Home   Agent Login

WebcastS
> Mark Litow Interview #1
> Mark litow Interview #2
Mark is a principal and consulting actuary with the Milwaukee office of Milliman and the International Health Steering Director for Milliman Global. He joined the firm in 1975.
( Read More on Mark )

Visit other videos in our Archives

Hot Topics:

Markets:

Individual

Small Group

Large Group

Final HIPAA Nondiscrimination Regs concerning Wellness Programs

It took over ten years to get here but beginning July 1 of 2007 (January 1st for calendar year plans) employers now have some guidance concerning the do’s and don’ts of implementing a Wellness Program. As we all know, HIPAA prohibits an employer from discriminating against an employee based upon any claims data, medical history, genetic information etc. The new regs allow for a “wellness” exception so a plan may vary deductibles, co-pays and co-insurance based upon whether an employee meets the standards of a wellness program that satisfies condition specific requirements. Much of the regulatory language centers on how and how much one can actually incentivize a program to either encourage overall participation or to take the necessary steps to meet a specific goal related to a health factor – such as lowering overall cholesterol by 10%.

Incentives are important – most studies support the “motive force” behind this necessary cost. Participation in a wellness program can vary by as much as 70% based upon the availability and “monetary” amount of an incentive. SimplyWell – a data driven wellness program started by physicians and based out of Omaha Nebraska – has found the greatest participation linked to an incentive with a minimum value of $500. If you’re considering an investment in wellness – you can rest assure that your dollars will be well spent. Having placed Wellness programs throughout the continental US and recognized for consumer excellence by JD Powers and Associates - SimplyWell not only improves the overall health of the employee population but has the data to show an ROI of 6:1 by year five.

Employers need to be cognizant of two basic differentiators when it comes to wellness programs. The overall design and implementation can either be participation based or standard based with the former being easier to implement and administer. The later requires adherence to condition specific standards due to the very nature that they are outcomes based and not simply participatory. HIPAA imposes a 20% ceiling (of the cost of the applicable coverage – COBRA rates used) on any incentives tied to the program. Additionally, the wellness program must be reasonably designed to promote health or prevent disease and individuals must be allowed to qualify annually for incentives tied to the program. The reward must be available for all similarly situated individuals and full disclosure is a must so plan on drafting your SPD’s accordingly.

Most confusion and misinterpretation surrounds the 20% maximum ruling and the reward availability ruling. If the overall premium for an employee on a group policy is $3600, regardless if the employer pays 50% or more of the premium, the maximum permissible incentive cannot exceed $720 (20% of the cost of applicable coverage). If a plan includes dependents – the 20% is based upon the aggregate of the total benefit package – dependents included. Also, all participation and standard based programs need to be voluntary or you’ll run up against issues with the ADA. I have found many employers who want to penalize smokers or charge a surcharge on premiums if an employee cannot meet standards for blood pressure or cholesterol. One has to be extremely cautious in this area. The SPD must highlight the availability of reasonable alternatives and waivers if one cannot meet a specific health related goal. For example, smoking can be deemed a medical addiction and therefore an actual health condition. A reward tied directly to smoking cessation would need a reasonable alternative such as enrollment in a smoking cessation class if one can’t quit or even a waiver from a physician.

One also must realize that wellness programs that are carved out of the overall health plan lose ERISSA Preemption and many states will likely come down hard on any penalties put in place for activities that are clearly legal, i.e., smoking, drinking and eating burgers and fries five days a week. There can also be tax consequences if your reward involves the use of non-qualified benefits. For example – reimbursing the cost of a smoking cessation kit is a tax exempt item, reimbursing for gym membership is not and you may run into constructive receipt issues with the IRS. If gym membership is an important incentive – try to find a carrier that will reimburse gym membership and leave the tax consequences with them to deal with.

Oversight involves numerous government regulatory bodies such as the Treasury Department, Department of Labor, Health and Human Services and the EEOC to name a few and not all agencies see eye to eye on matters that apply to standard based programs. The greyest area will likely fall within the scope of the EEOC - to date they have not clearly provided guidance on what is deemed an acceptable incentive. There is a likelihood that any reward exceeding a nominal value (which they have not defined) may be construed as high enough to make the program involuntary.

The safest route, as an employer – especially if you’re new to wellness - is to start off with a participation based program. You’re not limited in terms of a monetary reward (or equivalent of) when it comes to incentivizing your program and these programs are much easier to monitor and administrate.

To learn more about implementing a wellness program plan on participating in our wellness webinar series coming this fall. Case study driven and highly practical - we will cover the ins and outs of setting up a compliant wellness program. Stay tuned for more information.