The Health Insurance Portability and Accountability Act of 1996 (HIPAA) nondiscrimination rules generally prohibit a group health plan from discriminating on the basis of an individual’s health factor (such as health status, medical condition, medical history, and claims experience.) The exception to these rules are rewards for compliance with bona-fide wellness programs. The Affordable Care Act law expands the HIPAA wellness rules to all group plans (not just ERISA plans) and increases the rewards that may be offered.
There are different rules for programs that provide incentives based on mere participation in a wellness program and those that provide incentives based on the achievement of a health factor. Recent regulations explain many of these nuances.
Participatory Programs (program rewards participation)
A wellness program that provides an incentive based on participation in a health program, rather than achievement of a particular health target or standard, is generally considered nondiscriminatory under HIPAA. Examples of incentives that are conditioned on participation rather than results include the following:
- A program that reimburses all or part of the cost of a fitness center membership
- A diagnostic testing program that provides a reward for participation, regardless of outcomes
- A program that encourages preventive care through copayment or deductible waivers for such care
- A program that reimburses employees for the cost of a smoking cessation program, regardless of whether the employee quits smoking
- A program that provides an award for attending a free health education seminar
- A program that provides a reward for completing a health risk assessment, without requiring further action
Health-Contingent Programs (program rewards results)
The following are examples of health-contingent wellness programs designed to provide an incentive based on achievement of a health factor:
- A program that imposes a premium based on tobacco use
- A program that uses a biometric screening or a health risk assessment to identify employees with a specified medical condition or risk factors (such as high cholesterol, blood pressure or glucose level or unhealthy body mass index) and provides a reward for individuals within a normal or healthy range and requires employees outside of the normal or healthy range to take additional steps (such as meeting with a health coach, adhering to a health improvement action plan, or complying with a health care provider’s plan of care) to receive the same award.
These types of wellness programs must meet the following five requirements to be nondiscriminatory for purposes of HIPAA:
- The total reward that may be provided to an individual cannot exceed 20% of the total cost of employee-only coverage. Beginning in 2014, this will increase to 30% with an additional 20% available to reward compliance with tobacco use cessation programs (or a grand total of 50% for those programs).
- The program must be reasonably designed to promote health or prevent disease;
- The program must allow eligible individuals an opportunity to qualify for the award at least annually;
- The program must be available to all similarly-situated individuals; if it would be unreasonably difficult or medically inadvisable for an individual to attempt to satisfy the standard, the program must provide a reasonable alternative or waiver; and
- All materials describing the material terms of the program must disclose the availability of a reasonable alternative standard
Although a plan is not required to provide an alternative in advance of a request, an alternative must be provided upon request taking into consideration all facts and circumstances.
The plan must consider the following in coming up with an alternative:
- If the alternative is completion of an educational program, the plan needs to make the program available instead of requiring an individual to find a program unassisted
- If the alternative is a diet program, the plan must pay for any membership or participation fee, but does not need to pay for food
- If the alternative is compliance with a medical professional’s recommendation who is the employee of the plan, and the participant’s own medical professional states that the plan’s recommendations are not appropriate, the plan needs to provide an alternative that accommodates the recommendations of the individual’s physician
American Fidelity Assurance Company does not provide tax or legal advice.