The Health Insurance Portability and Accountability Act of 1996 (HIPAA) nondiscrimination rules generally, the nondiscrimination rules under HIPAA 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.) But these rules include an exception – group health plans may offer rewards for compliance with bona-fide wellness programs. Health reform 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.
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 the cost of a gym membership;
- A program that provides a reward for attending a monthly health education seminar;
- A program that provides an incentive to participate in a cholesterol or blood screening that is paid regardless of the outcome; and
- A program that provides for reimbursement for participation in a weight loss or smoking cessation program regardless of the outcome.
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 reimburses the cost of a gym membership if a stated weight loss goal (e.g., body mass index) is achieved;
- A program that provides an incentive to individuals who participate in a cholesterol or blood screening and whose cholesterol is reduced below a stated level; and
- A program that provides for reimbursement for participation in a weight loss or smoking cessation program if a weight loss goal is achieved or the individual quits smoking.
These types of wellness programs must meet the following five requirements in order 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; and
- All materials describing the material terms of the program must disclose the availability of a reasonable alternative standard
American Fidelity Assurance Company does not provide tax or legal advice.