The Health Insurance Portability and Accountability Act (HIPAA) of 1996 prevents group health plans from charging subscribers a different rate of premium based on their health status. Programs that tie financial incentives to “participation only” do not have to meet any additional requirements. However, programs that are “results-based” have to meet five specific benchmarks:
(1) The total reward for all the plan’s wellness programs that require satisfaction of a standard related to a health factor must not exceed 20 percent of the cost of employee only coverage under the plan. If dependents (such as spouses and/or dependent children) may participate in the wellness program, the reward must not exceed 20 percent of the cost of the coverage in which an employee and any dependents are enrolled.
(2) The program must be reasonably designed to promote health and prevent disease.
(3) The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
(4) The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of the initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult because of a medical condition, or medically inadvisable, to satisfy the initial standard.
(5) The plan must disclose in all materials describing the terms of the program and the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard). Source: http://www.dol.gov/ebsa/pdf/workplacewellnessstudyfinal.pdf
The ACA Expands Use of Incentives
The Affordable Care Act of 2010 builds upon existing wellness concepts first outlined in the Health Insurance Portability and Accountability (HIPAA) Act of 1996 and expands the use of incentives to further encourage well-designed and non-discriminatory health and wellness programs in the workplace.
Two types of wellness programs are endorsed in the Affordable Care Act: participatory wellness programs, which are non-conditional, and health-contingent wellness programs, which require participants to satisfy a health status standard before the receipt of an award or incentive. As of January 2014, the allowed value of incentives under these programs increased from 20 percent to 30 percent of the total cost of family or individual coverage in 2014. (source: http://dupress.com/articles/breaking-constraints/)
In addition to the requirements outlined by The Health Insurance Portability and Accountability Act, there are a number of federal and state laws governing the use of incentive based programs. Some of these include:
Genetic Information Nondiscrimination Act (GINA) limits the medical information that can be requested under a wellness program. Specifically, participants can’t be required to provide genetic information, including family medical history, to qualify for an incentive. This would include answering questions about family medical history on a HRQ in order to qualify for an incentive. If such questions are included, participants must be given the option to leave those questions unanswered and still receive the program incentive for completing the HRQ. (source: https://www.manning-napier.com/Corporate/Insights/WhitePapers.aspx?ArticleID=233)
Americans with Disabilities Act (ADA) imposes additional nondiscrimination requirements on wellness programs. Reasonable alternatives must be provided for individuals who can’t participate in some part of a wellness program due to a known disability. Any medical examination component must be voluntary, and would not be considered voluntary if there is a penalty for not participating. Some wellness programs could be considered medical examinations under the ADA. Additionally, the ADA prohibits penalizing or withholding a reward based on a disability. For example, severe obesity is considered a disability under the ADA, which would limit the ability of a wellness program to offer weight loss incentives for individuals with this condition. (source: https://www.manning-napier.com/Corporate/Insights/WhitePapers.aspx?ArticleID=233)
ERISA – An employer’s wellness program will fall under ERISA’s purview if the employer’s benefit plan is otherwise subject to ERISA and if the wellness plan provides medical care rather than just educational information or access to health care facilities. Source: http://www.jonesday.com/employer-wellness-programs-what-financial-incentives-are-permitted-under-the-law-08-01-2013/)
Click here for the complete 123 page document, developed by the U.S. Departments of Labor, the Treasury, and Health and Human Services, that further describes the guidelines for wellness incentives under the Patient Protection and Affordable Care Act.
This information is provided to give you a brief overview of the guidelines for establishing wellness incentives for your employees. The regulatory landscape is complicated and ever changing so consultation with legal counsel and/or experts within the industry is highly recommended.