Direct Primary Care for Employers: Pros and Cons Discussed

Direct Primary Care for Employers

For most small businesses, health benefits are one of their biggest expense line items every year. The 2021 Kaiser Family Foundation Employer Health Benefits Survey found that family premiums for employer-sponsored health insurance reached $22,000 in 2021 – a 47% increase over ten years.

In 2021, employer-sponsored health plan costs per employee rose by 6.3% – the biggest increase since the passage of the Affordable Care Act in 2010. 

So reducing your per-employee outlay can make a meaningful difference to the bottom line. For many small employers and their workers, this puts a traditional health insurance policy out of reach, entirely.

That’s why many small employers are taking a hard look at a new employee benefits strategy: direct primary care. 

What is Direct Primary Care?

Direct primary care, or DPC, is a relatively recent innovation in the employee benefits market: Rather than have workers use a major medical plan to access routine and preventative care from their primary care providers, employers contract directly with a local provider to provide services at a flat monthly rate.

DPC plan members and their families – beneficiaries under the company DPC plan – can all see their primary care doctor as needed. And at no additional out-of-pocket cost. There are no co-pays, no deductibles, and no co-insurance charges. All primary and preventive care services are covered under the monthly membership. 

These plans don’t cover hospitalizations, specialist visits, complex outpatient procedures, or most chronic care maintenance procedures such as dialysis treatments. But workers enrolled in DPC plans still receive routine checkups, treatment for minor ailments, bumps, bruises, and sprains, sick note verification visits, vaccines, medication monitoring and prescription renewals, and unlimited telemedicine services, all at zero out-of-pocket costs in most plans.

An article published in the American Journal of Lifestyle Medicine found that DPC is a viable and sustainable model for businesses to reduce health care costs while maintaining or improving health outcomes. 

What Direct Primary Care Is Not

Direct primary care is not health insurance. Benefits are limited to preventative and primary care services that you normally receive in your doctors’ office on an ongoing basis. Employees will need to get protection from catastrophic medical events and other health benefits from other sources.

Employers often offer it as a supplement to existing health insurance coverage, or alongside a health sharing option. Health sharing is a lower-cost alternative to traditional health insurance in which health sharing ministry organizations (HSMOs) help shelter members from unexpected high medical bills by facilitating the sharing of those expenses among like-minded members.

In some cases, small employers offer DPC plans as a low-cost alternative to traditional health insurance. Sometimes combined with another option, such as health sharing, hospital insurance, accident insurance, and/or critical illness insurance. More about those alternative approaches below.   

What is a DPC Doctor? 

A Direct primary care doctor is one who works for (or owns!) a direct primary care practice.

They don’t take insurance at all. Taking insurance – and dealing with all the attendant billing and recordkeeping hassles – would require unacceptably high overhead for the medical practice.

Instead, the direct primary care doctor doesn’t take insurance at all. Instead, they rely on membership fees to provide the revenue needed to run the practice.

This means the practice enjoys a steady and predictable revenue stream – without all the hassles of dealing with insurance companies and without the bureaucratic overhead of a full-fledged billing department.

Because they have so much less overhead, DPC doctors and their practices can have a much lower patient load per doctor. Consequently, they can spend more time with each patient, and provide a better healthcare experience for DPC plan members.

Direct Primary Care Trends

We’re still in the early days of the industry. But as of 2021, more than 4,000 employers have signed on with a direct primary care plan as an employee benefit. More than half of all DPC patients receive access to primary care via an employer’s DPC plan. The remainder purchase a DPC membership on their own, in the individual market.

Direct primary care has proven to be a massive success among both employers and patients. A recent study found that direct primary care membership has exploded, growing 241% from 2017 to 2021 – representing a compound annual growth rate of 36%.

DPC plans are especially popular in Indiana, Utah, and Idaho.

Despite the pandemic, DPC membership grew at 21% in 2021 – even as visits to traditional medical practices fell by 10%.

From 2017 to 2021, the number of active DPC clinicians per capita increased by 159%. Meanwhile, the number of active primary care providers per capita grew by only 6%. According to DPC Frontier, there are currently at least 1,832 DPC practices across the country (see map below).

Where Can I Find A DPC Practice?

Use the map below to find a DPC practice in your area. Note that some may not be accepting new patients at this time.

The drop pins that are Blue are DPC offices with whom we have a personal relationship, and that are currently accepting new patients. You can also see past issues of our DPC Newsletter that we mail out to our DPC Partners. (Attention doctors and patients: if you do not see your DPC clinic on the map, please click here to add your clinic.)

