Feds Clarify HIPAA Rules for Wellness Rewards

December 13, 2006 (PLANSPONSOR.com) - The Departments of Labor (DoL), Health and Human Resources (HHS), and Treasury have released final HIPAA (Health Insurance Portability and Accountability Act) rules, which allow for companies to provide rewards of up to 20% of coverage costs under qualifying wellness programs.

The final rules, published in the Federal Register for December 13, 2006, govern the HIPAA provisions prohibiting discrimination based on a health factor for group health plans and issuers of health insurance coverage offered in connection with a group health plan. According to the rules, wellness programs that would not have to satisfy any additional standards to comply with the nondiscrimination requirements include:

  • A program that reimburses all or part of the cost for memberships in a fitness center,
  • A diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes,
  • A program that encourages preventive care through the waiver of the copayment or deductible requirement under a group health plan for the costs of, for example, prenatal care or well-baby visits,
  • A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking,
  • A program that provides a reward to employees for attending a monthly health education seminar.

Only programs under which any of the conditions for obtaining a reward is based on an individual satisfying a standard related to a health factor must meet five additional requirements described in the regulations in order to comply with the nondiscrimination requirements.

The final rules clarify that, in order for a program to satisfy the standard for being reasonably designed to promote health or prevent disease the program must have a reasonable chance of improving the health of or preventing disease in participating individuals and, it is not overly burdensome, is not a subterfuge for discriminating based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease.

In addition to finalizing 2001 interim final rules issued by the departments, the regulations clarify how the source-of-injury rules apply to the timing of a diagnosis of a medical condition and add an example to illustrate how the rules apply to the carryover of unused employer contributions of health reimbursement arrangements (HRAs). The example concludes that because employees who have participated in the example plan for the same length of time are eligible for the same total benefit over that length of time, the arrangement does not violate HIPAA.

The final regulations are effective February 12, 2007 and apply for plan years beginning on or after July 1, 2007.