HIPAA Nondiscrimination

The Health Insurance Portability and Accountability Act (“HIPAA”) provides rights and protections for participants and beneficiaries in group health plans in order to improve portability and continuity of health coverage. It employs a number of mechanisms to advance this goal, including:

• Requiring plans to allow employees and dependents to enroll upon the occurrence of specified events (special enrollment).
• Prohibiting plans from discriminating with respect to premiums, eligibility or benefits based on an individual’s health status.
• Imposing guaranteed availability and renewability rules on insurers offering group health insurance.

This section addresses HIPAA’s prohibition on discrimination based on health status.  In addition, there are several other employment related laws that prohibit discrimination regarding health & welfare benefits on the basis of age, race, sex, disability, and other factors.  Click here for a complete discussion of these laws.

Plans Covered

• Applies to all group plans that are subject to ERISA, church plans and to governmental plans subject to the Public Health Service Act.
• “Excepted benefits” that provide certain types of medical benefits on a limited or ancillary basis are exempted from these compliance requirements.

HIPAA Nondiscrimination Provisions

• health status
• medical condition (including both physical and mental illness)
• claims experience
• receipt of health care
• medical history
• genetic information
• evidence of insurability
• disability

Eligibility and Benefits

• Enrollment;
• The effective date of coverage;
• Waiting (or affiliation) periods;
• Late and special enrollment;
• Eligibility for benefit packages (including rules for individuals to change their selection among benefit packages);
• Benefits (including rules relating to covered benefits, benefit restrictions, and cost-sharing mechanisms such as coinsurance, copayments, and deductibles);
• Continued eligibility; and
• Terminating coverage (including disenrollment) of any individual under the plan.

Premiums and Contributions

The rules prohibiting discrimination with respect to premiums or contributions include discounts, rebates, payments in kind and any other premium differential mechanisms that take account of an individual’s health status.

Note that this does not prevent a group insurer from underwriting a group as a whole based on the health of the group’s participants provided that it does not charge any particular participant a higher premium than it charges for a similarly situated participant based on health status.  The ACA has modified this rule for insurers in the small group market.  For plan years beginning in 2014, insurers cannot underwrite the policies it issues to small employers (those with fewer than 50 employees – or, beginning in 2016, 100 employees) based on the health or claims of plan participants.   Rather, it must charge all employers in a State the same rate subject to adjustment based only on:

• Coverage category (i.e. single or family)
• Rating area as established by each State
• Age (limited to no more than 3 to 1 for adults)
• Tobacco use (limited to 1.5 to 1).

Similarly Situated Individuals

• A bona fide employment-based classification of the participant through whom the beneficiary is receiving coverage;
• Relationship to the participant (for example, as a spouse or as a dependent child);
• Marital status;
• With respect to children of a participant, age or student status; or
• Any other factor if the factor is not a health factor.

Note that the Affordable Care Act imposes additional constraints on the ability of plans that provide dependent coverage to exclude or terminate coverage for the children of participants.

The rules do permit a plan to provide more favorable treatment to individuals with adverse health factors.  In addition, a plan may charge a higher premium or contribution with respect to individuals with an adverse health factor if they would not be eligible for the coverage were it not for the adverse health factor.  For example, coverage under an employer’s health plan normally ends when a person’s work hours drop below 20 hours per week.  However, in the case of employees who can’t work due to illness or injury, the plan extends coverage for 12 months.  However, it requires such employees to pay a higher premium.

The rules also permit plans to provide premium and benefit incentives in connection with a wellness program that meets certain requirements.

See Wellness Rules below for Additional Details.

Non-Confinement

A group health plan cannot impose a non-confinement clause (e.g., a clause stating that if an individual is confined to a hospital at the time coverage would otherwise take effect, coverage would not begin until that individual is no longer confined).

A group health plan may not deny or delay an individual’s eligibility, benefits, or the effective date of coverage because that individual is confined to a hospital or other health care facility. In addition, a health plan may not set an individual’s premium rate based on that person’s confinement.

Actively-at-Work

Many group health plans have an “actively-at-work” provision (i.e., a requirement that an employee be actively at work after a waiting period for enrollment in order to have health coverage become effective on that day).

Generally a group health plan may not refuse to provide benefits because an individual is not actively at work on the day that individual would otherwise become eligible for benefits. However, plans may have actively-at-work clauses if the plan treats individuals who are absent from work due to a health factor (for example, individuals taking sick leave) as if they are actively at work for purposes of health coverage.

Plans may require individuals to report for the first day of work before coverage may become effective. Plans may terminate coverage for persons who do not meet minimum work requirements (such as working a certain number of hours per week) provided that they apply those rules uniformly to all similarly situated individuals without regard to health status.

Note that ACA imposes additional restrictions on waiting periods and on the ability of employers to terminate coverage of employees who fail to meet minimum work requirements.

Source-of-Injury

A plan cannot deny benefits otherwise provided for the treatment of an injury based on the source of that injury.  If the injury results from a medical condition or an act of domestic violence, a plan may not deny benefits for the injury – if it is an injury the plan would otherwise cover.

For example, a plan may not exclude coverage for self-inflicted injuries (such as injuries resulting from attempted suicide) if the individual’s injuries are otherwise covered by the plan and if the injuries are the result of a medical condition (such as depression).  A plan may exclude coverage for injuries that do not result from a medical condition or domestic violence, such as injuries sustained in high risk activities (for example, bungee jumping). But the plan could not exclude an individual from eligibility for coverage because the individual participates in high risk activities such as bungee jumping.

Domestic Violence and Criminal Activity Exclusion
Plans sometimes include limitations that apply to treatment and services resulting from criminal activity.  Please note that these limitations would not apply in situations involving domestic violence.

Wellness Related Nondiscrimination Rules

On June 3, 2013, the Departments published the final rule on the use of incentives in wellness programs.  The final rule does not mark a radical departure from the 2006 regulations, but does provide some much needed clarifications. The following information incorporates the guidance from this final rule.

• Group health plans may discriminate based on health factors through Wellness Programs, if such programs are established and maintained appropriately under the regulations.
• All employer-sponsored health promotion and disease prevention programs are considered to be Wellness Programs, and if they are tied to the employer-sponsored health plan, they must meet the requirements of HIPAA’s nondiscrimination provisions.

Wellness Programs can be categorized into two types:

1.      Participatory: No Reward or Health Standard

Open to all similarly situated individuals, but does not offer a reward, or if it does offer a reward, does not require participants to meet any health standard in order to receive the reward.  Examples include:

• a program that reimburses employees for all or part of the cost of membership in a fitness center;
• a diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes; and
• a program that provides a reward to employees for attending a monthly, no-cost health education seminar.

These programs are deemed to comply with the HIPAA nondiscrimination rules.

2.     Health-Contingent: Reward Based on Health Standard

There are two types of health-contingent wellness programs: activity-only wellness programs and outcome-based wellness programs.

• Activity-only wellness programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward. Activity-only wellness programs do not require an individual to attain or maintain a specific health outcome. Examples of activity-only wellness programs include walking, diet, or exercise programs.
• Outcome-based wellness programs require an individual to attain or maintain a specific health outcome (such as not smoking or attaining certain results on biometric screenings) in order to obtain a reward.

The reward may be a discount or rebate of premium, waiver of all or part of cost sharing mechanism (deductible, co-payment or co-insurance); it may also be the absence of a penalty, such as a surcharge or the reduction of a benefit that would otherwise be provided under the health plan.

These programs must meet five requirements to satisfy HIPAA nondiscrimination rules:

1. Limited Reward: If the reward is tied to a group health plan, the total reward for meeting the wellness standard, combined with any other rewards for health factor based programs under the same plan, cannot exceed the allowable percentage  of the full cost of coverage under that health plan. Full cost of coverage includes the total cost of the employer and employee contribution. It will also include the total cost of family coverage if dependents are allowed to participate in the program.
   • For plan years beginning before January 1, 2014, the allowable percentage is 20%.
   • For plan years beginning on after January 1, 2014, the allowable percentage cannot exceed 30%; however, an additional 20% can be added to the extent the additional percentage is connected to a program designed to decrease tobacco usage.
2. Reasonable Design: The program must be reasonably designed to promote health or prevent disease.
3. Annual Opportunity to Qualify: The program must give eligible participants an opportunity to qualify for the full reward at least once a year. If a participant initially declines to participate but joins in the middle of the plan year, the plan is not required to offer the reward until the start of the next plan year.
4. Uniform Availability: The full reward must be available to all similarly situated individuals and provide reasonable alternative standards for persons unable to otherwise qualify for the full reward based on a health factor.
5. Disclosure of Reasonable Alternatives: Plan materials describing Wellness program standards must disclose that a reasonable alternative standard is available to participants for whom it is unreasonably difficult or medically inadvisable to meet the standard required to earn the reward.  This disclosure must include contact information for requesting an alternative standard and a statement that the recommendations of the individual’s personal physician will be accommodated.  This disclosure must also be provided with any notice that the individual failed to satisfy the initial standard of an outcome-based program (click here for model language).

The primary difference between the two types of health contingent wellness programs relates to the rules regarding uniform availability and alternative standards.  These rules are summarized below.

Activity-Only Programs

The program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom:

• It is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard.
• It is medically inadvisable to attempt to satisfy the otherwise applicable standard.
• The program may reasonably require a statement from the individual’s physician verifying that the individual meets the “unreasonably difficult” or “medically inadvisable” criteria.
• Plans are not required to determine a particular reasonable alternative standard in advance of an individual’s request for one; however, a reasonable alternative standard must be furnished by the plan upon the individual’s request or the condition for obtaining the reward must be waived.  In determining whether a particular alternative standard is reasonable, the following factors should be taken into account:
  • If the reasonable alternative standard is completion of an educational program, the plan or issuer must make the educational program available or assist the employee in finding such a program (instead of requiring an individual to find such program unassisted), and may not require an individual to pay for the cost of the program.
  • The time commitment required must be reasonable.
  • If the reasonable alternative standard is a diet program, the plan is not required to pay for the cost of food but must pay any membership or participation fee. If an individual’s personal physician states that a plan standard is not medically appropriate for that individual, the plan must provide a reasonable alternative standard that accommodates the recommendations that physician.

Outcome-Based Wellness Programs

These programs typically involve an initial screening measurement or test to determine which individuals already meet some specified standards.  These may also involve annual repetition of the tests and programs for those individuals who do not meet the standards. Examples of outcome-based wellness programs include a program that tests individuals for specified medical conditions or risk factors (such as high cholesterol, high blood pressure, abnormal BMI, or high glucose level) and provides a reward to employees identified as within a normal or healthy range (or at low risk for certain medical conditions). The program requires employees who are identified as outside the normal or healthy range (or at risk) to take additional steps (such as meeting with a health coach, taking a health or fitness course, adhering to a health improvement action plan, or complying with a health care provider’s plan of care) to obtain the same reward.

Reasonable alternative standards for outcome-based programs must meet the following requirements:

• The reasonable alternative standard (or waiver) for obtaining the reward must be available for any individual who does not meet the initial standard based on the measurement, test, or screening.
• The “unreasonably difficult” or “medically inadvisable” standards do not apply to outcome-based programs as a condition of providing a reasonable alternative standard and no physician’s verification can be required.  However, if the alternative standard is itself an activity-only program, the same rules that otherwise apply to such programs apply to the alternative standard.
• If the alternative standard is itself an outcome-based program, it must comply with special rules:
  • The reasonable alternative standard cannot be a requirement to meet a different level of the same standard without additional time to comply that takes into account the individual’s circumstances. For example, if the initial standard is to achieve a BMI less than 30, the reasonable alternative standard cannot be to achieve a BMI less than 31 on that same date. However, if the initial standard is to achieve a BMI less than 30, a reasonable alternative standard for the individual could be to reduce the individual’s BMI by a small amount or small percentage, over a realistic period of time, such as within a year.
  • An individual must be given the opportunity to comply with the recommendations of the individual’s personal physician as a second reasonable alternative standard to meeting the reasonable alternative standard defined by the plan, but only if the physician joins in the request. The individual can make a request to involve a personal physician’s recommendations at any time and the personal physician can adjust the physician’s recommendations at any time, consistent with medical appropriateness. If the physician suggests that an activity-only weight loss program is appropriate, the plan must comply but has a say on which weight loss program should be used.

Wellness programs that do not offer plan-based incentives do not have to comply with the HIPAA wellness rules. This includes programs that have incentives such as cash, gifts or time off for meeting program goals.

Wellness Programs and the ADA

Employer-sponsored wellness programs that feature completion of a health risk assessment or participation in a health screening will need to comply with the Americans with Disabilities Act (ADA). See Other Nondiscrimination Acts for a discussion on wellness programs and nondiscrimination requirements under the ADA.

FAQs

EEOC Q&As

ACA FAQs

Privacy/Security FAQs

Insurance Market FAQs

Additional Resources

Non Discrimination FAQs

DOL Self-Compliance Tool

Calculating Incentive Limits for Wellness Programs