33] Speaker A: In January we said what is the new administration going to look like? What's going to change in the healthcare landscape? And I had two predictions and one of them was we would likely see an expansion of Medicare Advantage check.
And the second one was around changes to direct primary care memberships and bills that had been, you know, kind of died in committee over the last few years that maybe this would be the year we would see changes to the tax code to enable and promote more direct primary care memberships. And that's what we've seen. So I just want to celebrate the fact that once again I was right. I have my crystal ball on healthcare policy, at least for this year. I have no idea what's going to happen in 26. But Vinay, our topic today is going to be the one big beautiful bill act, the OBB.
[00:01:25] Speaker A: Specifically around changes to direct primary care membership. So should we just dive into it?
[00:01:32] Speaker B: Let's do it. I think that's a great topic. It'd be a good explainer for everyone to understand because I know for me it's confusing and it's a huge bill.
[00:01:41] Speaker A: It is a massive bill and I'm not even going to pretend to go into everything. It changes the way, I mean, it was a budgetary reconciliation bill and you'll remember lots of drama between the parties to get this thing passed. There was questions about, you know, just setting it into separate bills.
The President said no, it should be in one big beautiful bill, hence the name, the obbba. But it is a budgetary bill that changes a lot of the US tax code. It allows certain things to expire, certain things that are brand new again, go read it. I'm sure you can get it done in an hour or so. It's only 10,000 plus pages, but as it relates specific to direct primary care, this is what's exciting. One of the things that has been a bipartisan push the last few years has been making direct primary care memberships compliant and compatible with consumer qualified high deductible health plans.
So I think probably most of our listeners are familiar with high deductible plans, but we've Seen over the last 10 years a lot of push a lot of employers as part of just ways of being able to manage their own budgets on top of rising healthcare costs of kind of doing more employee cost sharing. So more, more and more plans are moving from kind of the legacy preferred provider organization or PPO model into high deductible plans which tend to be lower cost for the premiums to the employees, lower cost for the premiums for the employer. But you know, these are plans that some years ago we might have called catastrophic coverage. Right. So it's going to be deductibles, individual and family deductibles, anywhere from $5,000, $10,000 and up depending on how the plan is structured. Under a qualified high deductible plan allows employers to offer for you to have a HSA health savings account. So for our listeners who aren't familiar with HSAs, it's similar like a debit card. It is a deduction that you can take from your paycheck to contribute to your hsa. So it's pre tax money that goes in or if you contribute money not out of your paycheck, so post tax you can actually claim that on your taxes.
[00:03:55] Speaker B: I believe that's it to be able.
[00:03:59] Speaker A: To receive a credit or a tax deduction for those contributions. And you can use that for healthcare services.
So you can use it to pay co pays at fee for service primary care, you can use it to pay for surgeries, medications at the pharmacy. You can pay for with your high deductible vinay. I mean a broad stroke. Any other things that you're familiar with that people use their HSAs for?
[00:04:24] Speaker B: I believe also durable medical equipment. We've, we've seen that being used for HSAs and.
[00:04:34] Speaker B: Medical virtual medical services as well when you, when there is a cost associated with it. But to date we haven't been able to use HSA funds for direct primary care memberships and for three years people have been asking why not? It is a healthcare service that people want to use and there's money for these healthcare services. But there was an explicit carve out, I guess you would call it, where you wouldn't be able to use these funds to pay for a direct primary care membership. I guess similar to how you can't use HSA funds to pay for your healthcare premium for your health insurance either. So I guess that's probably what they're lumping it into. But tell us what's changed Jeremy, because that's part of what, what's changed.
[00:05:17] Speaker A: Yeah, so the number one thing, we're going to talk about this from two lenses. For individual consumers looking to get a retail direct primary care membership. There's a DPC practice in town they want to sign up for themselves or their families. And also from employers who offer direct primary care services through companies like Got to put in my plug Proactive md, you know, to provide on site or nearsight health services. So let's start with individual consumers. So now, as of January 1, 2026, thanks to the OBBB, a healthcare consumers can purchase and pay for direct primary care memberships using HSA funds. And so this is huge, right, Because a lot of people will have high deductible plans and then as a result of offsetting the potentially very large out of pocket costs for anything beyond preventive care, you know, with the cost of a fee for service, primary care Visit might be $250. I know the cost of just, you know, getting a checkup, especially at a specialist could be in the hundreds of dollars.
