Rules proposed for direct primary care arrangements, health care sharing ministries

By Sally P. Schreiber, J.D.

The IRS issued proposed rules (REG-109755-19) on the treatment of amounts paid for certain medical care arrangements, including direct primary care arrangements and health care sharing ministries.

Sec. 213 allows individuals to take an itemized deduction for expenses for medical care, including insurance for medical care, to the extent the expenses exceed 7.5% of adjusted gross income.
Under the proposed regulations, payments for direct primary care arrangements and for membership in a health care sharing ministry would qualify as expenses for medical care under Sec. 213 and may be deductible medical expenses under Sec. 213(a). Also, these payments may be reimbursed by a health reimbursement arrangement (HRA) an employer provides. However, the proposed regulations say that individuals covered by a direct primary care arrangement are generally not eligible to contribute to a health savings account (HSA) (with limited exceptions) and individuals in a health care sharing ministry cannot contribute to an HSA.

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 for a fixed annual or periodic fee without billing a third party. A “primary care physician” is a physician who has a primary specialty designation of family medicine, internal medicine, geriatric medicine, or pediatric medicine.

A health care sharing ministry is an organization: (1) described in Sec. 501(c)(3) as exempt from taxation under Sec. 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 lives or works; (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 Dec. 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least Dec. 31, 1999; and (5) that conducts an annual audit, which is performed by an independent CPA firm in accordance with GAAP and whose audit is available to the public upon request.

The proposed regulations respond to Executive Order 13877, which directs the secretary of the Treasury, to the extent consistent with law, to propose regulations to treat expenses for certain types of arrangements, potentially including direct primary care arrangements and health care sharing ministries, as eligible medical expenses under Sec. 213(d).

The IRS is requesting comments by Aug. 9.

Sally P. Schreiber, J.D., ( is a JofA senior editor.


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