The line a membership must not cross: when a fee becomes a regulated risk product

Which law decides whether a membership fee is insurance?

Your state's insurance code decides, one state at a time, and the general definition it starts from is wide. Washington's runs a single sentence: insurance is a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies 1Ref 1Washington State Legislature (2024).RCW 48.01.040 — Insurance defined.Washington's general one-sentence statutory definition of insurance, used here as the default test a membership fee meets when no direct-care carve-out applies, and explicitly as one state's own definition rather than a national formulation.. Nothing in that sentence mentions medicine, membership or monthly billing. It describes a promise to absorb a cost that may or may not arrive.

Read a membership agreement against language like that and the fork is easy to see. A flat monthly fee for visits the practice itself performs is a price for services. A flat monthly fee that promises a patient will not pay for something an outside hospital, lab or imaging center bills is a promise about a contingent cost, which is the shape the definition describes.

But a general definition is only the fallback. A growing number of states have written a specific carve-out for direct primary care or for a medical retainer agreement, and where one exists it is the section that decides the answer for a practice in that state.

What a state carve-out exempts

The exemption is conditional. Washington's chapter says a direct practice that complies with the chapter is not an insurer, health carrier, health care service contractor or HMO under the state's insurance title 2Ref 2Washington State Legislature (2024).RCW 48.150.060 — Direct practices not insurers.That a Washington direct practice complying with chapter 48.150 is not an insurer, health carrier, health care service contractor or HMO, used here to show the exemption is conditional on chapter-wide compliance rather than automatic for any subscription fee.. The operative word is complies. Protection runs to a practice that meets every condition the chapter sets, so an agreement that borrows the name without the conditions has borrowed nothing.

Three of those conditions are drafting decisions made before the first patient signs: what the fee is allowed to cover, how money paid in advance is held, and whether the state expects a filing and how often it expects it again.

What the fee is allowed to cover

Washington draws its line by content. The definitions section lists what a direct fee may not cover: prescription drugs beyond a narrow statutory exception, hospitalization costs, major surgery, dialysis, high level radiology such as CT, MRI, PET or invasive radiology, rehabilitation services, and procedures requiring general anesthesia. The section then closes on similar advanced procedures, services or supplies, so the enumeration is a floor rather than a boundary 3Ref 3Washington State Legislature (2024).RCW 48.150.010 — Definitions.The content threshold for Washington specifically: the categories a direct fee may not cover, which the article uses as the concrete line a membership must not cross and as the reason to price add-ons outside the fee..

Those are the categories where a flat monthly fee stops paying for the practice's own work and starts standing behind a bill somebody else sends. The consequence is a pricing decision, and it gets made when the agreement is drafted. An imaging package or a bundled rehabilitation benefit folded into the monthly fee is the kind of add-on that reaches Washington's excluded list, and so is dispensing beyond the narrow drug exception the statute carves out 3Ref 3Washington State Legislature (2024).RCW 48.150.010 — Definitions.The content threshold for Washington specifically: the categories a direct fee may not cover, which the article uses as the concrete line a membership must not cross and as the reason to price add-ons outside the fee.. Price those outside the membership, on their own line, paid when used.

How prepaid money has to be held

Prepayment is regulated alongside the fee. Under the same Washington chapter, a patient may pay more than one month ahead only if the extra sits in a trust account and is paid over to the practice as earned at the end of each month 4Ref 4Washington State Legislature (2007).Chapter 48.150 RCW: Direct Patient-Provider Primary Health Care -- RCW 48.150.030, Direct fee..The money mechanics Washington attaches to the direct fee: prepayment beyond one month held in a trust account and drawn as earned each month, and an existing patient's direct fee schedule raised no more frequently than annually.. An annual prepay discount, a common membership offer, therefore lands the practice in trust accounting for as long as the money is unearned.

The chapter also fixes how often the price can move. An existing patient's direct fee schedule may not be raised more frequently than annually 4Ref 4Washington State Legislature (2007).Chapter 48.150 RCW: Direct Patient-Provider Primary Health Care -- RCW 48.150.030, Direct fee..The money mechanics Washington attaches to the direct fee: prepayment beyond one month held in a trust account and drawn as earned each month, and an existing patient's direct fee schedule raised no more frequently than annually., measured against the amount already negotiated with that patient, and the same section requires sixty days' advance notice before an increase takes effect 4Ref 4Washington State Legislature (2007).Chapter 48.150 RCW: Direct Patient-Provider Primary Health Care -- RCW 48.150.030, Direct fee..The money mechanics Washington attaches to the direct fee: prepayment beyond one month held in a trust account and drawn as earned each month, and an existing patient's direct fee schedule raised no more frequently than annually.. A practice repricing as its costs rise is working against a twelve-month clock and a sixty-day lead time.

