New HIPAA Regulations Apply to Employer-Sponsored Wellness Programs

A new regulation clarifies what financial incentives employers can and can’t offer under HIPAA’s nondiscrimination requirements.

On December 13, 2006 the Departments of Treasury, Labor and Health and Human Services jointly issued nondiscrimination requirements for employer-sponsored wellness programs. The new regulations exempt certain types of wellness programs from the nondiscrimination standards of HIPAA, the Health Insurance Portability and Accountability Act of 1996. This is good news for employers concerned their wellness programs might run afoul of HIPAA’s nondiscrimination standards. Generally, HIPAA prohibits a group health plan from charging a higher premium based on a health factor.

The regulations will make it easier for employers to offer wellness programs.

The following programs are not subject to the standards:

• A program that reimburses all or part of the cost for membership 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 co-payment or deductible requirement under a group health plan for the costs of pre-natal care, well-baby visits, or other types of preventive care.
• A program that reimburses employees for the cost of smoking cessation programs without regard to whether the employee quits smoking.
• A program that provides a reward to employees for attending monthly education seminars.

Programs covered by the HIPAA non-discrimination standards must meet five requirements:

• There must be limitations on the size of the award.
• The program must be reasonably designed to promote good health or prevent disease.
• The program must give individuals eligible for the program the opportunity to qualify for the reward at least once a year.
• The reward must be available to all similarly situated individuals unless thee program provides for a reasonable alternative standard or waiver for individuals who have difficulty meeting the standard due to a medical condition.
• Plan materials describing the program must disclose waiver options. Brief mentions of the wellness programs in employee handbooks do not have to reveal all details, but publications specifically addressing wellness programs must.

The regulations specifically limit the reward to 20 percent of the cost of employee-only coverage for employees. If the reward is available to dependents, it is limited to 20 percent of family coverage.

HIPAA is not the only federal law to keep in mind when developing wellness programs. The Americans With Disabilities Act forbids inquiries that are likely to reveal an employee’s disability. Make sure participation in wellness programs is purely voluntary.

For more information on wellness plans and how they might benefit your employees, please call us.

Mail Order Prescriptions

Remind your employees about the Prescription Mail Order program. Most insurance companies offer a discount on the prescription copays when members fill their prescriptions via the mail order program.

A prescription mail order program is:

• Convenient - prescriptions are mailed to your home
• Ideal for maintenance drugs
• Saves time and money

Tax Bill Will Ease HSA Administration

The Tax Relief and Health Care Act of 2006, signed into law on December 20, will help participants build HSA (health savings accounts) balances.

The most significant changes the bill will make include:

• Increasing contributions. Previous law limited HSA contributions to the lesser of the individual’s HSA-eligible plan deductible or a statutory maximum. The new rules allow participants to make the statutory maximum contribution, regardless of deductible. For 2007, the maximum contribution for self-only coverage is $2,850, and the maximum contribution for family coverage is $5,650
• Allowing those who enroll in an HSA-eligible plan in a month other than January to make the maximum annual contribution rather than a pro-rated one.
• Allowing employers to make higher contributions to the HSAs of non-highly compensated employees.
• Allowing employers to make a one-time transfer of funds from employees’ Flexible Spending Arrangements (FSAs) or Health Reimbursement Arrangements (HRAs) to an HSA. HRAs or FSAs with a grace period must be amended, and a rollover must be selected by an employee before year end, the guidance states. The balance amount must be transferred to the HSA by March 15 of the following year. The ability to make these transfers will facilitate an employer's transition to an HSA-eligible health plan when employees are covered by an HRA or FSA.
• Allowing individuals to make a one-time transfer from an Individual Retirement Account (IRA) into their HSA, up to the maximum HSA contribution amount.

The bill also requires Treasury to announce the next year’s contribution limits by June 1. Formerly, these notices came out later. Earlier notification will simplify education and enrollment processes.

For more information on HSAs or high-deductible health plans, please call us.