Subscription Models in Health Care: Legal Perspectives in Pennsylvania, New Jersey and New York
A Growing Trend
Subscription-based health care models, including Direct Primary Care (DPC) or Concierge Care, are becoming increasingly popular among physicians looking to simplify practice management and strengthen patient relationships. Instead of billing insurance, patients pay a monthly or annual fee in exchange for defined services or access to care.
For many providers, this approach offers predictable revenue and a return to patient-centered medicine. But legally, subscription models can occupy murky territory, especially in states where regulators view prepaid medical arrangements as a form of insurance.
Unlike a growing number of states, Pennsylvania, New Jersey, and New York have not yet adopted comprehensive statutory schemes to address subscription-based health care models.This blog post addresses the current status of the law in these states, along with some important federal considerations for those who participate in Medicare.
Pennsylvania
In Pennsylvania, the legislature has explored ways to support DPC through proposed legislation, but no bill has yet become law. A measure known as the Medical Service Agreement Act would have clarified that physicians offering care through a written “medical service agreement” are not engaged in the business of insurance, provided they meet certain disclosure and documentation requirements.
The proposed act would have required that all agreements clearly state that they do not provide comprehensive health insurance, and that both parties may terminate the arrangement at any time.
Although the bill has not yet passed, its introduction signals growing recognition of subscription-based care in Pennsylvania. Notably, the Pennsylvania Academy of Family Physicians is in support of legislation expanding protections for DPC programs in an effort to increase access to quality, affordable primary health care and improve population health.
Until legislation is enacted, however, providers should assume there is no clear exemption from insurance regulation. Any subscription arrangement should be narrowly drafted, transparent about the services covered, and not marketed as a substitute for health insurance.
New Jersey
New Jersey law does not directly address DPC or concierge medicine, but existing case law and regulatory guidance provide some helpful clues.
The New Jersey Department of Banking and Insurance has stated that “discount plans” – programs where patients pay a fee to access pre-negotiated lower rates – are not insurance products, since they don’t involve risk-sharing or reimbursement for covered services.
Similarly, a New Jersey appellate court has upheld the legality of certain dental membership or discount programs, reasoning that they simply provide reduced rates for services, not insurance coverage.
This reasoning suggests that New Jersey may be more receptive to subscription-style care if the arrangement is structured carefully. The key distinction is whether the provider guarantees future services at uncertain cost (which looks like insurance) or simply offering defined benefits for a set fee (which does not).
New York
New York has taken one of the strictest positions on subscription-based medical care. The New York Department of Financial Services has issued guidance suggesting that when a health care provider accepts a set fee in exchange for future, unspecified medical services, that arrangement may constitute “doing an insurance business.”
In other words, if the provider assumes the financial risk of delivering future care for a flat fee, the state could view the model as an insurance product – subject to licensure and regulation.
Because of this, DPC practices have struggled to gain traction in New York. Providers who want to pursue a subscription-style model should proceed carefully. The safest approach is to clearly limit the scope of services, avoid broad promises of “unlimited care,” and ensure the fee structure reflects payment for specific, identified services rather than general access to care.
Medicare Participation – Proceed with Extra Caution
For providers who participate in Medicare, subscription or membership programs raise additional compliance risks. Medicare rules prohibit charging beneficiaries for services already covered by the program.
If a provider is enrolled in Medicare and continues to participate, they cannot include Medicare-covered services in their subscription package – even if the patient agrees. To legally charge a membership fee for those services, the provider would need to opt out of Medicare and enter into private contracts with patients.
Otherwise, the arrangement could be viewed as double billing or a violation of federal billing rules. Providers transitioning to a subscription model should carefully separate covered services (billed through Medicare) from non-covered services (such as wellness, coaching, or enhanced access).
Conclusion
Subscription-based care models can offer a better balance between patient access and physician autonomy. But they also invite close legal scrutiny because they blur the line between health care delivery and insurance regulation.
Clinicians in Pennsylvania, New Jersey, and New York who are considering a DPC program or concierge model, should take the time to get proper legal guidance. The right structure can make all the difference between an innovative practice model – and an unintended insurance product.
If you have questions about implementing a DPC or concierge care model into your practice, please contact Evan Sampson, Counsel in the firm's Health Care Practice Group, at 856.301.2561 or esampson@postschell.com.
Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.
