The Contraceptive Equity Act was enacted by the Maryland General Assembly in 2016. Effective January 1, 2018, the Act mandates that male contraceptive services (vasectomies) must be covered as a preventive service, i.e., without any deductible or cost-sharing required. The current problem lies in the application of the Act to a high deductible health plan (HDHP). An HDHP is typically coupled with a health savings account (HSA). The benefit of an HSA is that the participant’s contributions to it are tax deductible, and the withdrawals used to pay health expenses are not taxable. Both the HDHP and the HSA are creatures of federal tax law. Each has its own rules, and certain preventive services are enumerated for HDHPs to be qualified for HSA treatment. There is no mention, however, of male contraception as a preventive service under Internal Revenue Service guidance for HDHPs. Thus the issue: Does the coverage mandated under the Maryland Act comply with HDHP requirements under federal law, or does it cause Maryland plans to be unqualified? There is no specific federal tax guidance on this point, and this question has been raised with the Internal Revenue Service by the Maryland Insurance Commissioner. To date, there has been no definitive response from the IRS to the Commissioner’s inquiry of May 2017.
If the IRS determines after January 1, 2018 that male sterilization is a preventive service AND that position is treated retroactively, no further legislative action will be needed. However, if no such determination is made, new Maryland legislation would be required to preserve HSA contributions in Maryland.
As a result of this Act, please note that HDHPs do not exist in Maryland as of January 1, 2018 and that HSA contributions made before this issue is resolved are in danger of being disallowed and potentially subject to penalty.
The mandate on male sterilization applies to plans “issued, delivered or renewed in the state on or after Jan. 1, 2018.” For plan years other than calendar-year, this will not apply until the start of the plan year if that year starts after January 1, 2018.
Maryland Association of Certified Public Accountants (MACPA) continues to push for a suitable resolution. We will keep you posted on any new developments.