Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
High-deductible health plans—meant to make Americans more mindful of medical costs—can’t exempt vasectomy patients from meeting their hefty annual deductibles before covering the procedures, the IRS said.
If plans do so, even to comply with state law, they’re not HDHPs anymore and employees who join them no longer get a tax advantage, the agency said in recent guidance.
High-deductible plans have lower premiums than traditional health plans and employees opting for them also get to contribute tax-free dollars to their health savings accounts to defray costs. Here’s the medicine: Employees also have to pay thousands of dollars out of pocket before the plan covers anything—except preventive services, as designated by the IRS. Female but not male sterilization and birth control are preventive services under federal regulations, at least for now.
But four states--Illinois, Maryland, Oregon, and Vermont--passed laws requiring all health plans to provide male contraception, as well as female, with little or no cost sharing. Vermont has since reversed this requirement for high-deductible plans and Maryland’s working on it with a bill pending in the senate. Officials with the Illinois and Oregon state legislatures didn’t immediately return Bloomberg Law’s request for comment. But the Illinois Department of Insurance told Bloomberg Law in an email that it would continue to enforce state law as long as the mandate is in place.
The average cost of a vasectomy varies by state, but can go as high as $1,000, according to Planned Parenthood. Bloomberg Philanthropies provides financial support for Planned Parenthood.
But vasectomy costs can be much higher or lower depending on various factors, including the state. The average annual deductible for HSA-qualified high-deductible health plans is $2,433 for single coverage and $4,647 for family coverage, according to Kaiser Family Foundation’s 2017 Employer Health Benefits Survey.
The Obama administration was lobbied to include male contraception and sterilization in the list of preventive services by some advocacy groups, but it never came to pass.
Now that the IRS has weighed in, the other states requiring health plans to cover male sterilization and contraception as preventive services will need to follow Vermont’s lead, Roy Ramthun, president and founder of HSA Consulting Services LLC, told Bloomberg Law. Ramthun led the implementation of health savings accounts while at the Treasury Department.
The IRS had many conversations about changing the rules on preventive services to include male contraception and sterilization, Rachel Leiser Levy, a principal at Groom Law Group, told Bloomberg Law. Levy served as associate benefits tax counsel in Treasury’s Office of Tax Policy with a focus on Obamacare implementation.
The argument for including male contraception and sterilization as a preventive service came from the idea that if it was preventive for men, it also was preventive for women, she said.
Levy said she reads the IRS ruling as a compromise between those that wanted the IRS to add male sterilization and contraception to the approved list of preventive services and the “heightened sensitivity around contraception in general.”
This ruling doesn’t have much interplay with the fight surrounding Obamacare’s contraceptive mandate, Levy said. Still, some at the IRS don’t believe the argument that male contraception is indirectly a preventive service for women, she said.
The IRS recognized in the guidance that some employees may have signed up for high-deductible health plans and HSAs with the understanding that sterilization and contraception would be provided without a deductible, not knowing the conflict between state and federal laws.
To alleviate any confusion, the IRS is offering transition relief: Until 2020, individuals in high-deductible health plans won’t lose their ability to contribute pre-tax funds to HSAs just because the health plan provides coverage for male contraceptives or sterilization before the deductible is satisfied, the IRS said.
One thing that could be overlooked in the notice is the IRS request for comments. While it’s perfunctory to ask for feedback on guidance, it could be a signal that the agency is leaving the door open for states and others to determine whether male contraception and sterilization should be added to the list of preventive services, Levy said.
Maryland Sen. Edward R. Reilly, the Republican who introduced the Maryland bill that would exempt high-deductible health plans, didn’t immediately return Bloomberg Law’s request for comment.
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