On March 5, 2018, the IRS released Notice 2018-12, which addresses the impact of coverage for male sterilization and contraceptives on an individual’s eligibility for HSA contributions. This is an important issue, as policies issued or amended in Maryland on or after Jan. 1, 2018, must provide coverage for male sterilization without cost-sharing for participants. Illinois and Vermont already have similar mandates for such coverage, with Oregon implementing the mandate effective 2019.
As a reminder, participants with qualified HDHP coverage aren’t eligible for HSA contributions if they’re eligible to receive benefits before the statutory annual deductible has been met. There’s an exception for certain preventive care services, which may be covered without regard to the deductible without impacting an individual’s eligibility for an HSA.
On that idea of preventive services, there had been confusion on this issue, as female contraceptive services are considered preventive care. Qualified HDHP participants may be eligible for benefits related to female contraceptive services prior to meeting the statutory annual deductible — and still remain eligible for HSA contributions. The IRS has clarified that while female contraceptive services are considered preventive care for HSA eligibility purposes, male sterilization and contraception are not. Therefore, an HDHP participant who is eligible for male sterilization coverage prior to meeting the statutory annual deductible isn’t eligible to receive or make HSA contributions. In other words, the HDHP wouldn’t be considered qualified HDHP coverage.
Importantly, though, the IRS has provided transition relief until 2020 for participants who are, have been or become participants in a health plan that provides benefits for male sterilization or male contraceptives without a deductible. Such individuals will continue to be eligible for HSA contributions until 2020.
The transition period gives states time to amend their mandated coverage, if desired. It also gives the IRS time to consider the appropriate standards for preventive care in regards to HSA eligibility. It also allows continued HSA eligibility (at least until 2020) for those that have already enrolled in a HDHP plan that covers male sterilization and/or contraception without charging any cost-sharing. The IRS is receiving comments on this issue as well as ways to expand the use and flexibility of HSAs.
IRS Notice 2018-12 »