[00:06:19] Speaker B: That's right.
[00:06:20] Speaker A: Which would not be covered under as a, you know, as an essential coverage under the ACA as a service that would be $0 out of pocket. So if you're on a high deductible plan, you're spending hundreds of dollars to go to that. A lot of folks say, hey, I would rather get a DPC membership so that I know I've got a concierge level practitioner, right, who's focused on my needs, able to manage my chronic conditions and I can see them as much as I need to. And I'm not spending hundreds of dollars until deductible and then coinsurance until I hit my out of pocket max.
So that wasn't allowed. Now it is. You can pay for a direct primary care membership up to $150 per month. So there is a limit. So some concierge medicine practices, you know, will charge thousand fifteen hundred dollars for this 24 hours a day they'll drive out to your home. This isn't going to cover that type of cost.
[00:07:13] Speaker B: Right.
[00:07:14] Speaker A: But for direct primary care doctors, the majority of them are falling under $200 anyway. So memberships up to $150 per month, you can pay for using your HSA funds. There are a few exceptions to this. So the key thing is that the service is covered by the membership. There are specific carve outs. So even under obba, those carve outs are, you can't, it can't be surgery. So I think there are some basic in office procedures that a primary care doc can do, but orthopedic surgeon is not allowed to hang a DPC shingle outside and you know, do a knee replacement or anything. So surgeries are excluded. Labs can be included in membership if they are labs that would traditionally be drawn in a primary care setting. I'm not exactly sure why some of these carve outs if it's to protect other industries or it's if it's to prevent everything being called DPC and just kind of, you know, looking for loopholes from a taxation perspective. The third one is probably going to hit a little bit more home to DPC members which is prescription drugs cannot be included with the DPC membership. So basically what that means is that if you're DPC membership includes and you're provided some of these services under your membership under obbba, it would not be considered a qualified DPC membership and therefore you would not be able to use your hsa.
And I think the third one on prescription drugs is pretty problematic. A lot of DPC practices and retail memberships do offer limited formulary of generic drugs, prescription drugs, but there are ways around that. There's those can be offered at cost or at reduced cost.
[00:08:52] Speaker B: Right.
[00:08:53] Speaker A: As a kind of buy up option. And you know, those could of course be sent to a pharmacy where you can use your HSA to pay for it. Though that would potentially be higher out of pocket to you of course as a member.
But it is something to consider for those plans. So that is really good news. These plans also cannot charge a copay. So there are certain practices out there that bill themselves as direct primary care. But it's really a hybrid of direct primary care and fee for service.
[00:09:23] Speaker B: That's right.
[00:09:24] Speaker A: So some of these, it's the pay me for the concierge access the same day appointment, but we will bill your insurance and charge you the copay per your insurance. Those plans are not considered qualified. So it needs to be basically soup to nuts. Everything in your visit is pure DPC covered under your membership with no additional out of pocket costs to you as the patient to be considered covered, unless it is one of those car vaps that I just mentioned a minute ago, like prescription drugs or you know, expensive labs, things like that.
[00:09:55] Speaker B: So would an example of a plan that feels or seems like it's dpc like would an example be Amazon One Medical is that I know that they also bill insurance but they charge us fee. Is that, would that be one of those things to look out for? Like that plan wouldn't be covered. You can use your HSA funds for that kind of service.
[00:10:17] Speaker A: That's correct. Yep. Yep. And it One Medical is always an interesting example because of the Amazon ownership. If anybody is hearing that you can use your HSA to buy an Amazon prime membership because it includes access to One Medical, I feel qualified enough to provide this advice. Don't do that. You know, that is, that is probably not what the IRS has in mind for you to use your, your HSA on. But it's a great question, Vinay.
Really, you should be looking for very pure DPC or virtual DPC providers that are of course licensed to be able to provide those services where everything is included under that one membership. But unlike A1 Medical, which you're right, it's also a. They charge additional out of pocket fees for the visit, but at a reduced rate if you're an Amazon prime member.