What happens to money already collected when someone leaves is a separate question, and cancelling a membership has terms worth writing before anyone needs them.

Whether the state expects a filing

In Washington the carve-out is administered, not assumed. The Office of the Insurance Commissioner's guidance describes what qualifies: a monthly fee, primary care only, and no billing of insurance for a direct patient's care 5Ref 5Washington State Office of the Insurance Commissioner (2026).Direct primary care practices.That Washington administers its direct-practice exemption through an affirmative registration with the Office of the Insurance Commissioner and an annual renewal, which the article uses to make the filing a calendared operational step.. A practice meeting that description registers with the office and renews the registration annually 5Ref 5Washington State Office of the Insurance Commissioner (2026).Direct primary care practices.That Washington administers its direct-practice exemption through an affirmative registration with the Office of the Insurance Commissioner and an annual renewal, which the article uses to make the filing a calendared operational step.. A practice that met every substantive condition but never filed shows up in no agency record, and that is a different compliance problem from the one the statute solves.

Calendar the renewal the day the registration is granted, because an annual filing is the kind that lapses quietly. Then check whether a filing is required at all before assuming it is not, since whether a state administers its exemption through a registration is a separate question from whether the exemption exists.

Dropping insurance billing moves a second question at the same time, the covered-entity test, which is settled nowhere in a state insurance code.

Three states, three different shapes

The exemptions do not share a design, so an agreement written for another state will not tell you your answer. Washington tests the content of the fee 3Ref 3Washington State Legislature (2024).RCW 48.150.010 — Definitions.The content threshold for Washington specifically: the categories a direct fee may not cover, which the article uses as the concrete line a membership must not cross and as the reason to price add-ons outside the fee.. Texas writes its rule around the physician: a physician providing direct primary care under a medical service agreement is not an insurer or health maintenance organization, and is not subject to Texas Department of Insurance regulation 6Ref 6Texas Legislature (2015).Texas Occupations Code § 162.253 — Direct Primary Care Not Insurance.Texas's differently-shaped, physician-centered rule: a physician providing direct primary care under a medical service agreement is not an insurer or HMO and is not subject to Texas Department of Insurance regulation, cited as the second of three state shapes.. Arizona puts the answer inside its definition of insurance.

Arizona's section states that direct primary care agreements, defined elsewhere in its code as a contract for primary care services at an agreed periodic fee over a period of time, are not insurance, and that the state's entire insurance title does not apply to them 7Ref 7Arizona State Legislature (2019).Arizona Revised Statutes § 20-103 — Definition of insurance; exemptions.Arizona's rule folded into its own definition-of-insurance statute: a direct primary care agreement is not insurance and Title 20 does not apply to it, cited as the third state shape and as evidence the exemptions differ in structure..

But the three statutes answer at different depths. Washington enumerates the features that break its exemption; the Texas and Arizona sections cited here state the conclusion and do not enumerate what would break it. Neither section tells a practice in those states where its own limit sits, which is a reason to put the draft agreement in front of a lawyer licensed where you practice rather than to reason from Washington's list.

Before you publish a price

Work in this order. Find your state's insurance code definition of insurance, then search the whole state code for a direct primary care or medical retainer section. Search past the insurance title while you are there: Texas puts its rule in the Occupations Code 6Ref 6Texas Legislature (2015).Texas Occupations Code § 162.253 — Direct Primary Care Not Insurance.Texas's differently-shaped, physician-centered rule: a physician providing direct primary care under a medical service agreement is not an insurer or HMO and is not subject to Texas Department of Insurance regulation, cited as the second of three state shapes.. If one exists, read it for three things: what the fee may cover, what happens to money paid in advance, and whether a filing is required.

If no such section exists anywhere in your state's code, the general definition of insurance is the whole test your fee has to survive.

• Describe services the practice itself performs, and price anything an outside lab, imaging center or hospital delivers as a separate charge the patient pays when it is used.
• Keep unearned prepaid months out of the operating account where the state requires it, and write the refund terms into the agreement at the same time.
• Calendar the registration renewal on the day registration is granted.
• Give a lawyer in your state a narrow question rather than a general one: which section of this code applies to this fee, and what would break the exemption.

Classification is one question of several. Whether the fee clears the practice's costs at a given panel size is the DPC equation, and whether the base holds month to month is churn arithmetic. Both belong in the business plan. This one belongs in the agreement, before a patient signs it.