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Date: |
February 14, 2008 |
Memorandum For: |
Virginia C. Smith, Director of Enforcement Regional Directors |
From: |
Daniel J. Maguire Director of Health Plan
Standards and Compliance Assistance |
Subject: |
Wellness Program Analysis
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What types of health promotion or disease prevention
programs offered by a group health plan must comply with the Department’s
final wellness program regulations and how does a plan determine whether
such a program is in compliance with the regulations?
On December 13, 2006, the Departments of Labor, the
Treasury, and Health and Human Services published joint final regulations
on the nondiscrimination provisions of the Health Insurance Portability
and Accountability Act (HIPAA). See 29 CFR 2590.702. The final regulations
include guidance on the implementation of wellness programs.
HIPAA’s nondiscrimination provisions generally
prohibit a group health plan or group health insurance issuer from denying
an individual eligibility for benefits based on a health factor and from
charging an individual a higher premium than a similarly situated
individual based on a health factor. Health factors include: health
status, medical condition (including both physical and mental illnesses),
claims experience, receipt of health care, medical history, genetic
information, evidence of insurability (including conditions arising out of
acts of domestic violence), and disability. An exception provides that
plans may vary benefits (including cost-sharing mechanisms) and premiums
or contributions based on whether an individual has met the standards of a
wellness program that complies with paragraph (f) of the regulations.
The regulations apply to group health plans and group
health insurance issuers on the first day of the plan year beginning on or
after July 1, 2007. Accordingly, for calendar year plans, the new
regulations began to apply on January 1, 2008.
Since the issuance of the final regulations, the
Department has received questions concerning what types of programs must
comply with the standards of 29 CFR 2590.702(f) and how to apply these
standards to particular wellness programs. The following checklist
provides further guidance.
Use the following questions to help determine whether
the plan offers a program of health promotion or disease prevention that
is required to comply with the Department’s final wellness program
regulations and, if so, whether the program is in compliance with the
regulations.
-
Insert the first day of the current plan
year: _______________________________.
Is the date after July 1, 2007?
Yes No
The wellness program final rules are applicable for
plan years beginning on or after July 1, 2007.
-
Does the plan have a wellness
program? Yes No
A wide range of wellness programs exist to promote
health and prevent disease. However, these programs are not always labeled
“wellness programs.” Examples include: a program that reduces
individual’s cost-sharing for complying with a preventive care plan; a
diagnostic testing program for health problems; and rewards for attending
educational classes, following healthy lifestyle recommendations, or
meeting certain biometric targets (such as weight, cholesterol, nicotine
use, or blood pressure targets).
Tip: Ignore the labels – wellness
programs can be called many things. Other common names include: disease
management programs, smoking cessation programs, and case management
programs.
-
Is the wellness program part of a
group health plan? Yes No
The wellness program is only subject to Part 7 of ERISA
if it is part of a group health plan. If the employer operates the
wellness program as an employment policy separate from the group health
plan, the program may be covered by other laws, but it is not subject to
the group health plan rules discussed here.
Example: An employer institutes a policy
that any employee who smokes will be fired. Here, the plan is not acting,
so the wellness program rules do not apply. (But see 29 CFR 2590.702,
which clarifies that compliance with the HIPAA nondiscrimination rules,
including the wellness program rules, is not determinative of compliance
with any other provision of ERISA or any other State or Federal law, such
as the Americans with Disabilities Act.)
-
Does the program discriminate based
on a health factor? Yes No
A plan discriminates based on a health factor if it
requires an individual to meet a standard related to a health factor in
order to obtain a reward. A reward can be in the form of a discount or
rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism (such as deductibles, copayments, or coinsurance),
the absence of a surcharge, or the value of a benefit that would otherwise
not be provided under the plan.
Example 1: Plan participants who have a
cholesterol level under 200 will receive a premium reduction of 20%. In
this Example 1, the plan requires individuals to meet a standard related
to a health factor in order to obtain a reward.
Example 2: A plan requires all eligible
employees to complete a health risk assessment to enroll in the plan.
Employee answers are fed into a computer that identifies risk factors and
sends educational information to the employee’s home address. In this
Example 2, the requirement to complete the assessment does not, itself,
discriminate based on a health factor. However, if the plan used
individuals’ specific health information to discriminate in individual
eligibility, benefits, or premiums, there would be discrimination based on
a health factor.
If you answered “No” to any of the above
questions, stop. The plan does not maintain a program subject to
the group health plan wellness program rules.
-
If the program discriminates based on
a health factor, is the program saved by the benign discrimination
provisions? Yes No
The Department’s regulations at 29 CFR 2590.702(g)
permit discrimination in favor of an individual based on a
health factor.
Example: Plan grants participants who
have diabetes a waiver of the plan’s annual deductible if they enroll in
a disease management program that consists of attending educational
classes and following their doctor’s recommendations regarding exercise
and medication. This is benign discrimination because the program is
offering a reward to individuals based on an adverse health factor.
