What Is Direct Primary Care?

Direct primary care (DPC) is a business model that allows primary care physicians to offer their services directly to their patients—without an insurance company in the middle—in exchange for a monthly or annual fee. The membership fee allows the patient to access a variety of primary care, including consultations, exams, care coordination, and some lab services, without paying any additional fees at the time of service.

This article will explain how direct primary care memberships work, why it's essential to also have major medical health coverage, and what consumers need to understand about enrolling in direct primary care plans.

The direct primary care model accounts for a small fraction of the primary care provided in the U.S.—there are between 1,000 and 2,000 direct primary care practices providing care to about 500,000 patients. But it's steadily growing, as virtually all of those practices have opened in the last decade.

Benefits of the Direct Primary Care Model

A direct primary care model allows physicians to spend more time with each patient: Roughly 30-60 minutes per visit, as opposed to 12-15 minutes per visit in a traditional clinic that relies on health insurance reimbursements.

Because they don't deal with health insurance paperwork or bureaucracy, direct primary care facilities spend less time and money on administrative tasks. And patients get to pay one monthly fee and have all of their primary care covered, without having to worry about deductibles or separate copays for each procedure.

The elimination of out-of-pocket costs at the time of service means patients are less likely to avoid seeking care due to cost. Combined with the increased amount of time that physicians get to spend with each patient, a direct primary care model could be more conducive to thoroughly addressing patients' primary care needs as soon as they arise. This can potentially prevent them from escalating into situations that require emergency or inpatient care.

Because doctors don't need to worry about whether a patient's insurer will cover telehealth services, most direct primary care memberships allow patients to access care via phone calls, email, or video chats, all of which can be more efficient and convenient than in-person consultations, depending on the situation.

Downsides of the Direct Primary Care Model

Physicians who utilize the direct primary care membership model typically have between 600 and 800 total patients, as opposed to more than 2,000 patients for physicians in a traditional primary care practice that gets paid by health insurers on a fee-for-service basis.

This is no doubt a benefit for the patients who receive care under the direct primary care model, although there are concerns that the direct primary care model could exacerbate primary care physician shortages in the traditional insurance-based clinic setting.

But on the other hand, there is also an argument to be made that the growth of the direct primary care model could encourage more physicians to enter family practice, as they wouldn't have to deal with the administrative headaches that often plague doctors in traditional practices.

There are also concerns that the direct primary care model inherently creates a two-tier system, in that people who cannot afford direct primary care memberships (in addition to their health insurance premiums) may have to wait longer for an appointment and receive far less time with their physician during their appointment.

Because a direct primary care member's fee is the same regardless of how much care they use in a given month, consumer advocates also worry that the primary care practices might be incentivized to limit care or to target patients who are healthier than average. And conversely, patients who participate in direct primary care membership programs might be incentivized to overutilize care, since they've essentially prepaid for it with their membership fee.

It's also important for direct primary care members to carefully understand what's covered under their membership fees, and to maintain major medical coverage for scenarios that are outside the scope of the direct primary care program (but that would be financially ruinous without coverage).

Unfortunately, reports indicate that there are some direct primary care practices where as many as half of the members are uninsured, relying fully on their direct primary care membership for their health coverage.

And while the general assumption is that the direct primary care model is beneficial for medical providers, there can be financial struggles with these models, just as there can be with traditional models. Seattle-based Qliance, regarded as the first direct primary care practice, closed in 2017 in the face of "overwhelming financial difficulties."

How Much Does Direct Primary Care Cost?

Direct primary care memberships generally cost in the range of $50 to $150 per month. But fees tend to be lower for children, and fees on the high end of that scale often cover a family.

DPC membership fees can be covered by the members themselves, but employers can also offer direct primary care membership to their employees, often in conjunction with a self-insured major medical health plan. Some employer-sponsored direct primary care memberships include onsite primary care facilities, allowing employees to seek care without having to travel anywhere, and with minimal disruption to their workday.

