On June 10, 2020, the Internal Revenue Service (IRS) issued proposed regulations concerning payments made to direct primary care arrangements, health care sharing ministries, and certain other medical care arrangements such as health maintenance organization (HMO) or coverage under certain government sponsored health care programs such as Medicare etc. as it pertains to Internal Revenue Code (IRC) Section 213, which determines the tax treatment of health care-related payments. Under the regulation:
- A direct primary care arrangement is a contract between an individual or employer and one or more primary care physicians (PCPs) to provide medical care for a fixed fee for services received without the need for medical insurance.
- A health care sharing ministry is an organization whose members have a common ethical or religious beliefs and share medical expenses among themselves based on those beliefs, similar to multi-employer plans, but with health care expenses.
- An HMO is a network or organization that provides health insurance coverage for a monthly or annual fee. An HMO is made up of a group of medical insurance providers that limit coverage to medical care provided through doctors and other providers who are under contract to the HMO.
- Government sponsored health care programs are health care programs offered by the government, such as Medicare, that are accessible for individuals due to various circumstances, i.e. attaining age 65, becoming permanently disabled, etc.
This Legal Update provides an overview of the proposed IRS regulations and how they redefine a health plan under ERISA as it relates to employers funding fees for the direct contracting arrangements.
It is important to note that these are only proposed regulations and are not final, meaning that there can be additional changes announced.
Contact your Cowden representative for more information on this or other compliance issues.