This post is Part 2 of our high-level overview of the regulatory framework guiding wellness programs. If you haven’t done so already, check out Part 1 so you can get the full scoop on the Americans with Disabilities Act (ADA), Americans with Disabilities Act Amendments Act (ADAAA), and Genetic Information Nondiscrimination Act (GINA). In a similar manner, below we discuss the rules and regulations associated the Health Insurance Portability and Accountability Act (HIPAA) and Patient Protection and Affordable Care Act (PPACA).
HIPAA and PPACA
The general rule pursuant to HIPAA nondiscrimination provisions is that a health plan is prohibited from charging similarly situated individuals different premiums on the basis of a “health factor.” However, there is an exception to the general rule if the reward (i.e., premium discount) is based on participation in a program reasonably designed to promote health or prevent disease (i.e., a wellness program).
When analyzing a wellness program under HIPAA and PPACA, the first step is to determine whether the wellness program is “participatory” or “health-contingent.” Participatory wellness programs are not required to follow HIPAA nondiscrimination provisions, discussed below. However, participatory (and health-contingent) wellness programs should be reviewed and scrutinized against the provisions of GINA, ADA, the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC), and other federal and state laws.
Participatory wellness programs are defined under HIPAA nondiscrimination final regulations as programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. Examples include a program that reimburses employees for a gym membership, 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.
If the wellness program is participatory, it does not have to follow HIPAA nondiscrimination regulations. However, if part or all of a wellness program is health-contingent, the program must be analyzed pursuant to HIPAA nondiscrimination regulations.
Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward. The standard may be performing or completing an activity relating to a health factor, or it may be attaining or maintaining a specific health outcome. The final regulations further subdivided health-contingent programs into (i) activity-only wellness programs and (ii) outcome-based wellness programs. While there are some differences, both types are permissible only if the program adheres to the five conditions:
- Be reasonably designed to promote health or prevent disease (the same rules apply to activity-only and outcome-based programs).
- Give employees a chance to qualify for the incentive at least once a year (the same rules apply to activity-only and outcome-based programs).
- Cap the reward or penalty at 50% of the total cost of coverage for avoiding tobacco and at 30% for all other types of wellness incentives (the same rules apply to activity-only and outcome-based programs).
- Provide an alternative way to qualify for the incentive for those who have medical conditions (different rules apply to activity-only and outcome-based programs).
- Describe the availability of the alternative method of qualifying for the incentive in written program materials (the same rules apply to activity-only and outcome-based programs).
These rules set forth criteria for an affirmative defense that can be used by plans and issuers in response to a claim that the plan or issuer discriminated under HIPAA nondiscrimination provisions.