The 2018 Survey of America’s Physicians found that over 21% of primary care providers plan to abandon the bloated, complex, and antiquated insurance system to implement a simpler direct pay model.

As these trends continue, the shortage of PCPs willing to work through traditional insurance channels will become more acute. Wait times in DPC practices will likely continue to fall, while wait times in traditional fee-for-service primary care practices will rise, and face-time with physicians will become shorter and shorter.

As a result, more and more employers and individuals will be likely to turn to the DPC model for primary care. 

DPC Benefits for Employers

Cost savings: Direct primary care costs much less for employers than offering traditional health insurance. Businesses can use the savings to provide other benefits, such as subsidizing employee health sharing memberships, or to fund health reimbursement accounts (HRAs) so that employees can purchase their own health insurance in the individual market.

Monthly per-member costs for direct primary care typically range from $50 to $100 per patient per month.

Removes the cost barrier between patients and family doctors: Studies show that even with insurance, many working families delay or skip doctor visits and receiving needed care because of deductibles and other out-of-pocket costs. 

A study from PolicyGenius found that more than 1 in 4 patients skipped needed medical treatment or appointments because they weren’t even sure what their medical plans covered.

Across large numbers of people, that leads to increased systemic health care costs – and higher premiums.

Direct primary care removes that cost obstacle between patients and their family doctors.  Because there are no co-pays, coinsurance charges, or deductibles in direct primary care, there’s no need for DPC patients to put off receiving the care they need. 

Differentiator in a tight labor market: Providing access to medical care at no out-of-pocket cost can be an important differentiator when it comes to recruiting and retaining talent – particularly in industries where most workers don’t have access to more extensive plans, or where low wages otherwise make even seeing a primary care provider tough to afford for many workers.

Improved absenteeism, presenteeism, and productivity: Research shows that putting off or delaying health care, or stress related to health care, has significant effects on employers’ bottom lines. Workers with health problems miss work more often, and are less productive when they are at work. Access to routine and preventative care helps reduce or prevent absenteeism.

More efficient utilization.: When workers are able to see their own PCP as needed with no out-of-pocket costs, they are less likely to use more expensive modes, such as going to the ER for something that could be handled under the DPC.

Both employers and employees benefit: An ER visit can easily cost thousands of dollars. A PCP consultation costs nothing. It’s included in the monthly retainer or subscription. 

DPC Benefits for Employees

Direct primary care also brings important benefits to workers and their families:

Zero out-of-pocket costs: As mentioned, DPC plans normally have zero deductibles, co-pays, or coinsurance costs for a visit with a primary care doctor. This can be a big deal for hourly or low-wage workers who would have trouble paying $125 to $200 out-of-pocket for a minor medical issue for themselves or for a family member.

It is also much easier for them to get a sick note to stay home from work if they are injured or hurt, rather than risk infecting other employees because they can’t afford the out-of-pocket cost of a doctor’s visit.

Naturally, this has follow-on benefits for other workers and for the employer, as it helps prevent further absenteeism and presenteeism from sick, injured, or distracted workers.

Unlimited access to telehealth: This is important for workers who may not have their own vehicles, or whose work schedules and children’s school schedules would otherwise require them to take a half day or more off work for an in-person doctor’s appointment.

More face-time with doctors: DPC primary care doctors can usually spend much more time with patients. This is valuable for patients with children or who have complex medical needs that require some time to explain, and for doctors to diagnose. 

Insurance-based practices have much higher overhead, and must maintain a small army of billing staff, and have to rack up much larger case loads to remain profitable. With DPC, those billing and insurance administration expenses are eliminated. Doctors can reduce patient loads accordingly.

As a result, DPC patients usually have a much better healthcare experience than patients using a traditional group medical insurance policy to access their primary care. This is especially true for Medicaid patients, who may be accustomed to “take-a-number” clinics that have to rack up doctor patient loads just to break even.

Reduced or eliminated wait times: DPC providers usually have much greater appointment availability compared to insurance-based practices. Often, patients can get a same-day or next-day appointment. And because DPC plans offer free telemedicine appointments, they can free up more slots for in-person visits.

Discounts on other services: DPC providers routinely negotiate discounts on other common health care products and services. These include lab fees, prescription drugs and pharmacies, and X-ray and imaging services.

No pre-existing condition restrictions: Direct primary care plans are open to all comers. There is no medical underwriting or medical criteria to join.

