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IRS update includes Medical Sharing Plans

The Internal Revenue Service recently issued a proposed rule that would expand the ability of HRAs to reimburse employees tax free monthly payments of health care sharing ministries.  More flexibility is good news for the approximately million Americans who use these lower-cost programs to address health care needs and it would clear up the existing gray area surrounding the use of HRAs and health care sharing ministries.

The proposed rule concludes that fees for direct primary care, “shares” to a health care sharing ministry, and payments for some public coverage should be considered as tax-deductible qualified medical expenses. 


Are Medical Sharing Plans going to be legal under the new president?

We believe things will change but the hope is that sharing plans provide access.

Are health care sharing ministries considered insurance? 

No, they are not. But they qualify for an exemption under the ACA so individuals on the programs are not penalized for having non qualified health coverage. 

While not considered insurance, sharing ministries have a special exemption under the ACA from maintaining Minimum Essential Coverage. But for individuals who wish to participate in QSEHRAs, this has posed a bit of a conundrum — one that the new IRS rules will hopefully clear up. 

What does new IRS update mean for QSEHRA and sharing ministries? 

In order to receive the tax-free benefits of a Qualified Small Employer HRA (QSEHRA), a participant must enroll in a plan that meets minimum essential coverage(MEC). This also has meant that health care sharing ministries aren’t sufficient on their own; they need to be accompanied by a MEC plan to qualify. 

What does the new proposed IRS guidance say about direct primary care?

For people who want to participate in a direct primary care arrangement, which the proposed rule defines as “a contract between an individual and one or more primary care physicians where a physician agrees to provide medical care for a fixed annual or periodic fee without billing a third party,” the proposed rule would also be good news.

According to the new proposed rule the IRS states that individuals can use HRAs to pay for direct primary care fees, declaring that this type of payment is considered medical care under IRS Section 213. 

The proposed regulations define a “primary care physician” in a direct primary care arrangement as a physician who has a primary specialty designation of family medicine, internal medicine, geriatric medicine, or pediatric medicine. We are waiting to see if the definition may be expanded to include nurse practitioners, clinical nurse specialists or physician assistants, since these professionals are playing an increasing role in providing primary care to Americans.

Both ICHRA and QSEHRA participants would be able to submit expenses for direct primary care fees under the new proposed rules. 

When will this go into effect if it’s passed?

If passed, the rule would go into effect for the next tax year after the publication of the final rule.

What happens next? 

Written or electronic comments and requests for a public hearing must be received by August 10, 2020.


IRS update includes Medical Sharing Plans