IRS Provides Transition Relief for Maryland HSAs

March 6, 2018

As we have been reporting, a new insurance mandate took effect in Maryland on January 1, 2018 that requires 100% coverage for male sterilization without applying the deductible. Unfortunately, this causes an unintended conflict for participants in Maryland High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs). Under the rules for HSA contributions, individuals must be enrolled in qualifying HDHP coverage whereby only services that are considered preventive care under IRS Code section 223 may be paid before the deductible.

Yesterday, the IRS issued Notice 2018-12 that clarifies that male sterilization is not preventive care, but the Notice also provides transition relief for any plans that provide this service without the required HDHP deductible. Therefore, Maryland HDHP participants may contribute to their HSAs during the transition period despite the mandated coverage. Maryland and other states with similar mandates have until the end of 2019 to correct their laws regarding male sterilization.

In the meantime, the Maryland General Assembly has been working on corrective legislation to allow HDHPs to apply a deductible to the mandated coverage. Earlier this year, Keller staff members testified at committee hearings in support of this necessary legislation. We are hopeful that the final bill will be passed by the end of this week and then immediately sent to the Governor to become law. Status updates will be posted to this article.

If you have any questions, please contact your Keller account team.