UMR CARE MANAGEMENT BENEFITS BULLETIN

Wellness/ Disease Management Programs

UMR is committed to helping ourcustomers understand the laws

aroundcare management programs.Thisbulletin is intended to alert

customers to provisions of the law that affect ourprograms.

The HIPAA Wellness Rule

Employers that wish to include wellness programs as part of their group health plans have flexibility in terms of how they design their programs.A wellness program is broadly defined to include any program of health promotion or disease prevention.There are at least three general categories ofprograms.Some plan designs simply provide enhanced benefits to persons with health conditions. Another plan design conditionally provides a reward [1], but obtaining the reward or avoiding a penalty is not based upon a health factor.Still another plan design conditionally provides a reward if a health factoris satisfied (or subjects participants to a penalty if the health factor is not met).

The Health Insurance Portability and Accountability Act’s (HIPAA’s) nondiscrimination provision is triggered any time a care management program uses a covered person’s health factor as standardto determine eligibility for a reward.HIPAA’s nondiscrimination provision, known as “section 702,” generally prohibits group health plans from discriminating against an individual, in terms of eligibility or premium contributions, on the basis of a health factor.A heath factor containsinformation such as health status, medical condition (mental and physical), claims experience, receipt of health care, medical history, genetic information and evidence of insurability.

Only certain wellness programs raise discrimination issues under HIPAA.Programs that automatically enhance benefits for those with particular health conditions or that do not base a reward on a health factor will generally not be found to discriminate under HIPAA.

1. Enhanced Benefits.UMR works with sponsors of group health plans who have adopted benefit enhancementsfor persons with health conditions as part of their plan designs.One example is an employer who makes cholesterol lowering drugs (statins) available to persons with high cholesterol without a co-pay.A more common example is programs that make prenatal or well baby benefits available to expectant mothers without subjecting the benefits to a deductible.These types of wellness programs increase benefits to persons with health conditions and do not raise discrimination issues under HIPAA.

Increasing Benefits for Persons with Adverse Health Conditions is not Discrimination.In 1997, the DOL, HHS and IRS published regulations under HIPAA section 702 which made clear that group health plans may provide more favorable treatment to individuals with adverse health factors.Under the regulation, group health plans are permitted to establish programs that increase the level of benefits provided to persons with health risks, chronic conditions or disabling conditions.Favorable treatment to encourage healthier outcomes may be provided in various forms, including increased coverage, lower deductibles or lower premiums or contributions.

2. Standards Not Based on a Health Factor.UMRalso administers wellness programs that condition a reward on the covered person’s conduct, but the conditions for the reward are not based on the individual satisfying a standard related to a health factor.For example, UMR works with employers who reduce premiums for employees who complete a health risk assessment (HRA).Because the reward (i.e., a reduced premium or increased deductible) is not based on a health standard—and is available to all covered persons without regard to health status—there is no discrimination under HIPAA.Examples of other wellness programs that are not based on health factorsinclude:

  • A program that provides reimbursement for the cost of cessation programs without regard to whether the person actually quits smoking
  • A program that provides a reward to any employee that attends a monthly health education seminar
  • A program that provides a reward to expectant mothers who complete a well-baby class
  • A diagnostic testing program that provides a reward for participation and does not base any part of the reward on health outcomes

3.Standards Based on a Health Factor. Finally, UMRworks with employers that have adopted wellness programs that use standards based on health factors to shape healthy behavior.Some plan sponsors, for example, do charge participants who smoke, have high body mass indexes (BMIs) or have high cholesterol counts more for their coverage.Other employers wish to increase the deductibles applicable to persons with health conditions who fail or refuse to participate in a disease management program.Because these types of wellness programs condition a reward on the attainment of a standard that is related to a health status, these programs raise discrimination issues under HIPAA.

While HIPAA generally prohibits plans from discriminating in terms of eligibility or premium contributions (including other forms of cost-sharing) on the basis of a health factor, the final wellness program regulations(see 71 Fed. Reg. 75014), do allow health status to be taken into account provided five additional standards are met.

Requirements.Under the HIPAA wellness program requirements, a plan may use a health factor as part of a wellness program if each of the following provisions are met:

(i)The reward may not exceed 20 percent of the cost of employee-only, family or dependent coverage under the plan.

(ii)The program must be reasonably designed to promote health.

(iii)The program must give eligible individuals the opportunity to qualify for the reward as least once per year.

(iv)The reward must be available to all similarly situated individuals.A reward is only considered available when there is a reasonable alternative method of compliance for those individuals for whom it is too difficult to meet the standard because of a medical condition.

(v)The plan booklet or summary plan document (SPD) must inform plan participants that an alternative standard is available.

