Q&A Health Insurance Portability and Accountability Act of 1996 (HIPAA)

May employer charge an employee more of a premium if he or she uses its health plan more than other employees?

No.  A health plan is not allowed to establish eligibility rules that discriminate on the basis of a health factor as provided in  Treasury Regulations  Section  54.9802-1(b)(1)(i), Labor Regulations Section  2590.702(b)(1)(i)and  Health and Human Services Regulations Section  146.121(b)(1)(i).

Under Code Section 9802(a)(1), ERISA Section 702(a)(1), and PHSA Section 2702(a)(1), the following factors are considered health factors:

• health status;

• medical condition (including both physical and mental illnesses);

• claims experience;

• receipt of health care;

• medical history;

• genetic information;

• evidence of insurability (EOI) (including conditions arising out of acts of domestic violence); and

• disability.

Under what situations may an employer offer a discount or impose a surcharge on premiums to employees?

Under Treasury Regulations Section 54.9802-1(f)(2), Labor Regulations Section  2590.702(f)(2) and Health and Human Services Regulations Section  146.121(f)(2), wellness programs that condition eligibility for a reward upon a participant’s ability to meet a standard that is related to a health factor are permissible only if they meet satisfy each of the following five requirements:

• reward must be no more than 20% of the cost of coverage,

• The program must be designed to promote health or prevent disease,

• The program must give individuals an opportunity to qualify for the reward at least once a year,

• The reward must be available to all similarly situated individuals, and

• The plan must disclose that alternative standards (or waiver) are available

Can an employer offer any other wellness programs to employees?

Under Treasury Regulations Section 54.9802-1(f)(1), Labor Regulations Section 2590.702(f)(1), Health and Human Services Regulations Section 146.121(f)(1)., Wellness programs that do not condition eligibility for a reward upon a participant’s ability to meet a health standard (which we refer to as “participation-only programs”) are permissible if participation in the programs is available to all similarly situated individuals.

Examples of such programs include:

• incentives to participate in a health fair or testing (regardless of outcome),

• waiver of co-payment/deductible for well-baby visits,

• reimbursement of health club membership,

• reimbursements for smoking cessation programs (regardless of outcome), and

• a program that rewards employees for attending a monthly health education seminar.

Are any wellness benefits offered to employees taxable?

Yes, if the benefit does not qualify either as an “eligible medical expense” under Code Section 213(d) or a “fringe benefit” under Code Section 132.