A new law that makes it easier for Marylanders to get birth control, including vasectomies, through their health insurance, has unexpectedly put some tax deductible savings plans in jeopardy because such coverage conflicts with federal IRS rules.

The state law that passed in 2016 and went into effect January 1, requires that health insurance plans cover most forms of birth control with no out-of-pocket charges, such as co-pays. The law, lauded as one of the most comprehensive contraception initiatives in the country, includes coverage of vasectomies, or male sterilization.


But IRS rules that govern health savings accounts, or health plans that allow people to put aside tax-deductible or pre-tax contributions to cover health expenses, don’t allow for coverage of vasectomies if the plan includes a high deductible. These plans require the insurance deductible to be met before coverage kicks in, unless the service is preventive. The IRS does not list vasectomies as a preventive service.

Those in the insurance industry worry that the IRS rules invalidates these health savings accounts and will leave people open to penalties when they file their 2018 taxes. Insurance brokers, accountants and employers say that they don’t know how to advise their clients and employees about these plans.

Some of the groups have formed a coalition to push for legislation in the upcoming session of the General Assembly that would protect health savings accounts. Marylanders have more than 300,000 health savings accounts in 2016, according to the trade group America’s Health Insurance Plans.

“Myself and others need to be confident in advising our clients that their future deposits won’t be disqualified by the new law,” said Jon S. Frank, a licensed insurance provider at the Prince Frederick office of Insurance Solutions, specialists in employee benefits.

Even if legislation is passed, it is unclear that it would be retroactive.

On its website, the Maryland Association of Certified Public Accountants advises members to warn their clients who choose health savings accounts about the potential tax penalties they could face. CareFirst BlueCross BlueShield also has warned in a letter to brokers that people who enroll in these plans leave themselves open to the possibility of tax penalties.

New Maryland law makes contraceptives more affordable, easier to get

A law that goes into affect Jan. 1 makes contraception more affordable by getting rid of co-pays, covering vasectomies and allowing women to buy birth control for six months at a time.

Maryland Health Commissioner Al Redmer has written to the U.S. Department of the Treasury’s tax policy office to ask for clarification on the rule. So far there has been no response. The agency also did not respond to email requests from The Baltimore Sun for comment.

As a practical matter, taxpayers probably would not know what, if any, penalties they could face, until next year or later after they file their 2018 tax return and are questioned about it,” said Tracy Imm, a spokeswoman for the insurance commissioner.

Margaret M.G. Enloe, executive director of the conservation organization Waterfowl Chesapeake, is for the time-being recommending her employees avoid contributing to the plans until the issue of potential penalties is resolved.

“I am hoping that the legislature will do something quickly about this,” she said. “I don’t have faith we will hear from the IRS in time.”

Del. Ariana B. Kelly, a Montgomery County Democrat and main sponsor of the bill that expanded contraception coverage in Maryland, said she is not prepared to back any new legislation and instead hopes the IRS will weigh in.

“I am hopeful that it can be resolved without legislation,” she said. “I recognize that there are a lot of folks that are concerned about the issue so I think it is important that we do get some clarity on it.”