In an August 13th release, the American Dental Association (ADA) reported that it had responded to a request for comment from the Treasury Department and the IRS by stating, “...the ADA supports ‘the inclusion of an agreement between dentists and patients as a direct primary care arrangement.’”
The request for comment was apparently due to the need to clarify whether dental direct primary care arrangements – usually referred to as in-office plans among other names – would qualify under section 213 of the Internal Revenue Code for individuals who want to deduct the amounts paid for an in-office plan as medical expenses.
It’s A State Thing
In a letter to the IRS, ADA President Chad P. Gehani and Executive Director Kathleen T. O'Loughlin wrote, “While state laws vary a bit in their particulars almost all of them include a provision that allows the ability to establish these plans without health care providers having to register with the state insurance commissioner. Most laws include provisions ensuring patients are aware that these agreements are not insurance. States also provide direction on how to properly terminate the agreement and how unused funds are to be refunded to patients. The laws are consistent in establishing protections that ensure patients’ care is maximized under plans that help manage expenses.”
The ADA also noted that “more than half of states have enacted direct primary care agreement laws within the last few years — at least 16 of which include dental.”
Is It About You? Maybe.
If you’re firmly opposed to the idea of “membership savings plans,” this is probably a non-issue for your practice.
However, if you currently have such a plan, your state may have laws regarding in-office plans that cover dental practices. While it’s not possible to know what form the final rule will take, having “cover” from your state increases the odds that your current in-office plan will continue in its current form.
But if you’re considering starting an in-office plan in a state that doesn’t have existing direct primary care agreement laws that cover dentists, the new rules, once enacted, may impact your plan considerably.
One of the incentives for patients to participate in an in-office plan is the ability to deduct the payments as medical expenses. Without that incentive, participation is likely to decrease; how much, is anyone’s guess.
The commenting period for the proposed rule change ended on August 10. It’s unlikely that the IRS and Treasury will reopen the issue for further comment.
With that said, if the proposed rule change to section 213 would impact your business, you’ll want to keep a close eye on this issue. Rule changes such as these typically have a waiting period before being put in place, meaning that you’ll have perhaps a few months to adjust your in-office plan (or plans for an in-office plan) beforehand.
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