The Health Insurance Portability and Accountability Act of 1996 (HIPAA) added provisions to the Internal Revenue Code, ERISA and the Public Health Service Act to generally prohibit a group health plan from denying individual benefit eligibility or charging higher premiums based on health factors (e.g., health status, medical condition, claims experience, medical history, genetic information and disability). Penalties for HIPAA violations include a tax of up to $100 per person per day. However, HIPAA expressly provides that this discrimination prohibition does not “prevent a group health plan from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention” (now commonly referred to as “wellness programs”). Final regulations that include guidance on implementation of wellness programs were issued in December 2006 and are effective for the first plan year beginning on or after July 1, 2007 (January 1, 2008 for calendar year plans). This week, the Department of Labor’s Employee Benefits Security Administration (EBSA) published a “checklist” to assist health plan administrators with determining the types of program that must comply with the final regulations and whether a program is in compliance. See FAB 2008-2.
The checklist first helps administrators determine whether they have a program that must meet compliance criteria. In general, the program must be part of a group health plan, and provide a reward based on health factors (e.g., a rebate on premiums for cholesterol below 200) that does not operate in favor of individuals with adverse health factors (e.g., waiver of annual deductible for diabetic participants who enroll in a disease management program). For example, the following programs do not have to satisfy any additional standard: (a) fitness center membership reimbursements, (b) diagnostic testing program participation rewards not based on outcomes, (c) waivers of copayments or deductibles for costs of preventive care, such as prenatal care or well-baby visits, (d) smoking cessation program fee reimbursements (cannot depend on whether an employee quits smoking), and (e) health education seminar attendance rewards.
Covered wellness programs that do not satisfy the above rules must meet the following criteria: (1) rewards cannot exceed 20% of the applicable cost of coverage; (2) the program must reasonably be designed to promote health or prevent disease without being overly burdensome; (3) eligible participants must be given the opportunity to qualify for the reward at least once per year; (4) the reward must be available to similarly-situated individuals and must offer a reasonable alternative standard for those who cannot meet reward standards if unreasonably difficult or inadvisable given their medical conditions; and (5) the plan must disclose the availability of a reasonable alternative in all materials describing the program.
Wellness programs are fast becoming staples of many health plans. However, because of the potential penalties for discriminatory programs, it is important that such programs comply with the final regulations. Most plan administrators should find the EBSA checklist to be a helpful tool.