IRS Confirms – Vasectomies Are Not ACA-Preventive Care for HDHPs

With IRS Notice 2018-12, the IRS has clarified that health plans covering male sterilization or male contraceptives without a deductible, or with a deductible below the statutory minimum deductible for high-deductible health plans (HDHPs), are not HDHPs under current IRS guidance regarding requirements for health savings accounts (HSAs). As background, individuals who wish to make or receive HSA contributions must be covered by a qualifying HDHP and have no impermissible coverage. An HDHP is an insured or self-insured health plan that meets certain requirements, including minimum annual deductible and maximum out-of-pocket expense limits, although HDHPs may provide preventive care benefits without a deductible or with a deductible below the statutory minimum.
To qualify as preventive care, a benefit must be defined as such under the Social Security Act (SSA) or in IRS or Treasury Department guidance. These standards govern whether benefits that a state law requires insurance policies to provide on a no-deductible or low-deductible basis will qualify as “preventive care”. The IRS has also confirmed that preventive services that must be provided without cost-sharing under health care reform (the ACA) will qualify as preventive care for HDHP purposes.
Why now? Why this change and guidance?
The guidance notes that some states have recently adopted laws requiring health insurance policies to cover male sterilization or male contraceptives without cost-sharing—they cite Illinois, Maryland, Oregon, and Vermont as examples. These benefits are not preventive care under the SSA or under IRS or Treasury Department guidance, nor are they preventive services that must be provided without cost-sharing under health care reform. Therefore, plans that provide these benefits before the HDHP minimum deductible is satisfied are not HDHPs, even if the benefits are required under state law, and an individual who is covered under such a plan is not eligible to make or receive HSA contributions.
However, the IRS has provided transition relief for periods before 2020. Under the relief, individuals will not be treated as failing to qualify as HSA-eligible merely because they are or were covered by an insurance policy that is not an HDHP solely because it covers male sterilization or male contraceptives without a deductible, or with a deductible below the HDHP minimum deductible.
As you may recall from our December 2017 guidance, many concerned employers and plan sponsors with HSA programs worried about this issue, and were concerned that state legislators were not moving fast enough to exempt HDHPs from their mandates. With this new guidance and transitional relief state legislators will have additional time to correct the oversight that “free vasectomies” were not intended to cause.
Should you have any questions or concerns, please contact your Account Manger or Sales Executive. Thank you.