If it seems too complicated to figure out, it probably doesn't qualify.
But of course, if you're an individual, talk to the direct primary care practice before you sign up with them and just see, hey, what's covered under here? Is this something that I can use my HSA for? If you're an individual who purchases through your insurance through a marketplace plan, reach out to your insurer and talk with them. They usually have member relations who might be able to help answer some questions. Or if you use an insurance agent, an insurance broker who's geared towards individual consumers purchasing individual plans, that would be another great source to get advice as to, hey, would this plan qualify? Does this provider work? So talk to the experts if you ever have questions on that other question.
[00:11:54] Speaker B: You mentioned, $150, is that for an individual or is that like a family? Sometimes they get bundled pricing. If a family wants to sign up, you know, let's say, you know, husband, wife and two kids.
[00:12:10] Speaker B: Or is it just per person that the 150 would apply to? So you could use it potentially up to $600 for a whole family?
[00:12:18] Speaker A: Vinay, that's a great question. You're absolutely right. A lot of practices will provide family memberships and cover multiple members of the family. So the obbba allows for $150 per individual and up to $300 for the family unit.
[00:12:35] Speaker B: Great, great.
All right. I guess just a side note here, and it remains to be seen, the future will tell here, I'll put an analogy here, that when the ACA was passed so many, gosh, 15 years ago now, one thing that it did, and this is just again calling out to keep an eye on this incentive, which is the ACA undid or eliminated lifetime caps on your insurance, on your health insurance. And what that did was inadvertently it created these really expensive drugs because now there was no limit to how much your insurance could pay for Medicaid, for anything for your healthcare coverage. And so now drugs, more and more drugs and newer drugs that were approved were just six figure drugs, seven figure drugs that have come out now that we have this cap, not that it's a huge amount, but you know, one on the high end for a DPC coverage. Will we start seeing DPC coverage? Our DPC memberships start going up in price to sort of say, okay, well, I know what the ceiling is, or I know people are coming in with $150 to spend. Do we need to match the DPC rates there? And it's just something interesting to keep an eye on and we'll see what happens with the prices and the CBC markets.
[00:13:45] Speaker A: That's absolutely a great point. I think direct primary care is probably closer to kind of the truer ideals of capitalism as it relates to health healthcare because it is a transparent pricing, it's a fixed cost, it's not a, trust me, you'll find out what it costs when I send you the bill. Right?
[00:14:05] Speaker B: Yeah, that's right.
[00:14:07] Speaker A: And so I do think that as a DPC provider, ProActive MD, we're very aware of what our competitors in different geographies are charging. So I like to think that if anything, maybe the $300 cap or the $150 cap might actually encourage some of the more expensive DPC practices to lower their rates to make it more accessible.
When you have some, that we're trying to gear more towards that concierge side of being a few hundred dollars a month, we might see actually the reverse happen, which is now that people recognize that they can spend their HSAs on this, they're not going to want to go, you know, necessarily for that practice if there's others in the available, you know, area. I also like to think that by doing this with more and more individuals being kind of pushed or selecting high deductible health plans, that it might actually encourage more direct primary care providers or more doctors to open practices or convert to dpc, because that's always been one of the biggest problems that and things that I've heard from individuals is, can I use my insurance to pay for this? Well, no, we don't bill insurance. Well, can I use my hsa? No, that's not, that's not allowed by the irs. Now that it is, I think you're going to see people potentially being wiser consumers of their healthcare dollars and there being a market opportunity there which might actually help reduce or prevent what you're describing, as far as, you know, prices spiraling upward. If, if you used to charge $65 a month, now you're going to, you know, paint over the sign, say 150.
[00:15:44] Speaker A: I can be a Pollyanna, but I hope to think it's going to be the reverse, which is we just see more competition which is going to be better for health care consumers. And I am totally confident saying that as somebody who is a competitor in this space, that more competition is a good thing and more independent primary care doctors is a good thing. And if this provides an opportunity for folks who are on the fence and just not knowing how they would do it and make the jump to direct primary care, being direct primary care providers, this might be one more thing that helps invigorate that movement nationally.
