Notice of Transition Relief Regarding the Application
of Section 223 to Certain Health Plans Providing Benefits for Male
Sterilization or Male Contraceptives
Notice 2018-12
PURPOSE
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) under section 223(c)(2)(A) of the Internal Revenue Code (Code), is
not an HDHP under current guidance interpreting the requirements of section
223(c)(2) of the Code. This notice further provides transition relief for
periods before 2020 during which coverage has been provided for male sterilization
or male contraceptives without a deductible, or with a deductible below the
minimum deductible for an HDHP.
BACKGROUND
Section 223 of the Code permits eligible individuals
to deduct contributions to Health Savings Accounts (HSAs).[1] Among the requirements for an individual to qualify
as an eligible individual under section 223(c)(1) is that the individual be
covered under an HDHP and have no disqualifying health coverage. As defined in
section 223(c)(2), an HDHP is a health plan that satisfies certain
requirements, including requirements with respect to minimum deductibles and
maximum out-of-pocket expenses.
Generally, under section 223(c)(2)(A), an HDHP may not
provide benefits for any year until the minimum deductible for that year is
satisfied. However, section 223(c)(2)(C) provides that “[a] plan shall not fail
to be treated as a high deductible health plan by reason of failing to have a
deductible for preventive care (within the meaning of section 1871 of the
Social Security Act, except as otherwise provided by the Secretary).”[2] Therefore, an HDHP may provide preventive care
benefits as defined for purposes of section 223 without a deductible, or with a
deductible below the minimum annual deductible otherwise required by section
223(c)(2)(A) of the Code. To be a preventive care benefit as defined for
purposes of section 223, the benefit must either be described as preventive
care for purposes of the SSA or be determined to be preventive care in guidance
issued by the Department of the Treasury (Treasury Department) and the Internal
Revenue Service (IRS).
Notice 2004-23 (2004-15 I.R.B. 725) and Q&As 26
and 27 of Notice 2004-50 (2004-33 I.R.B. 196) provide guidance issued by the
Treasury Department and the IRS regarding preventive care benefits that an HDHP
may provide without satisfying the minimum deductible requirement of section
223(c)(2)(A). Notice 2004-23 clarifies that preventive care generally does not
include any service or benefit intended to treat an existing illness, injury,
or condition.
Notice 2004-23 also explains that state law
requirements do not determine whether health care constitutes preventive care
under section 223(c)(2)(C). State insurance laws often require health insurance
policies and similar arrangements subject to state regulation to provide
certain health care benefits without regard to a deductible or on terms no less
favorable than other care provided by the health insurance policy or
arrangement. However, the determination whether a health care benefit that is
required by state law to be provided by an HDHP without regard to a deductible
is “preventive” for purposes of the exception for preventive care under section
223(c)(2)(C) is based on the standards set forth in guidance issued by the
Treasury Department and the IRS, rather than on how that care is characterized
by state law.
Notice 2004-23 further indicates that the Treasury
Department and the IRS are considering the appropriate standard for determining
preventive care under section 223(c)(2)(C) and, in particular, whether any
benefit or service should be added to the list of preventive care benefits and
services set forth in Notice 2004-23 or other guidance.
Notice 2004-50, Q&A 27, provides that drugs or
medications are preventive care when taken by a person who has developed risk
factors for a disease that has not manifested itself or become clinically
apparent, or to prevent the reoccurrence of a disease from which a person has
recovered.
Section 1001 of the Patient Protection and Affordable
Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (Affordable Care Act),
added section 2713 to the Public Health Service Act (PHS Act) requiring
non-grandfathered group health plans and health insurance issuers offering
group and individual health insurance coverage to provide benefits for certain
preventive health services without imposing cost-sharing requirements.[3] The Affordable Care Act also added section 715(a)(1)
to the Employee Retirement Income Security Act of 1974 (ERISA) and section
9815(a)(1) to the Code to incorporate the provisions of part A of title XXVII
of the PHS Act, including section 2713 of the PHS Act, into ERISA and the Code.
Guidance under section 2713 of the PHS Act is published jointly by the Treasury
Department and the Departments of Labor and Health and Human Services.
