Government Guidance Helps With State Health Coverage Conflicts

June 22, 2004 ( - The Internal Revenue Service (IRS) and the U.S. Treasury Department have issued more Health Savings Account guidance to help high deductible health plans (HDHP) that fail federal requirements due to state coverage mandates.

IRS Notice 2004-43  applies to health insurance that meets the deductible standards but otherwise fails to qualify as an HDHP, if the only reason is because of state-mandated benefits required by state law in effect January 1, 2004. The government document provides transition relief until January 1, 2006.

The IRS/Treasury notice states “because of the short period between the enactment of HSAs and the effective date of section 223, these states have had insufficient time to modify their laws to confirm to the standards of the (federal) law.”   Many states have enacted, or are aware, that their mandates can “blow up” a HDHP – the latest IRS/Treasury document will allow HSAs to flourish and give an incentive for legislatures and insurance commissions to make changes by January 1, 2006, officials said.

The transition relief is not limited to preventive care state mandates. If below-the-deductible state mandates are the only problem, be they preventive or not (and the mandates were in effect on January 1, 2004), the relief in Notice 2004-43 will apply, officials said.