H&W Transition Relief for Male Sterilization
The IRS released Notice 2018-12, which provides transition relief to certain health plans currently providing benefits for male sterilization or male contraceptives. This notice clarifies that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for a high deductible health plan (“HDHP”) would not meet the definition of an HDHP under section 223(c)(2) of the Code.
Meaning, health plans that provide male sterilization or male contraceptives without having to meet the minimum deductibles that are required of HDHPs, would cause the plan to not meet the definition of an HDHP. Consequently, if the plan does not meet the definition of an HDHP, plan participants would no longer meet eligibility requirements to make contributions to a health savings account (“HSA”).
A similar issue does not exist for plans providing female sterilization and contraceptives. Plans providing this coverage can still meet the definition of an HDHP even though these benefits are provided without meeting the required deductible limit. Here’s why. ACA requires female sterilization and contraceptives be covered without cost-sharing and is considered to be preventive care. The classification as “preventive care” is the differential here. Code Section 223(c)(2)(C) allows health plans that provide preventive care without meeting the deductible limits required of HDHPs to still be treated as an HDHP.
Guidance had been requested to determine if male sterilization and contraceptives would be treated similarly. Notice 2018-12 provides this guidance and, as mentioned earlier, sterilization and contraceptives for males is NOT treated similarly and is not considered preventive care.
This can be an issue for states that require gender parity. This means there are plans currently in place that treat both female and male sterilization as preventive care under their HDHP without requiring the deductible to be met. Notice 2018-12 clarifies that these plans, do not meet the definition of HDHP and their participants would NOT meet eligibility requirements to contribute to an HSA.
This leaves certain HSA owners in the position of making contributions to HSAs when they were not eligible to do so. The IRS has granted transition relief for HSA owners in this situation. For the 2018 and 2019 calendar years, these individuals will still be considered HSA eligible and they can contribute to their HSAs even though their plan does not meet the HDHP definition. This transition relief will expire in 2020. The goal of the transition relief is to provide states time to make any necessary changes to their benefit requirements so that this situation does not exist.