Wellness programs meeting each of the above five elementsmay use standards that take health status into account.

Other federal laws thatapply to wellness programs.Compliance with the HIPAA wellness rule is required for any wellness program that seeks to shapebehavior using a health factor.At the same time, employers must remember that other federal lawsalso apply to wellness programs.The wellness program regulations warn employers that they must comply with other laws, such as the tax code, Americans with Disabilities Act (ADA), Title VII, the Family and Medical Leave Act and state law.

Of concern are programs that solicit medical history information.A wellness program may, for example, require that medical claims history, genetic information and family medical history be disclosed to the employer.The ADA, however, prevents employers from obtaining medical history information except on a voluntary basis.(See ADA section 102(d)(4)(B)).

Plan sponsors obtaining medical history information may use the information obtained to write a health advisory noteto the covered employee suggesting recommended steps to improve his or her health.To encourage broad participation in wellness programs, certain employers have designed penalties fornon-compliantindividuals who fail or refuse to complete the questionnaire.

While it may be that the use of a penalty in this situation is acceptable under the HIPAA wellness rule, it raises concerns under the ADA.As previously noted, medical history information may only be obtained on a voluntary basis under the ADA.The agency in charge of the civil rights laws, the Equal Employment Opportunity Commission, has advised that depending on the size of the penalty applied to non-compliant individuals, at some point “voluntary” questions about medical history may become “mandatory.”As a result, an employer requesting medical history information and seeking to impose a penalty on non-compliant individuals, may wish to consult with an attorney.

A final consideration relates to the tax treatment of benefits wellness programs.The tax law imposes special requirements on self-funded group health plans.The fact that a benefit, such as membership in a health club, may be an acceptable wellness program benefit, does not mean that the benefit will be qualified under the tax code.Your tax advisor may be able to provide you with more information on qualified health benefits.

We hope this information is helpful to you.Please contact your UMRaccount manager if you have any questions about the information in this bulletin.

HEALTH AND WELLNESS PROGRAM KEY

This key is intended to help you assess where a Health and Wellness Program might fit into HIPPA non-discrimination rule requirements.It is not intended to be comprehensive.If you still have questions, you may wish to contact your attorney.

Step 1

Is it a Health and Wellness Program? A Health and Wellness Program is broadly defined to include any program of health promotion or disease prevention.

Yes No

If Yes, check which of the following applies:

Step 2

Does the program automatically enhance benefits for persons with health conditions/risks, or chronic or disabling conditions?That is, does it identify individuals with certain health conditions and automatically provide them with better or extra benefits?Examples:Pay first dollar benefits for Statins, pay for tobacco cessation products, etc.

If Yes, this meets HIPAA non-discrimination requirements and is allowable under HIPAA Section 702 – group health plans may provide more favorable treatment to individuals with adverse health factors.The program can be implemented without conditions.

If No:
Does the program provide a reward or apply a penalty, and either:

(1) Everyone is eligible.For example, everyone must complete a Health Risk Assessment in order to be eligible for the plan or to receive reduced premium rates, or everyone who attends a monthly health education class received a reduced premium rate.

If Yes, meets HIPAA non-discrimination requirements.Program can be implemented without conditions.

(2) The reward is aimed at a specific identified population with a health factor but is not based upon an individual satisfying a standard related to that health factor.For example, expectant mothers who attend a prenatal class have reduced or no office co-payments, or a program that provides reimbursement for the cost of smoking cessation programs without regard to whether an individual quits smoking.

NOTE:If a penalty applies that could cause individuals with an identified health factor to have less favorable benefits than individuals without identified health conditions, then move on to Step 3.

If Yes, meets HIPAA non-discrimination requirements.Program can be implemented without conditions.

If No:

Step 3

Does the program base the application of a reward or penalty on health condition standards?

In other words, does the program identify a subset of individuals with a health factor and apply a penalty if certain conditions are not met?The condition could be as specific as obtaining a certain BMI, quitting smoking or obtaining a certain cholesterol level.It could also be as broad as identifying individuals with chronic conditions and requiring their participation with a particular program in order to avoid a penalty, i.e., providing individuals with identified health factors with less favorable benefits unless certain criteria are met.

If yes, the program must meet all five conditions:

The reward does not exceed 20 percent of the cost of employee-only, family or dependent coverage under the plan.

The program must be reasonably designed to promote health.

The program must give eligible individuals the opportunity to qualify for the reward as least once per year.

The reward must be available to all similarly situated individuals.A reward is only considered available when there is a reasonable alternative method of compliance for those individuals for whom it is too difficult to meet the standard because of a medical condition.

The plan booklet or summary plan document (SPD) must inform plan participants that an alternative standard is available.

[1] The term “reward” includes a “penalty.”