For decades, elite “concierge” practices have been providing easy access to primary care in return for several thousand dollars in retainer fees. Recently we’ve seen the emergence of more affordable versions of this arrangement, with monthly fees that cost far less than the average ACA marketplace plan premium. At first blush, these arrangements, frequently called “direct primary care arrangements” (DPCAs), might seem like an innovative solution to the problem of ensuring access to health care services in the face of rising health insurance premiums, but depending on how they are designed and marketed, they could pose risks for consumers – and the insurance market as a whole.
What is a Direct Primary Care Arrangement?
Simply put, a direct primary care agreement is a contract between a primary care provider (PCP) and a consumer under which the consumer pays a periodic membership fee directly to the PCP and the PCP agrees to provide, at no extra cost, services within the scope of primary care practice, which in some cases includes management of chronic diseases. DPCAs do not typically cover prescription drugs, specialty care services, hospitalization, or other benefits provided by a major medical insurance policy. While many advocates of DPCAs recommend that these arrangements supplement, not supplant, major medical insurance, there is evidence that many patients who choose DPCAs use it as their only source of coverage. Further, some companies have begun marketing DCPAs as “alternatives” to traditional health insurance, sometimes in combination with membership in a health care sharing ministry.
When is a DPCA considered insurance?
An entity that takes on insurance risk is one that bears the risk for an individual’s health care costs and spreads that risk across a larger pool of people. In such a case, state insurance regulators have an interest in protecting consumers from potential fraud and insolvency, and the broader insurance market from an uneven regulatory playing field. Can a primary care practice be considered a risk-bearing entity that should be regulated as insurance? At least one state department of insurance thinks so, arguing that direct primary care arrangements, by providing unlimited visits and charging fees that do not represent the fair market value of the promised services, are pooling risk and conducting the unauthorized business of insurance.
At the same time, advocates of DPCAs wanting to avoid state oversight have successfully pushed legislation that exempts these arrangements from state insurance codes and curtails the ability of state departments of insurance (DOIs) to regulate them. Without state oversight, it is impossible to know the extent to which DPCAs might be engaged in health status underwriting in order to minimize their insurance risk, cherry picking healthy members, or otherwise able to cover costs without exposing consumers to unexpected financial liabilities.
The increasing popularity of these arrangements combined with state-level legislative efforts to exempt them from regulation could result in two casualties: the ACA-compliant health insurance market and individual consumers. In the wake of repeal of the ACA’s individual mandate, these low-cost arrangements could siphon healthy consumers away from the more comprehensive plans available in the ACA marketplaces, leaving behind a sicker risk pool and further contributing to the rise of health insurance premiums. Second, without state-level protections, consumers who depend on DPCAs for their coverage could find themselves without recourse if they have a complaint or the DPCA unexpectedly goes out of business.
To better understand how different states are handling DPCAs and what kinds of benefits and risks these arrangements pose to consumers and insurance markets, CHIR will be taking a deeper dive into the issue, so stay tuned.