Open Wide And Say Ah: It's HIPAA Checkup Time

(Published March 12, 2007)

Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), group health plans can't discriminate against employees and their dependents based on health factors, or treat similarly-situated individuals differently. Final regulations, effective for plan years beginning July 1, 2007, implement these non-discrimination provisions. These provisions vary only slightly from interim final regs, which have been in effect since 2001. The regs make significant changes to wellness programs. As a result, employers with wellness programs will need to review them to ensure that they conform to new regulatory mandates.

Health Factors And Similarly-Situated Individuals 

HIPAA's non-discrimination provisions cover eight largely overlapping health-related factors: health status; medical conditions, including physical and mental illnesses; claims experience; receipt of health care; medical history; genetic information; evidence of insurability; and disability.

The regs require plans to sort employees and their dependents into groups of similarly-situated individuals. Plans have latitude in making groups, but distinctions must be based on bona fide employment-based classifications consistent with the employer's usual business practices. Allowable distinctions: full-time vs. part-time status, geographic location, union membership, date of hire, length of service, current vs. former employee, and occupation.

While the regs require that all members of a group be treated the same, different groups can be treated differently. In addition, plans may treat individuals with adverse health conditions more favorably, and charge them more. Plans, for example, can extend coverage to employees who can't work because they're disabled, extend coverage to adult dependent children who are disabled, or waive or reduce employees' contributions under exigent circumstances.

Eligibility And Benefits Rules  

HIPAA's thrust is to prevent plans from discriminating based on health factors, or treating group members differently, in terms of eligibility rules, benefits, and premiums and contributions. Eligibility rules include enrollment, when coverage begins, waiting periods, late and special enrollment, eligibility and continued eligibility for benefits, and terminating coverage.

The final regs clarify that employees already enrolled can't receive more favorable treatment than employees waiting to enroll. The trap is often found in employers' different leave policies. Say, full-time employees are defined as those who work 30 hours a week. If full-time employees who are on paid leave are considered to be actively at work for purposes of benefits eligibility, the plan must credit time on paid leave toward satisfying the 30-hour-per-week requirement for employees seeking to enroll.

Plans may deny benefits, but not the right to enroll in the plan, based on the source of the injury. Example: Plans can cover head injuries, but exclude benefits if the injury results from high-risk sports, like bungee jumping. Exception: The source-of-injury rules don't apply to injuries related to domestic violence or to medical conditions (e.g., depression-related suicide attempts).

The regs follow through with forbidding three practices enumerated in the interim final regs: list billing (separating individual employees on a bill based on a health factor); denying benefits to individuals who aren't actively at work on the day they're eligible for benefits; and denying benefits if individuals are hospitalized when enrollment eligibility begins.

Benefits must be uniformly available to group members. Plans may limit or exclude benefits for a specific disease or condition; limit or exclude treatments or drugs; or limit or exclude benefits based on whether the benefits are experimental or not medically necessary, if limits or exclusions are uniform.

As for premiums and contributions, group members must be charged the same. On the same non-discriminatory basis, plans may impose deductibles, co-payments, and annual or lifetime caps. Exception: Plans may charge group members less if they participate in a wellness program.

Wellness Programs  

Since the interim regs were released in 2001, wellness programs have grown in popularity. These programs seek to reward employees who adopt healthy lifestyles, which means lower health premiums for employers and employees. Rewards often take the form of monetary incentives — a reduction in premiums or co-payments, discounts, cash, etc. The regs specify that monetary incentives are allowable, but place restrictions on how much may be offered and how wellness programs must be structured.

The regs split wellness programs into two categories. Into the first go participation-based programs, which don't require employees to attain any particular result to obtain a reward. They include:

• reimbursing employees for gym memberships;

• rewarding employees who participate in a diagnostic testing program;

• well-baby visits;

• reimbursing smokers for the cost of smoking cessation, without regard to whether they actually quit; and

• rewarding employees who attend monthly health education seminars. 

The second category includes programs that require participants to meet a health-related standard before they can collect their rewards. This is acceptable discrimination, provided the program satisfies five requirements.

• The total reward available to employees under all wellness programs in which they participate is limited to 20% of the total cost of coverage (i.e., the combined amount of employer and employee contributions).

• The program is reasonably designed to promote health and prevent disease. The reasonably-designed standard is flexible. The program should offer participants a reasonable chance of improving their health, but doesn't need to be overly burdensome.

• Participants must be allowed to qualify for a reward at least once a year.

• Reasonable alternative standards for obtaining the reward must be provided if it's unreasonable for certain participants, due to a medical condition or for whom it's medically inadvisable, to attempt to satisfy the original standard. A simple alternative could be lowering the original standard. Plans can seek verification of a participant's medical condition from a doctor.

• Plan materials must describe the wellness programs, the monetary differentials, and the availability of the reasonable alternative standards.

So what about an employee who wants to quit smoking? He could participate in the first category of wellness programs, and be rewarded even if he doesn't, or can't, quit. But that's not much of an incentive for him or his employer. If the smoking-cessation program is a rewards-based program, the monetary reward, perhaps a premium discount, would have to be limited to 20%. The program would have to provide him with a reasonable alternative if he can't quit right away, and would have to continue to offer him reasonable alternatives as long as he continues to participate. For example, the program could offer different stop-smoking classes or switch to subsidizing the cost of nicotine patches or gum. What's important, the regs say, is the trying, not the success.

The final regs include copious examples of each non-discrimination and wellness provision. To read the regs in their entirety, surf to:

http://edocket.access.gpo.gov/2006/pdf/06-9557.pdf

Related Topic(s): Benefits - HIPPA