Tip: The benign discrimination exception
is not available if the plan asks diabetics to meet a
standard related to a health factor (such as maintaining a certain BMI) in
order to get a reward. In this case, an intervening discrimination
is introduced and the plan cannot rely solely on the benign discrimination
exception.
If you answered “Yes” to the previous question, stop.
There are no violations of the wellness program rules.
If you answered “No” to the previous question, the
wellness program must meet the following 5 criteria.
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Compliance Criteria
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Is the amount of the reward offered
under the plan limited to 20% of the applicable cost of coverage?
(29 CFR 2590.702(f)(2)(i))
Yes No
Keep in mind these considerations when analyzing the
reward amount:
Who is eligible to participate in the wellness
program?
If only employees are eligible to participate, the
amount of the reward must not exceed 20% of the cost of employee-only
coverage under the plan. If employees and any class of dependents are
eligible to participate, the reward must not exceed 20% of the cost of
coverage in which an employee and any dependents are enrolled.
Does the plan have more than one wellness program?
The 20% limitation on the amount of the reward applies
to all of a plan’s wellness programs that require individuals to meet
a standard related to a health factor.
Example: If the plan has two wellness
programs with standards related to a health factor, a 20% reward for
meeting a body mass index target and a 10% reward for meeting a
cholesterol target, it must decrease the total reward available from 30%
to 20%. However, if instead, the program offered a 10% reward for meeting
a body mass index target, a 10% reward for meeting a cholesterol target,
and a 10% reward for completing a health risk assessment (regardless of
any individual’s specific health information), the rewards do not need
to be adjusted because the 10% reward for completing the health risk
assessment does not require individuals to meet a standard related to a
health factor.
-
Is the plan reasonably designed to
promote health or prevent disease?
(29 CFR
2590.702(f)(2)(ii)) Yes No
The program must be reasonably designed to promote
health or prevent disease. The program should have a reasonable chance of
improving the health of or preventing disease in participating
individuals, not be overly burdensome, not be a subterfuge for
discriminating based on a health factor, and not be highly suspect in the
method chosen to promote health or prevent disease.
-
Are individuals who are eligible to
participate given a chance to qualify at least once per year? (29
CFR 2590.702(f)(2)(iii)) Yes No
-
Is the reward available to all similarly
situated individuals? Does the program offer a reasonable
alternative standard? (29 CFR 2590.702(f)(2)(iv))
Yes No
The wellness program rules require that the reward be
available to all similarly situated individuals. A component of meeting
this criterion is that the program must have a reasonable alternative
standard (or waiver of the otherwise applicable standard) for obtaining
the reward for any individual for whom, for that period:
It is permissible for the plan or issuer to seek
verification, such as a statement from the individual’s physician, that
a health factor makes it unreasonably difficult or medically inadvisable
for the individual to satisfy or attempt to satisfy the otherwise
applicable standard.
-
Does the plan disclose the availability
of a reasonable alternative in all plan materials describing the
program? (29 CFR 2590.702(f)(2)(v))
Yes No
The plan or issuer must disclose the availability of a
reasonable alternative standard in all plan materials describing the
program. If plan materials merely mention that the program is
available, without describing its terms, this disclosure is not required.
Tip: The disclosure does not have to say
what the reasonable alternative standard is in advance. The plan can
individually tailor the standard for each individual, on a case-by-case
basis.
The following sample language can be used to satisfy
this requirement: “If it is unreasonably difficult due to a medical
condition for you to achieve the standards for the reward under this
program, call us at [insert telephone number] and we will work with you to
develop another way to qualify for the reward.”
If you answered “Yes” to all of the 5
questions on wellness program criteria, there are no violations of the
HIPAA wellness program rules.
If you answered “No” to any of the 5
questions on wellness program criteria, the plan has a wellness program
compliance issue. Specifically,
Violation of the general benefit discrimination rule
(29 CFR 2590.702(b)(2)(i)) – If the wellness program varies
benefits, including cost-sharing mechanisms (such as deductible, copayment,
or coinsurance) based on whether an individual meets a standard related to
a health factor and the program does not satisfy the requirements of 29
CFR 2590.702(f), the plan is impermissibly discriminating in benefits
based on a health factor. The wellness program exception at 29 CFR
2590.702(b)(2)(ii) is not satisfied and the plan is in violation of 29 CFR
2590.702(b)(2)(i).
Violation of general premium discrimination rule (29
CFR 2590.702(c)(1)) – If the wellness program varies the amount of
premium or contribution it requires similarly situated individuals to pay
based on whether an individual meets a standard related to a health factor
and the program does not satisfy the requirements of 29 CFR 2590.702(f),
the plan is impermissibly discriminating in premiums based on a health
factor. The wellness program exception at 29 CFR 2590.702(c)(3) is not
satisfied and the plan is in violation of 29 CFR 2590.702(c)(1).
Additional compliance information regarding the other
provisions in Part 7 of ERISA, including the HIPAA portability provisions
and the rest of the HIPAA nondiscrimination provisions, is available on
the Department’s Web site.
Questions concerning the information contained in this
Bulletin may be directed to the Office of Health Plan Standards and
Compliance Assistance at 202.693.8335.
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