Direct Pay Medical Homes and ACA Part I : ERISA Plans

Direct Pay Medical Homes (DPMHs) are provider lead alternate payment models.  The patient pays the provider directly a monthly fee and in return receives as many basic services such as office visits, basic labs, and X-rays for no additional fee.  While there is a provision in the Patient Protection and Affordable Care Act (PPACA) allowing for DPMHs to be included as a portion of a qualified health plan (QHPs) or insurance products offered on the state based Health Exchanges.  However, there are a variety of hurdles to be overcome before such plans can be developed.  Some of these hurdles include understanding how DPMHs will count for ensuring that QHPs provide robust coverage and the information flows that must flow between DPHMs and insurance companies.

Before looking at how DPHMs could be included in QHPs, it is actually easier to understand how a DPHM might be included in a plan sold outside the individual and small group markets.  These plans are sold to employers and allow for more flexibility.  The key requirement these plans need to meet are the employer responsibility provisions.  An employer needs to offer a plan that covers “60% of the allowed medical costs”  of participants and meets an affordability requirement.  How would a DPMH interact with these provisions?

The language around the coverage requirement is both unique and vague.  In other sections of PPACA, the concept of actuarial value is defined. The actuarial value of a plan is the amount paid by the plan divided by the amount paid by both the plan and member over a specific set of benefits called the essential benefits. The concept of actuarial value was not applied to the employer responsibility requirement because that would require all plans to cover the essential benefits.  A reasonable assumption until further regulation is released would be that the coverage provider would be modified actuarial value calculation where if a plan did not cover an essential benefit then all of those costs are included in the member’s cost sharing portion.

If plans do have to meet a modified actuarial value standard, how would a DPMH interact with that standard?  If the employer paid for both the DPMH subscription fee and a portion of the insurance there is a reasonable argument that all of the services performed by the DMPH should be included in the portion of costs paid by the plan.  These costs will not be paid by the member but will instead by the plan.  Including these costs in the modified actuarial value calculation would allow for much higher deductibles outside of the DPMH coverage enabling employers to hold down the insurance premium.

Holding that premium down is important because of the affordability requirement.  If the required contribution for a worker is more than 8% and 9.5% of the worker’s income then the employer is required to give the employer a voucher to purchase coverage on the exchange.  If the required contribution is more than 9.5% the worker may purchase a plan on the Exchange and the employer is subject to penalty. It is important to remember that the required contribution is likely to include any portion of the DPMH subscriber fee that the employee is eligible for otherwise those costs would not be included in coverage determination and the worker could enter purchase from the Exchange, and subject the employer to the penalty, regardless of income.

Plans sold in the individual and small group markets face even more hurdles related to restrictions on the deductible and increased coordination with the insurance carrier.  These topics will be covered next week.

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  1. DPMHs and ACA Part 2 Qualified Health Plan | Technological Risk

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