Taro Health, which offers ACA-compliant individual/family health plans in Maine as of 2023, integrates DPC memberships with their health plans. This was a unique approach when Taro debuted it, but it could become a trend with other insurers as time goes by.

For services that are fully covered under the direct primary care arrangement, patients won't pay anything else when they see the doctor. But it's important to understand the details in terms of what's covered under the membership and what isn't.

Some direct primary care memberships cover a fairly limited scope of services, while others are more extensive. Services like lab work and imaging may have additional fees. And while some direct primary care memberships cover the cost of basic medications, most medications will require an additional fee. But the direct primary care membership can be structured so that there's no markup on these fees, with the patient paying wholesale costs instead of retail costs.

DPC Plans Inadequate As Stand-Alone Coverage

No matter how comprehensive the covered primary care services are, medical services that go beyond primary care are not going to be covered under a direct primary care membership. Specialty care, surgery, inpatient care, emergency care (including emergency transportation), etc. are well outside the scope of a direct primary care plan.

Since these are the sort of things that can very quickly become unaffordable for the average person, direct primary care programs generally recommend that their members also have major medical health insurance coverage.

Direct primary care plans can serve as a useful supplement to a health plan that has a high deductible and limited pre-deductible coverage for primary care. For example, if your health insurance plan has a $5,000 deductible and counts all of your non-preventive care towards the deductible, a direct primary care membership might make you much more likely to seek routine medical care if and when you need it.

The combined cost of the health insurance premiums plus the direct primary care membership might end up being lower than the premium for a more robust health insurance plan that provides extensive pre-deductible coverage for routine/primary care.

As described below, however, a direct primary care membership will make you ineligible to contribute to a health savings account (HSA), even if you have an HSA-qualified high-deductible health plan as your major medical coverage.

It's also common for people to combine direct primary care memberships with health coverage that isn't compliant with the Affordable Care Act, including fixed indemnity plans, health care sharing ministry plans, and short-term health plans that have fairly high deductibles.

Although the combination may cover most day-to-day needs, there can certainly be coverage gaps that arise when people rely on plans that aren't compliant with the ACA. This can be especially true for pre-existing conditions, catastrophic medical issues, and certain types of care that are covered under ACA-compliant plans but excluded from non-compliant plans.

ACA-compliant major medical plans, including those offered in the individual/family and group (employer-sponsored) markets, are required to cap out-of-pocket for in-network services (unless the plan is grandmothered or grandfathered). As of 2023, that cap is $9,100 for a single individual.

But plans that aren't regulated by the ACA, including things like sharing ministry plans and short-term health insurance, do not have to cap out-of-pocket costs at all. And obviously, neither do DPC plans, since they only provide access to a limited scope of services; all other services are paid by the patient if they don't have major medical coverage.

Direct Primary Care vs. Concierge Medicine

Direct primary care memberships differ from concierge medicine in several ways, although the two models are both based on the idea that patients (or, in some cases, their employers) pay a membership fee in order to have access to basic medical care.

But while concierge practices tend to cater to higher-income clientele and often accept health insurance in addition to their concierge fees, direct primary care practices generally rely entirely on membership fees paid by patients.

Regulation of Direct Primary Care Plans

The Affordable Care Act specifically allows ACA-compliant health insurance plans to provide primary care via a direct primary care plan, in conjunction with the rest of the health plan's overall ACA-compliant coverage (as noted above, Maine's Taro Health takes this approach as of 2023). But most direct primary care plans are stand-alone memberships, separate from major medical health insurance.

It's recommended that members maintain major medical coverage in addition to the direct primary care membership, but not necessarily required. Prior to 2019, the ACA required virtually all Americans to maintain health insurance (stand-alone direct primary care memberships did not fulfill this requirement) or pay a penalty, unless they qualified for an exemption.

But the penalty for not having health insurance was eliminated after the end of 2018, so there is no longer a penalty for people who rely solely on a direct primary care membership (unless they're in Massachusetts, New Jersey, California, Rhode Island, or the District of Columbia, all of which impose penalties on uninsured residents).

The federal government does not consider stand-alone direct primary care plans to be health insurance, so they are not regulated under federal health insurance laws.

