In October 2018, the Trump administration issued a proposed rule that would greatly expand the use of Health Reimbursement Accounts (HRAs). HRAs are account-based group plans that employers can utilize to provide pretax health care funds to their employees.  Employees with HRAs can use these accounts, which are funded exclusively by employers, to pay for qualifying health expenses, such as out-of-pocket costs for a medical procedure. Unused funds roll over to the following year.

In the executive order that spurred the proposed rule change, President Donald Trump directed the Departments of Labor, Health and Human Services, and the Treasury to “increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.”

The proposed rule would increase access to HRAs and allow employees more ways to use them, reversing the approach of the previous administration. HRA funds could be utilized to cover premiums for individual health insurance coverage, and a new “excepted benefit HRA” would permit employees to use HRAs to pay for short-term, limited-duration health insurance plans, according to an October report by Health Affairs. Short-term, limited-duration plans are much more affordable than the plans now offered in Obamacare exchanges. The Treasury Department estimates 800,000 employers and 10 million employees would take advantage of HRAs once the new rules are fully implemented.

Although the proposed HRA rule is a major step forward, there is still room for improvement. In particular, the rule should be expanded so that employees can use HRA funds to pay for direct primary care (DPC) agreements.

DPCs have received significant attention in recent years from health care reform advocates because they reduce health care costs and improve the quality of primary care services. Under a DPC arrangement, patients pay a primary care physician a flat monthly fee for a package of services. These include annual exams and essentially unlimited (up to 25 per year) visits for anything from unexpected problems to management of chronic disease. Commonly ordered labs and imaging and some prescriptions are often included or available at a significantly reduced price. Care that is provided outside the scope of service, such as less common prescriptions, labs or imaging, or care by a specialist, is offered at a previously negotiated, discounted cash price. These prices are often less than the typical copay for these services under traditional insurance. 

Patients can join a direct primary care practice for a monthly fee of roughly $75-$100 for an individual or $150-$200 for a typical family of four. “Catastrophic” health insurance is usually purchased to cover rare and expensive medical events. Such policies cost far less than traditional comprehensive insurance plans. The total cost of all components is usually far less -- about 30-60 percent less -- than a traditional insurance arrangement.

DPC agreements save money and improve quality by removing the health insurance middleman from the patient-doctor relationship. The physician is free to focus on the patient instead of spending countless hours on insurance paperwork and unnecessary documentation and meeting useless quality measures. With DPC, the patient becomes the primary judge of quality, rather than a far-off, uninterested bureaucrat.

In places where DPC practices have been permitted to exist, they have thrived.  New practices are starting up all over the country.

During the proposed rule’s public comment period, a pro-DPC think tank, the Docs 4 Patient Care Foundation (D4PCF), submitted a comment suggesting that “the monthly fees associated with DPCs are qualified medical expenses which can be offset by HRA funds.” If employees with HRAs could use those funds to pay the monthly fees of direct primary care instead of paying astronomical insurance premiums, they could save thousands of dollars each and billions of dollars in total.

The Trump administration has made numerous important health care reforms over the past two years, including expanding association health plans and enhancing short-term, limited-duration health policies. Like those reforms, expanding and improving HRAs to pay for direct primary care would help families struggling with increasingly higher health insurance costs.

Michael McGrady is a syndicated columnist covering public health care policy, foreign affairs, and technology. Dr. Michael Koriwchak is the vice president of the Docs4PatientCare Foundation.