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New IRS Proposed Rule: Direct Reimbursement from HRAs for Primary Care and Health Ministry Fees

The IRS is proposing a rule that lets employer-funded health reimbursement arrangements (HRAs) pay for employees’ care received through direct primary care arrangements (DPCAs) and health care sharing ministries (HCSMs).

The proposed rule was published on June 10, and under it, direct primary care arrangement (DPCA) fees are treated as medical care or medical insurance.

These regulations would offer cheaper alternatives to either the traditional employer-provided group health care plans or nongroup health coverage purchased through an Affordable Care Act (ACA) marketplace exchange. However, they would also restrict DPCA funding or reimbursement in certain areas (see Restrictions).

Under this rule, individuals without insurance or stand-alone HRAs can deduct payments to DPCAs or HCSMs as eligible expenses under Section 213 of the tax code.

The new options

A DPCA is fundamentally a contract between an individual and one or more primary care doctors, wherein the doctors provide medical care for a fixed monthly or annual fee.

An HCSM is a tax-exempt organization made up of individuals sharing a common set of ethical or religious beliefs who have agreed to share medical care costs.

An HRA (other than a qualified small employer health reimbursement arrangement (QSEHRA) is a type of account-based group health plan whose entire funding comes from employer contributions, without any additional resources coming from salary reduction contributions or other employee contributions. Employees are reimbursed solely for medical care expenses they incur for up to a maximum dollar amount for a coverage period, at the discretion of the plan sponsor, the employee’s family.


The new regulations clarify when direct primary care arrangements and health sharing ministry membership fees qualify as medical expense under Internal Revenue Code Section 213(d).

However, while an HRA or an HAS can cover Section 213(d) expenses, employees receiving DPCA or HCSM coverage would not be able to make additional HSA contributions.

The IRS has yet to provide a definite guide on whether health FSAs could pay for any expenses associated with a DPCA or HCSM.

DPCA fees are reimbursed only for care provided by primary care physicians—generally those specializing in family, internal, geriatric, or pediatric medicine, says Ed Fensholt, senior vice president and director of compliance services at Lockton. “The proposed rule does not yet extend this treatment to arrangements providing for direct primary care from nonphysicians, nor does it apply to arrangements where the care is dental or vision care.”

Request for comments

Until then rule is actually finalized, the IRS is soliciting comments regarding these two items:

  • Definition of a primary care provider
  • Whether DPCA fees with other care providers should be reimbursable from an HRA

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.