Skip to main content
Sister Publication Links
  • ESG: THE IMPLEMENTATION IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Digital Health
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Unwell in America
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Healthcare Economics
June 10, 2020 05:18 PM

New tax rule could boost HRAs, but don't expect a big impact

Michael Brady
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Employers could soon be able to reimburse their employees for concierge medicine and healthcare sharing ministry payments, the Trump administration said Monday.

    According to a proposed rule from the Internal Revenue Service, payments for direct primary care arrangements and healthcare sharing ministry memberships would become so-called "qualified medical expenses" under the tax code. They would also be tax-deductible under many circumstances, and employers would be able to reimburse their employees for those expenses through health reimbursement arrangements, or HRAs.

    The proposal is "smartly crafted" because it creates "bright line" rules and eliminates much of the ambiguity in the current tax code, said former Department of Treasury counsel Bill Sweetnam, Jr., now legislative and technical director for the Employers Council on Flexible Compensation.

    The IRS didn't clarify whether flexible spending arrangements, or FSAs, could reimburse payments for direct primary care arrangements or healthcare sharing ministry memberships. Those expenses might be considered medical care or insurance, according to the agency, and FSAs can't reimburse health coverage.

    "It's an open issue," Sweetnam said.

    But it's unclear whether the rule would have any practical impact, even if the IRS implemented it as proposed.

    The financial incentives created by making those arrangements tax-deductible are probably too small to influence consumer behavior. They're also buried in the tax code, so most people would never know about them.

    They also wouldn't apply to many people because most people won't deduct qualified medical expenses from their taxes going forward. After all, the expenses threshold will increase from 7.5% to 10% of gross income beginning in 2020, or 2021 if the IRS finalizes the rule as proposed. Most people don't have that many medical expenses.

    Likewise, fewer taxpayers itemize their taxes because lawmakers nearly doubled the standard deduction for individual income tax when it changed the federal tax code in 2017. The deduction increased from $6,500 to $12,000 for individuals, and from $13,000 to $24,000 for married filers.

    According to the Internal Revenue Service, more than 30% of taxpayers itemized their deductions in 2017. The Tax Foundation, a conservative think tank, expects less than 14% of taxpayers to itemize their deductions for 2019 thanks to the boost in the standard deduction.

    Still, even if someone doesn't itemize their taxes, they could benefit if the IRS finalizes the proposed rule because FSAs, HRAs and health savings accounts require expenses to be qualified medical expenses for reimbursement. People taking part in those arrangements often can't get reimbursed if their costs don't qualify as medical expenses under the tax code.

    It could also be "a sign that innovation in healthcare financing is receiving attention beyond just the health policy community," said Mollie Gelburd, associate director of government affairs for the Medical Group Management Association.

    But critical stakeholders in the healthcare community probably didn't ask for the changes because "this isn't something that has ever come up," Gelburd said. Most practice groups participate in Medicare, which makes them much less likely to provide concierge medicine because they can't contract with Medicare enrollees.

    The proposed rule probably has more political value than real-world implications because it advances the conservative policy agenda and costs nearly nothing compared to other policies the Trump administration could pursue. Conservative policy wonks tend to favor more individual choice, less regulation and lower taxes. The proposed IRS rule hits on all three themes.

    It's the type of policy win that's hard to come by, especially in an election year.

    But Gelburd is worried about a policy that encourages more participation in healthcare sharing ministries because they don't have to provide the same benefits as traditional health insurance.

    "Consumers that join those organizations may not understand what coverage they offer. That could result in frustrating and unexpected out-of-pocket costs," Gelburd said.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    pay health equity
    'Bias is profitable': Health disparities may cost $1T by 2040
    doc-businessman-handshake-purple_i.png
    Study: Private equity linked to higher anesthesia costs
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Digital Health
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Unwell in America
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing