Question: We're concerned about
our self-insured plan's compliance with the nondiscrimination
rules under the Health Insurance Portability and Accountability Act
(HIPAA). Would we be in violation if the plan requires employees
who use tobacco to pay more for coverage than employees who
don't use tobacco?
Answer: No, you wouldn't
necessarily be out of compliance — but you must get the
details right. As long as the cost difference is structured as part
of a wellness program, and the applicable conditions are met, you
can charge tobacco users a higher contribution rate to participate
in your group health plan without violating HIPAA's
HIPAA generally prohibits group health plans from discriminating
among similarly situated individuals based on health status or
health factors. However, the law's nondiscrimination provisions
don't prevent a group health plan from reducing participant
contributions for participants who qualify under a program of
health promotion and disease prevention (in other words, a wellness
program). Nor does HIPAA stop a plan from increasing participant
contributions for participants who fail to meet the requirements of
a wellness program.
Five Mandatory Conditions
Wellness programs that offer a reward only if the employee is
able to meet a standard related to a health factor (such as not
using tobacco) must satisfy five conditions:
incentive. Rewards related to tobacco use, when
combined with rewards for all other wellness programs under your
plan, cannot exceed 50% of the cost of coverage. If your plan
includes rewards not related to tobacco use (such as biometric
testing), the rewards unrelated to tobacco use cannot exceed 30% of
the cost of coverage.
promotion. The program must be reasonably designed to
promote good health or prevent disease.
opportunity. Participants must have a chance to
qualify for the reward at least once per year.
Availability. The program must be
available to all similarly situated individuals. This includes a
requirement that the program provide a reasonable alternative
standard, such as attending smoking-cessation classes, to all
participants — regardless of whether they have a medical
condition that makes it unreasonably difficult or medically
inadvisable to stop tobacco use.
alternatives. All plan materials describing the
wellness program must disclose the availability of characteristics
of the reasonable alternative standard. Department of Labor
regulations provide sample language for this disclosure.
Alternative standards are subject to additional requirements.
For example, if the alternative is completion of an educational
program, you must make the program available or help participants
find a suitable program. Also, you cannot require participants to
pay for the program.
All Applicable Laws
In addition to HIPAA, other laws may further restrict the design
of your wellness program. For example, final regulations issued by
the Equal Employment Opportunity Commission under the Americans
with Disabilities Act (ADA) state that HIPAA's increased
incentive limit for programs related to tobacco use cannot be used
if your program uses a medical test to detect participants' use
of tobacco. In this situation, the maximum allowable incentive
under the ADA may be calculated differently from the HIPAA limit,
depending on the terms of your plan.
The Affordable Care Act includes incentives for employers to
create wellness programs. However, when designing or administering
one, it's important to coordinate the requirements of all
applicable laws and not focus exclusively on HIPAA.
If you have questions about wellness programs, please
contactRon Present, Partner and Health Care
Industry Group Leader, at email@example.com or
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Mostly unnoticed amidst the recent series of multimillion dollar settlements announced as penance for HIPAA violations has been the unknown number of government investigations of data breaches for which no fine has been imposed.
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