New FAQs issued by the Departments of Health and Human Services ("HHS"), Labor and the Treasury (the "Departments") provide guidance on the application of HIPAA nondiscrimination rules to wellness programs. Here are the highlights:
Nondiscrimination . The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") amended ERISA, the Code, and the Public Health Safety Act to add, among other things, provisions prohibiting discrimination by group health plans in eligibility, benefits, or premiums based on a health factor. However, there is an exception for wellness programs.
Final regulations (issued in 2006) generally divide wellness programs into two categories: (1) those which do not require an individual to meet a health condition to obtain a reward (e.g., a fitness center reimbursement program), and are therefore permitted because they do not discriminate under HIPAA, and (2) those which do require that a health condition be met to receive the award (e.g., being a non-smoker, attaining certain results on biometric screenings, or exercising a certain amount). The programs in category (2) are discriminatory under HIPPAA, but are permitted under the exception for wellness programs, if the following rules are met:
--the total reward under the program is limited to 20 percent (raised to 30 percent after 2013 by the Affordable Care Act) of the total cost of employee-only coverage under the program (modified if dependents may participate);
--the program must be reasonably designed to promote health or prevent disease; and
--the program must give eligible individuals an opportunity to qualify for the reward at least once per year, and the reward must be available to all similarly situated individuals (with a reasonable alternative-disclosed in all plan materials- for those who would have difficulty obtaining the award due to a medical condition).
A wellness program is not subject to HIPPAA's nondiscrimination requirements if it is operated as an employment policy separate from the employer's group health plan, although other Federal or State nondiscrimination laws may apply.
Examples. A group health plan gives an annual premium discount of 50 percent of the cost of employee-only coverage to participants who adhere to a wellness program, which consists of attending a monthly health seminar. This does not violate HIPAA nondiscrimination-the reward is not based on meeting any health condition.
A group health plan gives an annual premium discount, equal to 20 percent of the cost of employee-only coverage, to participants who, under a wellness program, have a cholesterol count not exceeding 200. The plan also provides that if it is unreasonably difficult or medically inadvisable to achieve the targeted cholesterol count within a 60-day period, the plan will make available a reasonable alternative condition to qualify for the reward. Although the reward is based on meeting a health condition, this plan qualifies for the HIPPAA exception for wellness programs-it is available to all similarly situated individuals, it provides a reasonable alternative standard, and the reward is limited to no more than 20 percent of the total cost of employee-only coverage.
A group health plan offers two different wellness programs, both of which are offered to all full-time participants in the health plan. The first program requires participants to take a cholesterol test and provides a 20 percent premium discount for every individual with a cholesterol count under 200. The second program reimburses participants for the cost of a monthly membership in a fitness center. The programs, together, do not violate HIPAA nondiscrimination requirements. This assumes that the first program, which is based on a health condition, meets the exception to the HIPAA nondiscrimination rules for wellness programs. Note that both programs may be offered together, because only one of them must meet this exception.