South Florida Hospital News
Friday June 22, 2018
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June 2018 - Volume 14 - Issue 12

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Florida: Direct Primary Care Makes Its Debut

Direct Primary Care (DPC) is finally here in Florida. Florida joins the growing trend of states – up to 25 now - who have adopted this “new” payment model. Some of you will recognize it as your old friend capitation but without the HMO. But overall, it will allow for entrepreneurs and innovators to have one more option to create exciting new medical business models.

Statutory Requirements. The bill provisions are rather simple and not very complex. It will create a new Florida statute under the insurance code – section 624.27. What the bill allows is direct contracting between a health care provider and a patient or the employer of the patient. The physician and the patient can contract for a monthly fee arrangement for care services on a scope and frequency the parties agree to. There are some rather simple requirements for this contractual relationship which are meant to avoid confusion or provide disclosures.
 
Doctors, Chiropractor and ARNPs. All Medical and Osteopathic Doctors, Chiropractors and APRNs can take advantage of this model. They can do these contracts as solo, group or corporate practices of medicine business organizations. Health Clinics which are majority practitioner owned are authorized too.
 
Insurance or Not? It is significant to realize the reason the statute is needed is because Florida’s Office of Insurance Regulation takes the position DPC is insurance. There was a real regulatory concern that such arrangements need to meet the licensure requirements for a Prepaid Health Clinic. Licensure would require significant capital reserve funds to be held, application and obtaining approval for licensure and engaging in at least annual reporting. All those requirements are avoided by DPC not being classified as insurance.
 
Taxes … Deductions and Credits. DPC does ask the consumer to pay somewhere between $1,000 to $2,000 a year for payments. Unfortunately for the consumer, payment may not be tax deductible, since the payment will for most people not reach the threshold as an itemized tax deduction (7.5% of adjusted gross income).
 
Health Savings Accounts. Recognizing the lack of tax appeal (especially for higher income individuals), the holy grail of DPC programs is to have a DPC program as a benefit which is paid out of a health savings account (HSA). Under an HSA, the employer’s or employee’s deposits into the account are untaxed, and when the payments are used for qualified medical expenses, then there is still no income to be taxed upon.
 
But … as in all things tax, the devil is in the details. The IRS has come up with a very tortured reasoning to prohibit DPC payments being eligible for payment out of an HSA. While the IRS is not tested on the matter, a state law recognizing the payment as “not insurance premium” should be compelling. Given the tidal wave of states adopting this law, the IRS will have to relent on its illogical position.
 
Exchange Worthy? One of the disclaimers required the DPC bill exposes that there are severe limitations on using it as a standalone DPC product to meet the Obamacare mandatory health insurance requirements. A consumer just purchasing a DPC product will not meet their health insurance purchase mandate. As a result a DPC cannot be listed on the government healthcare exchange as a stand-alone product. But, as we all know, Obama care is being repealed by the free market, anyway, and the exchanges are floundering.
 
As all things in health care, the details matter. Great care will be needed in structuring and marketing the DPC product. Even greater care will be needed to structure an economically viable product that can take advantage of tax and employee benefit planning, so payments can be made and deductions taken. There is a feeling of great opportunity available to develop DPC products, and that it is just a matter of carpe diem. DPC is a good idea whose time has come.

Got questions? You can contact Frank Rainer, Esq, Senior Counsel, Broad and Cassel, at frainer@broadandcassel.com.

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