Pre-tax Payment of Health Care Provider "Retainer"

[Guest EMC]

I have been seeing more and more physicians' practices, tiring of insurance claims, moving to a system whereby the patients pay the practice a flat fee up front per month for the year. That fee entitles the patient to receive physician services as often as needed during the year with no additional charge. The fee is not refunded if it is not "applied" to specific treatment during the year.

Query: May the patients make these payments on a pre-tax basis via a health care FSA (or through a cafeteria plan)? Because the payments are not directly linked, at the time of payment, to a specific provision of medical expenses that have been incurred by the partcipant, it seems like it would be hard to "substantiate" these claims.

Has anyone seen the arguments for or against this practice (i.e., the pre-tax payment of these expenses through a health FSA) articulated anywhere?

[Sandra Pearce]

I'm curious where you are located. We have employees across the country and I have only run across this one other time, in the state of Washington. Since there is no specific service rendered I don't see how this could be paid either by a health plan or through a spending account.

[Guest EMC]

Southeast (pretty far from Washington, eh?), but one of the first physicians' groups that I encountered that was making a go of this practice had spent a great deal of time with some physicians in Washington state who were doing it. So, it doesn't surprise me to hear that you ran into this in WA as well. For what it is worth, the physicians and their accountants are all gung-ho and positive about the patients' ability to pay for this service pre-tax via their health FSA.

Although, there has been no on-point guidance from the IRS on the issue, I'm not quite convinced. Since the payment is not for any PARTICULAR diagnosis, treatment, or prevention of disease (but merely for the coverage of such diagnosis, treatment, and prevention if the need arises), it does not seem like the payment is for "medical expenses" under section 213 of the Code -- as is required. Having said that, I'd be interested to know if anyone has a contrary point of view.

[QDROphile]

Maybe you want to look at this as though the physicians are providing insurance -- pay a premium, get health care. Viewed this way, do think FSAs can pay premiums?

[Guest EMC]

That is a good point, and I appreciate the perspective, but health insurance premiums cannot be reimbursed through a health FSA (with the exception of certain types of COBRA coverage).

[QDROphile]

That is the point.

[mroberts]

This is very similar to how some insurance companies pay their participating providers and is known as capitated payment. I have not yet seen it work where the employee pays the doctors directly however. Does your company negotiate directly with doctor groups or do you go through an insurance carrier?