[00:16:19] Speaker B: I agree. I agree.
[00:16:20] Speaker A: So let's talk about employers for a second. What does this mean for employers? For employers who offer direct primary care to their employees? Whether that's they, they pay for direct primary care memberships at a community provider, that's one option, or they provide on site or nearsight access that's dedicated to them as the employer. At Proactive, we serve both types of employers. We have some who share a site and access community site and pay for their employees and dependents. We also have folks, many of our clients are, they're running an on site clinic through us. Right. We're operating the XYZ corporations, you know, manufacturing facilities, on site, healthcare center, primary care, medical home for their employees. So what does this mean for them? Well, a few things. One of the, I would say grayest areas that we've experienced talking to multiple benefits consultants, talking to multiple employers is prior to the obbba, nobody actually knew or I would say felt extremely confident about what they could provide for employees who are on a high deductible health plan.
[00:17:28] Speaker B: That's right.
[00:17:29] Speaker A: So that meant that certain benefits consultants or certain HR experts or legal analysts would say because of this thing called the first dollar spend, where the IRS expects that if you're on a high deductible plan, if it's not one of those ACA covered preventive services, you need to pay the first dollar, there's no such, there's no free lunch under a high deductible plan and you need to be paying some kind of fair market value for the care that you're receiving through your high deductible plan. And so some employers or the experts that are advising them have said, hey, we think that means you need to charge a copay or sometimes it's called a copay or an access fee or something that your on site or nearsight or DPC clinic provider charges the employee on every visit. Unless it's a covered prevent a visit. You need to basically charge a copay. Otherwise we're worried we won't be in compliance with IRS regulations. A lot of other employers have said, we've looked at it, we've talked with our benefits consultants, we've talked to our legal analysts and we don't see anything that requires us to do this. So basically these, these DPC memberships, this advanced primary care, direct primary care, on site, nearsight community operated in this gray area where nobody was genuinely confident on what it meant. So us being a provider, we have some clients where we do charge the co pay, you know, at the client's request and we look to be able to refund that back to them. We encourage employers to hey, if we're collecting these fees, you're already paying us to operate the clinic. So if we collect these fees, we, we don't need them so we can credit them back to you. So then use them to fund the HSA for the employees, basically just recycle the dollars for healthcare, you know, and then we also have other clients who don't want us to charge a copay. And I will tell you, the copay can be a barrier. Our experience is if you're trying to maximize your investment in your on site clinic because your people aren't going for primary care, and then you tell them you can go to a community provider for 40 bucks or you can come to the on site clinic for 40 bucks. A lot of people will say, well that doesn't really help me, right, Because I don't have either I don't have 40 bucks to spend or I don't want to move my career to, you know, the health center because then, well, it costs me as the employee or the patient the same whether I go to the on site or whether I go to the doctor that I used before.
If it's $40 either way right now, that $40 might translate to the plan as another several hundred dollars in charges, you know, but that that individual is only paying $40. So if you're looking to maximize your investment and drive the highest level of engagement to your on site or your DPC plan, copace can be a barrier. And so great news about OBBBA is that it actually clarifies it. So employers for employees who are with a qualified high deductible plan, they can pay for one of these qualifying DPC memberships and it is $0 out of pocket to the patient. So this question of the first dollar spend appears to go away. Again, yes, please don't take my word for it. If you're one of our, our dedicated listeners, please talk to your benefits consultant. But ask them this question because I have done some reading for multiple legal scholars, benefits consultants nationally, et cetera, who have looked into this and it appears that if you were believed that you had to be charging a copay before, now it appears that you cannot charge a copay because to be one of these qualified plans, there's a couple things. One of them is it needs to be $0 out of pocket to the patient. So just like a retail plan, you can't be charging additional fees to them. We would interpret that as saying can't charge an additional copay for the services. It needs to be all inclusive in that membership cost. Again, the same cost of membership is it should be up to $150 for the individual or up to $300 for the, for the family. So again, you can't get by with, you know, I've yet to meet an employer who's willing to spend $2,000 a month for their, you know, for a concierge practice. But again, the same kind of rules apply for what can be done prescription drugs in the on site clinic space. Like what we do for employers is we're already not charging the patient for those, but those are paid for by the employer.
So that can continue to be done, dispensed to the individual patients. It's not then interfering with their high deductible plan because those are kind of considered two different services. It is incumbent on the employer to ensure that their plan is qualifying and compliant, which is no different than it ever has been. Right. It's nobody tells you exactly these are the guidelines, which is why we've had these vagaries. But questions around if there are any costs that the employee might have where something needs to be charged and go against their deductible. Again, the, it's incumbent upon the employer to figure that out and ensure that their plan's in compliance, that if their employee is paying for something out of pocket, that should be covered, you know, through their, through their plan, that it does go against their deductible, et cetera. So I think what we're going to see Vinay over the next so many months. As you know, this goes into effect for plans and individuals starting January 1st of 2026 is we're going to see probably more analysis of this.
We're going to see more employers that are talking to benefits consultants, more benefits consultants publishing about what this means for providing healthcare benefits under the obbba. But I think it is an exciting time for DPC and I think it's hopefully will help employers who have been nervous about providing DPC memberships either on site, near site, you know, or encouraging their employees who are on high deductible plans to get these memberships to provide more coverage than just catastrophic coverage from a primary care lens. I think hopefully this will be a breath of fresh air and encourage them to do more for value based care, do more for DPC and certainly for individual consumers who are on high deductible plans. Hopefully knowing that you can do this with your pre tax dollars, you can do this with your HSA and purchase this for you and your family, you know, without it feeling like an additional expense on top of all the premiums and you can't even use your HSA to do it. I am very hopeful that we're going to see just more movement, more energy than ever before in the DPC movement and for value based care.
[00:24:08] Speaker B: Completely agree. I think there's a lot coming that's going to slowly unravel or slowly reveal itself from the bill as we get into next year and employers will start realizing that there is.
[00:24:22] Speaker B: Hopefully ways to reduce employee health care costs and provide a benefit to their employees by providing services like on site DPC or maybe accessing a dpc. That's nearsight for them and their employees and that this just makes it a clear path forward, that this is one of the ways we can help to reduce health care costs overall, not just for employees, but overall health care costs that employers are now burdened with and have to figure out what they need to do.
In the context of this OBBA bill, we have rising costs, we have a debate that's ongoing right now as to what to do with health care subsidies that people have to now face in addition to just, you know, 9 to 15% cost increases on healthcare that employers are faced with that they're gonna see next year in renewal. So this is all in the context of what's happening in the broader picture of healthcare. And I think this will be one path that one new type of tool or new way to use an existing tool that can help employers for sure.
[00:25:23] Speaker A: I love that and I will say Vinay I like to celebrate when I'm right, but I also know when to eat my words. So you know, there will be more legal scholarship, there will inevitably be more benefits consultants digging in on this in the new year. So to our listeners, if if anything that I've said or we've said today turns out to be incorrect or there's follow up legislation that clarifies things, we will make sure to let you know about it. Not a not afraid to eat crow, but we do recommend, of course, that follow up with your benefits consultant, follow up with your broker and talk to them as they're the experts who should be guiding you as an employer or an individual if you have access to those resources to make sure that you stay in compliance with the law. But we're just excited to share the news as we understand it today.
[00:26:13] Speaker B: That's right. And if you're a PMD client, PMD has resources to help. We do as well.
[00:26:18] Speaker A: Absolutely do.
[00:26:19] Speaker B: So we're here to support you as well, for our clients and for everyone else. Please reach out, as Jeremy said, to your legal expert, to your benefits consultant who can guide you through this. What we're doing is really just sharing information that we've learned and we're all learning in this together to figure out how we can help employers and individuals that need to solve for healthcare.
[00:26:38] Speaker A: Love it, Vinay. Let's use that as our words of wisdom for parting today. And as always, from ProactiveMD, I'm Jeremy Vanderkinijf.
[00:26:46] Speaker B: And I'm Vinay Patel.
[00:26:47] Speaker A: And we'll see you next time.
[00:26:54] Speaker A: Proactivemd.
