Physicians, as well as employers and their employees, are becoming increasingly frustrated with the complexity and inefficiency of traditional insurance-funded care and opting instead to bypass insurance altogether.
Despite moderating health care cost trends, employers are still struggling to provide affordable medical coverage to employees and their dependents. Even with the emphasis on prevention, cost shifting through plan design remains one of the primary approaches to control costs. Over the past 10 years:1
- Medical plan deductibles have more than doubled (rising to $1,573 in 2018) and,
- The percent of employees enrolled in health plans with deductibles has grown from 59% to 85%.
- Higher deductibles, in conjunction with the demise of copays for routine care, have fueled concerns that employees may forego non-preventive care due to higher out-of-pocket costs. A recent Harris Poll of 2,000 adults conducted on behalf of Earnin, reported that more than half of Americans delayed medical care over the last 12 months and almost a quarter has delayed medical care for more than one year.2
At the same time, physicians have grown frustrated with:
- The administrative burden of contracting with multiple insurance companies,
- Complex requirements for approvals of treatment plans,
- Filing claims with multiple carrier systems, and
- Functioning as a collection agency for payments from patients.
What is Direct Primary Care?
An increasing number of physicians are choosing to deliver care outside of insurance, opting instead to operate on a retainer basis with their patients. Patients pay a monthly fee (the average monthly fee is $77 or $954 annually) for which the physician agrees to provide unlimited primary care services (among a specified list of services). This fixed fee arrangement is called concierge or Direct Primary Care (DPC). By 2015 there were DPC style arrangements in 39 states.3
Advantages of Direct Primary Care
In addition to physicians, DPCs may offer material advantages for employers:
- DPC can be a differentiator from a recruitment and retention perspective as employees increasingly expect more customized and personalized benefits
- Front end Investments in primary and routine care can mitigate costs over the long run and help fill the coverage gaps when offering higher deductible plans
- 24/7 access to a personal physician can result in lower urgent and emergency care utilization
- DPC arrangements can benefit small as well as large employers and can be offered alongside traditional and nontraditional health insurance
- Employers who cover the cost of DPCs argue they get better value from DPCs, than paying for things like gym memberships or wellness incentives through improved productivity
In some respect, this model is “back to the future,” to the time when HMOs compensated primary care physicians under a fixed monthly (capitated) reimbursement arrangement. The difference today is that providers are cutting out insurance companies entirely and determining their own fees and services. DPC practices claim they can reduce administrative overhead by more than 40% resulting in lower costs for patients.4 DPC physicians also say they can spend more time with patients including shorter waiting room times; focusing on preventative health care as well as offer personalized services such as same-day visits; and 24/7 access via phone, email or text.
And there’s evidence DPC provides a higher quality of care and cost savings. Launched in 2010 Qliance, backed by Jeff Bezos (Amazon) and Michael Dell, was arguably one of the earliest and largest DPC groups. By 2015, Qliance had several Seattle area clinics with over 35,000 patients representing a combination of individuals, employers, and Medicare. Early cost and quality results from Qliance looked extremely promising.
Why are organizations slow to adopt DPC?
Many expected the DPC model to be widely adopted when the Affordable Care Act permitted DPC practices to be offered in insurance exchanges offered in conjunction with a wraparound insurance policy.5 But the fixed monthly fee model raised concerns with many state insurance regulators that DPCs were effectively operating as insurance companies because physicians assume the financial risk associated with treating patients (patients who pay not on a per service basis but rather on a monthly fixed fee).
In 2018, Florida joined 24 other states by amending Florida’s insurance code to clarify that; physicians, chiropractors and group practices that sign DPC agreements with patients do not constitute insurance. The legislation contained other requirements including requiring contracts between physicians and patients must in writing, clearly listing the scope of services and preventing DPC providers from billing insurance companies.
Aside from state insurance laws conflicts, other reasons for the slow adoption:6
- There are concerns that DPC medicine creates a two-tiered health system in the face of a nationwide primary care physician shortage. Fifty years ago, 70% of U.S. physicians practiced primary care, today that number is only 30%.
- DPCs tend to be local physicians/practices which limits how many patients it can serve. A typical DPC physician may treat less than half the number of patients as a traditional physician (hundreds rather than thousands). Therefore, assuring DPCs are available to all employees in an organization becomes difficult if employees are scattered geographically.
- Since DPC providers bear the financial risk for providing unlimited care (funded only by a monthly fixed fee) critics are concerned this could create unintentional incentives to limit care.
- DPC can be more work for patients when care outside the DPC is needed. Because DPCs do not participate in insurance, patients are the primary connection between a DPC physician and their insurance plans.
Considerations for Adopting DPC
DPC programs may not be the best solution for your organization. ask yourself the following questions if you’re considering implementing DPC:
- Geography – can DPC arrangements be available to all employees?
- Current medical plan designs and carriers– are they conducive to DPC utilization and will carrier factor the value of the services provided by the DPC into renewals?
- Employee demographics – will employees and their families utilize DPC providers to support the program?
- Current wellness and incentive programs – how will/can DPCs be incorporated?
Designing benefit programs that are affordable (to both employers and employees), financially sustainable over the near term (3 years) and drive better health outcomes will require nontraditional approaches. Successful benefit strategies are increasingly complementing core insurance-based programs with non-insurance arrangements in a way that leverages the best of both worlds, incites behavior changes, and is easily understood by employees and their families. This is no small feat, which requires a thorough evaluation of options, careful planning and a commitment to ongoing communication and education.
1 Kaiser Family Foundation 2018 Annual Employer Health Benefits Survey, pp 104 – 108.
2 Harris Poll on behalf of Earnin (2018). Waiting to Feel Better: Survey Reveals Cost Delays Timely Care. October 23, 2018.
3 Philip M. Eskew, DO, JD, MBA and Kathleen Klink, MD (2015). Direct Primary Care: Practice Distribution and Cost Across the Nation. Journal of the American Board of Family Medicine, December 2015 vol 28 no.6.
4 Forrest B. Breaking even on four visits per day. Family Practice Manager 2007; 14:19–24.
5 Patient Protection and Affordable Care Act. PL no. 11–148, 124 Stat. 119, §10104 (March 23, 2010).
6 Timothy J. Hoff, Ph.D. (2018). Direct primary care has limited benefits for doctors and patients. Statnews.com, September 8, 2018.
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