How Does Direct Primary Care Work?

Fact checked by James Lacy

Direct primary care (DPC) is a business model that allows primary care physicians to offer their services directly to their patients—without an insurance company in the middle—in exchange for a monthly or annual fee.

The membership fee allows the patient to access a variety of primary care, including consultations, exams, care coordination, and some lab services, without paying any additional fees at the time of service.

This article will explain how direct primary care memberships work, why it's essential to also have major medical health coverage, and what consumers need to understand about enrolling in direct primary care plans.

Advantages of Direct Primary Care

Because they don't deal with health insurance paperwork or bureaucracy, direct primary care facilities spend less time on administrative tasks and more time with patients.

People also get to pay one monthly fee and have all of their primary care covered without having to worry about deductibles or separate copays for each procedure.

The elimination of out-of-pocket costs at the time of service means people are less likely to avoid seeking care due to cost. This enables physicians to address their patients' primary care needs as soon as they arise.

Because physicians don't need to worry about whether a patient's insurer will cover telehealth services, most direct primary care memberships allow patients to access care via phone calls, email, or video chats, all of which can be more efficient and convenient than in-person consultations, depending on the situation.

Downsides of Direct Primary Care

The main critique of the direct primary care model is that it worsens the primary care shortage. Physicians who follow the direct primary care model typically have about 900 patients. This is much less than the more than 2,000 patients for physicians in a traditional primary care practice.

There are also concerns that the direct primary care model inherently creates a two-tier system. This means that people who cannot afford direct primary care memberships may have to wait longer for an appointment and receive far less time with their physician during their appointment.

Because a direct primary care member's fee is the same regardless of how much care they use in a given month, consumer advocates also worry that the primary care practices might be incentivized to limit care to healthier people. Conversely, since care under direct primary care is prepaid, people may be incentivized to overutilize care.

It's also important for direct primary care members to carefully understand what's covered under their membership fees and to maintain major medical coverage for scenarios outside the scope of the direct primary care program (but that would be financially ruinous without coverage).

How Much Does Direct Primary Care Cost?

Direct primary care memberships generally cost in the range of $50 to $150 per month. Membership fees tend to be lower for children and higher for adults and families.

DPC membership fees can be covered by the members themselves. Employers can also offer direct primary care membership to their employees, often in conjunction with a self-insured major medical health plan.

For services that are fully covered under the direct primary care arrangement, patients won't pay anything else when they see the doctor. But it's important to understand the details in terms of what's covered under the membership and what isn't.

Some direct primary care memberships cover a fairly limited scope of services, while others are more extensive. Prescription medications and services like lab work and imaging may have additional fees. However, the direct primary care membership can be structured so people pay wholesale costs instead of retail costs.

Takeaway

Direct primary care membership fees don't cover everything. Memberships don't cover the cost of visits to specialists, urgent care, or hospitalizations. They also don't cover prescription medications.

Membership Does Not Replace Insurance

No matter how comprehensive the covered primary care services are, medical services that go beyond primary care are not going to be covered under a direct primary care membership. Specialty care, surgery, inpatient care, emergency care (including emergency transportation), etc. are well outside the scope of a direct primary care plan.

Since these things can quickly become unaffordable for the average person, direct primary care programs generally recommend that their members also have major medical health insurance coverage.

Direct primary care plans can serve as a useful supplement to a health plan that has a high deductible and limited pre-deductible coverage for primary care. For example, if your health insurance plan has a $5,000 deductible and counts all non-preventive care toward the deductible, a direct primary care membership might make you much more likely to seek routine medical care when you need it.

Explainer

The combined cost of the health insurance premiums plus the direct primary care membership might end up being lower than the premium for a more robust health insurance plan that provides extensive pre-deductible coverage for routine/primary care.

As described below, a direct primary care membership will make you ineligible to contribute to a health savings account (HSA), even if you have an HSA-qualified high-deductible health plan as your major medical coverage.

It's also common for people to combine direct primary care memberships with health coverage that isn't compliant with the Affordable Care Act (ACA), including fixed indemnity plans, health care sharing ministry plans, and short-term health plans that have fairly high deductibles.

Although the combination may cover most day-to-day needs, there can certainly be coverage gaps that arise when people rely on plans that aren't compliant with the ACA. This can be especially true for pre-existing conditions, catastrophic medical issues, and certain types of care that are covered under ACA-compliant plans but excluded from non-compliant plans.