Under section 2713(a)(1) of the PHS Act,
evidence-based items or services constitute preventive health services if they
have in effect a rating of A or B in the current recommendations of the United
States Preventive Services Task Force (USPSTF) with respect to the individual
involved. Also, preventive health services under section 2713(a)(4) of the PHS
Act include, “with respect to women, such additional preventive care and
screenings not described in paragraph (1) [concerning the USPSTF A or B rated
recommendations] as provided for in comprehensive guidelines supported by the
Health Resources and Services Administration” (HRSA). HRSA guidelines generally
provide for coverage of all Food and Drug Administration approved contraceptive
methods, sterilization procedures, and patient education and counseling for all
women with reproductive capacity. The guidelines, however, do not provide for
coverage of benefits or services relating to a man’s reproductive capacity,
such as vasectomies and condoms. (78 FR 8456 (Feb. 6, 2013) at 8458 n. 3.)
Notice 2013-57 (2013-40 I.R.B. 293) provides that any
item that is a preventive service under section 2713 of the PHS Act will also
be treated as preventive care under section 223(c)(2)(C) of the Code.
The Treasury Department and the IRS are aware that
several states have recently adopted laws that require certain health insurance
policies and arrangements to provide benefits for male sterilization or male
contraceptives without cost sharing.[4] Some individuals
in those states are participants or beneficiaries in insured health plans or
other arrangements subject to the state’s insurance laws. Certain stakeholders
have asked the Treasury Department and the IRS whether benefits for male
sterilization or male contraceptives constitute preventive care for purposes of
section 223(c)(2)(C).
ANALYSIS
Under section 223(c)(2)(C), “preventive care” means
(1) preventive care within the meaning of section 1871 of the SSA, and (2)
preventive care as otherwise provided for by the Treasury Department and the
IRS. Benefits for male sterilization or male contraceptives are not preventive
care under the SSA, and no applicable guidance issued by the Treasury
Department and the IRS provides for the treatment of these benefits as
preventive care within the meaning of section 223(c)(2)(C). Accordingly, under
current guidance, a health plan that provides benefits for male sterilization
or male contraceptives before satisfying the minimum deductible for an HDHP
under section 223(c)(2)(A) does not constitute an HDHP, regardless of whether
the coverage of such benefits is required by state law. An individual who is
not covered by an HDHP with respect to a month is not an eligible individual
under section 223(c)(1) and, consequently, may not deduct contributions to
an HSA for that month. Similarly, HSA contributions made by an employer on
behalf of the individual are not excludible from income and wages.
TRANSITION
RELIEF
The Treasury Department and the IRS are aware that
certain states require benefits for male sterilization or male contraceptives
to be provided without a deductible, and that individuals have enrolled in
health insurance policies and other arrangements that otherwise would qualify
as HDHPs with the understanding that coverage for male sterilization or male
contraceptives without a deductible did not disqualify the policies or
arrangements from being HDHPs. The Treasury Department and IRS also understand
that certain states may wish to change their laws that require benefits for
male sterilization or male contraceptives to be provided without a deductible
in response to this notice, but may be unable to do so in 2018 because of
limitations on their legislative calendars or for other reasons. Until these
states are able to change their laws, residents of these states may be unable
to purchase health insurance coverage that qualifies as an HDHP and would be
unable to deduct contributions to an HSA.
Accordingly, this notice provides transition relief
for periods before 2020 (including periods before the issuance of this notice),
to individuals who are, have been, or become participants in or beneficiaries
of a health insurance policy or arrangement that provides benefits for male
sterilization or male contraceptives without a deductible, or with a deductible
below the minimum deductible for an HDHP. For these periods, an individual will
not be treated as failing to qualify as an eligible individual under section
223(c)(1) merely because the individual is covered by a health insurance policy
or arrangement that fails to qualify as an HDHP under section 223(c)(2)
solely because it provides (or provided) coverage for male sterilization or
male contraceptives without a deductible, or with a deductible below the minimum
deductible for an HDHP.
REQUEST
FOR COMMENTS
The Treasury Department and the IRS continue to
consider ways to expand the use and flexibility of HSAs and HDHPs consistent
with the provisions of section 223. Accordingly, the Treasury Department and
the IRS request comments on the appropriate standards for preventive care under
section 223(c)(2)(C) (in particular, the appropriate standards for differentiating
between benefits and services that would be considered preventive care and
those that would not be considered preventive care) and other issues related to
the provision of preventive care under an HDHP.
