If you're like many employers, you may be trying to combat rising health care costs by encouraging your employees to adopt healthier lifestyles. Perhaps you subsidize more nutritious food choices in the employee cafeteria, offer a reward to workers who quit smoking, or provide premium discounts to employees who meet a certain cholesterol or blood pressure target. These incentives are often a win-win for both the employer and the employee, but did you know that such programs may be subject to the nondiscrimination requirements of the federal Health Insurance Portability and Accountability Act (HIPAA)?
Wellness Programs and HIPAA Nondiscrimination
HIPAA's nondiscrimination provisions generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductible, copayment or other cost sharing requirements based on a health factor, including a medical condition or medical history. However, there is an exception that allows plans to offer wellness programs.
Wellness programs are divided into two categories for purposes of determining compliance with the HIPAA nondiscrimination requirements:
- Programs that do not require an individual to meet a standard related to a health factor in order to obtain a reward are not considered discriminatory under HIPAA. Assuming that participation in the program is made available to all similarly situated individuals, such a program complies with the HIPAA nondiscrimination rules. Examples include a program that reimburses employees for the cost of smoking cessation aids regardless of whether the employee quits smoking, or a plan that provides rewards for attending health education seminars.
- Programs that require individuals to satisfy a standard related to a health factor in order to obtain a reward must meet five additional requirements to comply with HIPAA. An example of this type of program is one that requires an individual to obtain or maintain a certain health outcome in order to obtain a reward (such as being a non-smoker or exercising a certain amount).
5 Requirements for Rewards Based on Standards Related to a Health Factor
If any of the conditions for obtaining a reward under a wellness program is based on an individual satisfying a standard that is related to a health factor, the wellness program violates HIPAA unless the following five requirements are met:
- The total reward for all the plan's wellness programs that require satisfaction of a standard related to a health factor is limited to 20% of the cost of employee-only coverage under the plan (or 20% of the cost of the coverage in which an employee and any dependents are enrolled, if dependents may participate in the wellness program).
- The program must be reasonably designed to promote health and prevent disease.
- The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
- The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of the initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard.
- The plan must disclose in all materials describing the terms of the program the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard).
Important Note: In order to be subject to HIPAA's nondiscrimination requirements, a wellness program (also called a disease or case management program) must be, or be part of, a group health plan. If an employer operates a wellness program as an employment policy separate from the group health plan, the program may be covered by other federal or state nondiscrimination laws, but it would not be subject to HIPAA's nondiscrimination regulations. For example, an employer who institutes a policy that any employee who smokes will be fired is not acting under a group health plan, and HIPAA's wellness program rules would not apply (but other federal and state nondiscrimination laws may apply, including disabilities laws).
As with any employee program, check with a knowledgeable employment law attorney to ensure that your program complies with all applicable state and federal laws, including nondiscrimination laws other than HIPAA.
For More Information
The U.S. Department of Labor offers a Wellness Program Checklist to help determine whether your employee wellness program is HIPAA-compliant and FAQs regarding HIPAA's nondiscrimination provisions. Our Health and Wellness section contains valuable information for employers designing their own programs to improve employee health. And now would be a great time to download our free 2012 Employee Benefit Plan Compliance Calendar to help you stay on top of federal notice requirements related to your health plans.
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