Limitations of Direct Primary Care for Employers

While DPCs have many valuable benefits for both employers and their workers, they aren’t designed to be used by themselves. DPCs won’t help if your workers or their family members need to see a specialist, need surgery, ER services, hospitalization, X-rays or MRIs, lab services, audiology, dialysis, outpatient procedures, or any number of other services. 

To be protected from high unexpected health care costs, workers need to combine DPC plans with other programs, such as:

Compare Pricing on the Best HealthShare Plans Available

DPCs and Health Sharing Plans

Direct primary care plans and health sharing plans are a powerful money-saving combination for both employers and workers. Health sharing plans are an increasingly popular alternative to traditional group health insurance – and usually available at 40% or 50% off traditional insurance premium costs.

Health sharing is not health insurance. Instead, health sharing is an innovative, lower-cost alternative to health insurance. With health sharing, faith-based groups called health sharing ministry organizations facilitate the voluntary sharing of benefits among like-minded plan members.

The most cost-effective strategy is to combine a direct primary care plan with a health sharing plan carefully tailored to pick up where the DPC plan leaves off: The health sharing plan would specifically exclude anything covered under the DPC plan.

This allows employers and plan sponsors to reduce costs by avoiding duplicate coverage. For example, they don’t have to pay twice for a primary care benefit, as they would if they combined a DPC plan and a conventional low-deductible health insurance plan.

With a DPC and a health sharing plan combined – workers can enjoy significant protection across a broad spectrum of care, from routine care, primary care, and catastrophic medical events. All at a fraction of the total cost of a comprehensive group major medical plan.

Health sharing plans don’t have “open enrollment” periods, or “special enrollment” periods. Workers can join a health sharing plan at any time. However, unlike group medical insurance, health sharing plans may impose restrictions on health sharing for pre-existing conditions.

Employers considering offering health sharing may want to offer a group medical plan alongside it to cover workers and/or family members with pre-existing conditions. 

DPCs and Health Reimbursement Arrangements (HRAs)

Another budget-friendly approach small businesses can adopt is to use health reimbursement arrangements, or HRAs. These provide a tax-advantaged way for small businesses to provide cash to employees to allow them to purchase their own health insurance or health sharing plans as they see fit.

Rather than force all employees into a one-size-fits-all group plan, an HRA empowers employees to make the decisions that are right for their specific circumstances.

However, under current law, employees can’t use HRA dollars to fund their own direct primary care memberships. That could change soon, as there is mounting pressure in Congress to equalize the treatment of direct primary care plans and traditional health insurance.

The IRS has already proposed regulations allowing HRAs to reimburse employee DPC expenses.

As the number of employers and individuals opting for DPC plans continues to expand exponentially, that pressure will likely increase. However, current rules prohibit employers from reimbursing employees for DPC plans via HRAs.

Furthermore, the Biden Administration is generally not friendly to pro-HRA, HSA, or other cost-saving, consumer-directed healthcare measures, as they are seen to undercut the health insurance industry – which is a major political donor.

But employers can still provide DPC memberships themselves as an employee benefit, deductible as a compensation expense.

Get more information on health reimbursement arrangements.  

Take action now.

While direct primary care isn’t an all-inclusive solution, no health plan is. However, the vast majority of employers can benefit from including a DPC plan among their benefits offerings.

DPC shouldn’t be used in isolation, but rather take its place alongside complementary plans like health sharing, HDHPs, health savings accounts, hospital and accident insurance, and various health reimbursement arrangements.

There are multiple strategies employers can use that can help control costs, increase employee access to medical care, and improve productivity.

Don’t waste another payroll cycle with an antiquated, inefficient insurance plan – nor with a plan that doesn’t attract or retain the best available talent out there. Take action now to modernize your health care benefits for your employees.

Our team of experienced Personal Benefits Managers can help any business formulate a strategy that combines these innovative health benefits approaches, and tailor it to your specific work force.

So you can maintain a healthy work force and improve your own efficiency, competitiveness, and profitability.

Take control of your health care costs, and get the best care possible for your employees! To arrange a free, no-obligation analysis and consultation, click here.

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Further Reading for Business Owners and HR Pros:

• Best Health Insurance for Small Business Owners: 5 Plans for Self-Employed Entrepreneurs in 2024
• Who Should Pay the HSA Contribution – The Business, or the Employee?
• The Complete Guide to Healthcare for Small Businesses [2024 Update]
• Everything You Need to Know About Health Sharing Plans for Small Businesses [2024 Update]