Some states have regulations that apply to direct primary care plans, but as of 2018, there were laws in 24 states that specifically exempted direct primary care plans from the state's insurance laws and regulatory oversight. This had grown to 32 states by 2020.

A number of those states have explicit consumer protections built into their laws. But in some of them, for example, there are no rules to prevent direct primary care plans from dropping patients if they start to use an increasing amount of services.

Some states that exempt direct primary care plans from insurance oversight have imposed various other restrictions. For example, Colorado enacted legislation in 2017 to exempt direct primary care plans from the state's insurance laws, but the state prohibits direct primary care practices from enrolling members who have Colorado Medicaid coverage (direct primary care is particularly popular in Colorado; the state is home to 2% of the U.S. population, but about 10% of the country's direct primary care clinics.)

There are other states, however, that have taken an active role in overseeing direct primary care plans, with significant consumer protections in place. If you're considering a direct primary care plan, it's worth your while to contact your state's insurance department and ask whether—and to what extent—direct primary care plans are regulated within the state.

DPC Members Cannot Contribute to HSAs

People who are enrolled in high-deductible health plans (HDHP) are allowed to contribute pre-tax money to a health savings account. HDHP is an IRS-specific term—it doesn't mean any plan with a high deductible.

And the IRS has very specific rules about what other coverage a person can have (in addition to the HDHP) and still remain eligible to contribute to an HSA. It's limited to supplemental coverage for accidents, dental, vision, disability, and long-term care, as well as coverage under workers' compensation, a specific/critical illness plan, or a fixed indemnity plan.

But there is no exception for direct primary care plans. That means people enrolled in these plans are not eligible to contribute to an HSA, even if they have HDHP coverage and would otherwise be HSA-eligible.

There have been bills introduced in Congress to change the rules regarding HSAs and direct primary care, but none have passed. Some have focused on allowing people with HDHPs to contribute to HSAs even if they have direct primary care memberships. Others have included provisions that would have allowed people to use HSA funds to pay direct primary care membership fees.

In 2019, President Trump issued an executive order that directed the Treasury Department to propose new regulations that would allow direct primary care membership fees to be counted as medical expenses that can be tax deducted, which would allow people to use HSA funds to cover the membership fees.

The IRS proposed that regulatory change in mid-2020, but it was never finalized. If those regulations had been finalized, they would have allowed direct primary care membership fees to be tax-deductible. They also would have allowed people who had already accumulated HSA funds to use those funds to pay direct primary care membership fees. But the proposed regulations would not have relaxed the rule that prohibits people from contributing to an HSA while they have a direct primary care membership in addition to an HDHP.

However, those regulations were not finalized, so nothing has changed: DPC membership fees are not considered medical expenses and are not tax-deductible. HSA funds cannot be used to pay DPC membership fees, and if a person obtains a DPC membership in addition to an HDHP, it will prevent them from being able to make pre-tax contributions to an HSA.

Summary

Direct primary care programs are increasingly popular in the U.S. For a set monthly fee, members are able to access whatever primary care services they need. Direct primary care memberships are not sufficient to serve as a person's only health coverage, since they are not insurance and will not provide access to non-primary care. Direct primary care membership fees are not considered medical expenses and are not tax-deductible. If a person has a direct primary care membership in addition to an HSA-qualified health plan, they cannot make contributions to an HSA.

A Word From Verywell

Health insurance and health care are expensive. Premiums and out-of-pocket expenses continue to climb, and families are increasingly having to juggle their expenses in order to cover the cost of medical care. Direct primary care memberships can offer an opportunity to have access to primary care for an affordable monthly fee, and with convenient features like phone, email, and video consultations.

But it's important to understand the fine print of any plans you're considering and to know how your state regulates these plans. No matter how impressive a direct primary care plan's included services are, it's essential that you maintain major medical coverage as well. The cost of non-primary care, if and when you need it, will quickly dwarf the cost of primary care, and will be entirely unaffordable for most people who don't have major medical health coverage.