DOL, Treasury & HHS Issue Final HIPAA Nondiscrimination Rules

Finishing what they started five years ago, three federal departments – Labor, Treasury, and Health & Human Services – recently published final regulations on health factor nondiscrimination for group health plans, including wellness programs and Health Reimbursement Arrangements (HRAs). Employers and insurance agents are encouraged to review plans to ensure they contain compliant provisions.

Little has changed from the 2001 Proposed Regulations. These final rules are effective on February 12, 2007, for plan years on or after July 1, 2007, and cover six major areas:

1. Health Factors. Health plans cannot discriminate on the basis of eight health factors: (i) health status, (ii) medical condition, (iii) claims experience, (iv) receipt of health care, (v) medical history, (vi) genetic information, (vii) evidence of insurability, and (viii) disability. The regulations provide an HRA example where the carryover of unused amounts – typically based on prior claims experience – does not violate the rules.

Source-of-injury clauses continue to be permissible. For example, a plan may exclude injuries related to a suicide attempt, unless the injuries result from a medical condition, even if not diagnosed until after the injury. Thus, a plan must cover medical care related to a suicide attempt later diagnosed as due to depression.

2. Wellness Programs. The proposed regulations coined the term “bona fide wellness program.” The “bona fide” description left many with the misconception that any program that was not bona fide was prohibited. The final rules dropped the description because some programs are not subject to HIPAA rules, including:

• Fitness Center reimbursements
• Participation in diagnostic testing programs
• Preventive care benefits (e.g., prenatal care)
• Reimbursement for smoking cessation programs regardless of success
• Rewards for attending monthly health education seminars

The five requirements for a permissible wellness program are:

• Maximum reimbursementamount of 20 percent. This is based on employee-only coverage, unless covered dependents can participate in the program. Then, the maximum is 20 percent of the coverage category for the employee and dependent(s).
• Reasonable design. The program must provide a reasonable chance of improving health or preventing disease.
• Annual qualification. Participants must have the chance to qualify for the reward at least once per year.
• Reasonable alternative standard. If participants cannot reasonably meet a standard due to a health factor, plans must provide an alternative standard. Following the recommendations of a physician is an example. Many comments focused on smoking cessation programs and whether it was fair for smokers to receive a reward for non-smoking each year simply by participating in a program. Employers may vary the classes and require an annual physician’s statement that a health factor (e.g., nicotine addition) makes it unreasonably difficult or medically inadvisable to meet the non-smoking standard.
• Disclosure of reasonable alternative standard. All wellness program materials describing its terms must disclose that another standard is available. If the document merely mentions the program and does not describe the standard, it does not have to disclose availability of an alternative standard.

The regulations contain examples showing how to structure programs featuring premium discounts, deductible waivers and tobacco-use premium surcharges.

3. Prohibited Discrimination for Eligibility and Premiums. Plans may not have different eligibility requirements or higher premiums for participants based on a health factor. This prohibition includes “list billing” – quoting a different premium for an individual – even if an employer makes up the difference.

4. Nonconfinement and Actively-at-Work Clauses. Nonconfinement clauses make benefits contingent on the participant not receiving inpatient care. The regulations prohibit such clauses. The rules clarify that a new employer’s plan would have to provide benefits to a newly enrolled participant who was in a hospital, regardless of the prior plan’s obligations. Actively-at-work clauses condition benefits on being actively at work. These also are prohibited, unless individuals who are absent from work due to a health factor are treated as if they are actively at work.

5. Preferential Treatment for Health Factors. The rules clarify that plans may provide more favorable treatment for those with health factors.

6. Effect on Other Laws. The regulations clarify that HIPAA compliance does not necessarily translate into compliance with other laws. For example, excluding prescription contraceptives used only by women would likely violate Title VII if the plan provided for other preventive benefits.

On the same day, the IRS issued regulations that exempt certain church plans from the nondiscrimination rules. Such self-insured plans may require evidence of good health for eligibility in certain circumstances. These rules have the same effective and applicability dates as the other regulations.

The regulations are available under the Internal Revenue section of the Federal Register at www.access.gpo.gov/su_docs/fedreg/a061213c.html. Also, the DOL posted an FAQ page on these rules at: www.dol.gov/ebsa/faqs/faq_hipaa_ND.html.

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