ACA-compliant major medical plans, including those offered in the individual/family and group (employer-sponsored) markets, are required to cap out-of-pocket for in-network services (unless the plan is grandmothered or grandfathered). As of 2023, that cap is $9,100 for a single individual.

But plans that aren't regulated by the ACA, including sharing ministry plans and short-term health insurance, do not have to cap out-of-pocket costs. Obviously, neither do direct primary care plans, since they only provide access to a limited scope of services; all other services are paid by the patient if they don't have major medical coverage.

Takeaway

If you're planning to combine a direct primary care plan with a health coverage plan that isn't compatible with the ACA, be sure to read the fine print very carefully and fully understand what isn't covered under your combined plans.

Direct Primary Care vs. Concierge Medicine

Direct primary care memberships differ from concierge medicine in several ways, although the two models are both based on the idea that patients (or, in some cases, their employers) pay a membership fee in order to have access to basic medical care.

But while concierge practices tend to cater to higher-income clientele and often accept health insurance in addition to their concierge fees, direct primary care practices generally rely entirely on membership fees paid by patients.

Regulation of Direct Primary Care Plans

The Affordable Care Act specifically allows ACA-compliant health insurance plans to provide primary care via a direct primary care plan, in conjunction with the rest of the health plan's overall ACA-compliant coverage. But most direct primary care plans are stand-alone memberships, separate from major medical health insurance.

It's recommended that members maintain major medical coverage in addition to the direct primary care membership, but not necessarily required. Prior to 2019, the ACA required virtually all Americans to maintain health insurance or pay a penalty unless they qualified for an exemption. Stand-alone direct primary care memberships did not fulfill this requirement.

Explainer

The federal government does not consider stand-alone direct primary care plans to be health insurance, so they are not regulated under federal health insurance laws.

Some states have regulations that apply to direct primary care plans, but as of 2018, there were laws in 24 states that specifically exempted direct primary care plans from the state's insurance laws and regulatory oversight. This had grown to 32 states by 2020.

A number of those states have explicit consumer protections built into their laws. But in some of them, for example, there are no rules to prevent direct primary care plans from dropping patients if they start to use increasing services.

Some states that exempt direct primary care plans from insurance oversight have imposed various other restrictions. There are other states, however, that have taken an active role in overseeing direct primary care plans with significant consumer protections in place.

If you're considering a direct primary care plan, it's worth your while to contact your state's insurance department and ask whether—and to what extent—direct primary care plans are regulated within the state.

DPC Members Cannot Contribute to HSAs

People enrolled in high-deductible health plans (HDHP) are allowed to contribute pre-tax money to a health savings account. HDHP is an IRS-specific term—it doesn't mean any plan with a high deductible.

The IRS has very specific rules about what other coverage a person can have (in addition to the HDHP) and still remain eligible to contribute to an HSA. It's limited to supplemental coverage for accidents, dental, vision, disability, and long-term care, as well as coverage under workers' compensation, a specific/critical illness plan, or a fixed indemnity plan.

But there is no exception for direct primary care plans. That means people enrolled in these plans are not eligible to contribute to an HSA, even if they have HDHP coverage and would otherwise be HSA-eligible.

There have been bills introduced in Congress to change the rules regarding HSAs and direct primary care, but none have passed.

In 2019, President Trump issued an executive order that directed the Treasury Department to propose new regulations allowing direct primary care membership fees to be counted as medical expenses that can be tax deducted, allowing people to use HSA funds to cover the membership fees.

The IRS proposed that regulatory change in mid-2020, but it was never finalized, so nothing has changed.

Summary

Direct primary care programs are increasingly popular in the U.S. Members can access whatever primary care services they need for a monthly fee. Direct primary care memberships are insufficient to serve as a person's only health coverage since they are not insurance and will not provide access to non-primary care.

Direct primary care membership fees are not considered medical expenses or tax-deductible. If a person has a direct primary care membership in addition to an HSA-qualified health plan, they cannot make contributions to an HSA.

A Word From Verywell

Health insurance and health care are expensive. Premiums and out-of-pocket expenses continue to climb, and families increasingly have to juggle their expenses to cover the cost of medical care.

Direct primary care memberships can offer an opportunity to have access to primary care for an affordable monthly fee and with convenient features like phone, email, and video consultations. But it's important to understand the fine print of any plans you're considering and know how your state regulates them.

Read the original article on Verywell Health.