Wellness Programs Must Comply with HIPAA Restrictions

Design of an effective wellness program requires collaboration between insurance brokers, benefit providers and legal advisors in light of limitations placed on certain aspects of their design by HIPAA’s Nondiscrimination Requirements.    Under the final regulations that take effect for plan years beginning after July 1, 2007, HIPAA impacts the design of wellness programs that take into account "health factors" when providing incentives under the program. Programs such as the following that do not take into account a participant’s health factors when a reward is given or withheld for participation by an employee or beneficiary:

• Health Assessments
• Diagnostic testing that does not take into account test results
• Preventive care encouragement incentives such as waivers of co-pays or deductibles
• Smoking cessation programs so long as the benefit is received regardless of whether the employee quits smoking
• Health education seminars
• Gym membership reimbursement

Wellness programs that give rewards for healthy conduct or that penalize unhealthy activities must meet all of the five following standards:

• Limited Reward:       All rewards offered under the program must not exceed 20% of the cost of coverage (total amount of employee and employer contribution). The reward can be in the form of a discount or rebate of premium or contribution; waiver of deductible, copayment or coinsurance; or the value of a benefit provided under the plan.

• Reasonably Designed to Promote Health or Prevent Disease:    The plan must have a reasonable chance of improving health or preventing disease in a way that is not overly burdensome.

• No More that Annual Qualification for Award:    Individual’s eligible to participate must be given the opportunity to qualify at least once a year.

• Uniform Reward Availability for "Similarly Situated" Individuals: The reward must be available to all similarly situated individuals and there must be a reasonable alternative for receiving the reward for any individual for whom it is unreasonably difficult due to a medical condition or for whom it is medically inadvisable to attempt to obtain the applicable standard. Physician verification may be required.

• Plan Material must Describe all Terms:     The plan must describe all terms of the program and the availability of a reasonable alternative. The following language may be used to satisfy the alternative:

"If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at            and we will work with you to develop another way to qualify for the reward."