HSA/FSA rules


(Robin Berzin) #1

@philsq @Zak suggested I ask you about FSA/HSA rules and DPC/membership based practices. We have an annual membership and an up front payment option. If members choose to pay up front, and we run the charge not on registration but on the day of the first doctors visit, can they then use FSA/HSA $ to pay for the annual fee? Or are there other ways to make our annual membership fee eligible? Thanks!


(Dr Phil Eskew, DO, JD, MBA) #2

The IRS hates the periodic fee payment. They understand fee for service, and have no problem with cash pay fee for service arrangements being used in HSA arrangements. If you arrange all or a portion of your fees to look like cash pay fee for service then the IRS will deem them a eligible health expense under section 213(d). Remember that currently the IRS believes that by merely having a membership in a DPC practice the patient is no longer HSA eligible (cannot contribute or use an HSA for any purpose), and your attempted workaround does nothing to overcome more fundamental problem.

But back to the theoretical 213(d) only discussion. The timing of the charge makes little difference to the IRS. What would matter to them is whether you could successfully defend that these were FFS charges and not monthly fee charges. I think that would be a tough argument for most DPC practices to make. Everyone knows the majority of the value being paid for is for ongoing primary care. Some practices try to argue that paying 12 months worth of fees in advance is all for an executive physical and that the ongoing year’s worth of primary care is just “included” at no additional charge. Any government attorney would have a blast blowing up this hollow argument.

Full discussion is here http://www.dpcfrontier.com/tax-treatment/


(Robin Berzin) #3

Thanks so much! We are not technically a DPC practice - as I understand it - as we do not bill insurance. In this instance if members pay their fee up front for the year for their initial visit with FSA/HSA, per the above are they eligible? How often is the govt going after practices for accepting HSA/FSA payment for annual fees?


(Ken Rictor, MD) #4

@philsq Phil thanks for the explanation but this all goes away once the feds pass the primary care enhancement, is that correct? Also, what is your take on the timing of this passage?


(Dr Phil Eskew, DO, JD, MBA) #5

I must say I find your reply a bit confusing. Here is the most common way states define DPC, along with an explanation of the definition. If I were a government or insurance regulator I would not approve of the annual fee is “just for one physical” argument that many practices make. I’m aware of plenty of reimbursement denials. I can only think of one practice that was closed for breach of insurance agreements over something similar. I am not aware of any prosecutions.


(Dr Phil Eskew, DO, JD, MBA) #6

The HSA problem should be solved with the primary care enhancement act. I used to think we would have a fix by the end of April, but given the disagreements within the Republican ranks in DC I’m not making any timing predictions now. Tom Price might be the first one to change things with revised guidance out of HHS resulting in revised guidance from treasury. Who knows. In any event the risk of prosecution certainly seems to be much lower.


(Ken Rictor, MD) #7

Thanks Phil This has been such a beaten subject… I would like to see it resolved soon.


(MarshaCarver) #8

Phil: Just to clarify with a potential scenario. A DPC patient visits monthly and pays for that service monthly with a HSA. The IRS would deem as a “fee for service” so no problem utilizing HSA?


(Melissa Mc Atee) #9

Thank you so much for the question! We are a DPC practice and thus far have had no problem with patients using an HSA card, but FSA cards are being rejected; as the monthly DPC fee doesn’t have a “corresponding diagnosis code” or CPT code attached. We are watching this carefully to see what transpires.


(Dr Phil Eskew, DO, JD, MBA) #11

It depends on the details. If the transaction looks like cash pay fee for service then the IRS has no problem with it.


(Minda Gold) #12

Thanks again Phil for explaining this. We don’t permit our patients to use their HSA cards for their memberships. Hoping this will be changing soon.


(Jack Forbush, DO) #13

key phrase being “looks like cash pay fee for service”?