Warning: Your insurance incentives may be illegal
HIPAA legislation guidelines are unclear
You know those insurance incentives you’re using to help boost program participation? Don’t look now, but you may be in violation of a law passed in 1996.
This warning was recently issued by Barry Newman, JD, vice president for research and technical services, Aon Consulting, in Newburyport, MA. He specializes in health and welfare plans at AON, a consulting organization that helps clients maximize performance with a wide range of integrated human resource services.
In the March 1999 issue of Employee Benefits Journal, Newman writes: "Prior to the enactment of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the federal law most likely to affect these types of [incentive] programs was the Americans with Disabilities Act . . . with the enactment of HIPAA, the legal validity of almost all aspects of these programs was placed in doubt."1
Guidelines extremely vague
Why is HIPAA, better known for eliminating the onus of "pre-existing conditions" for people who are out of work and seeking new insurance, such a threat to incentive programs? And why is Newman issuing his warning now — three years after its passage?
"We’re not finding out enough about this law, and that’s the problem," Newman explains. "Yes, its main purpose was to give people credit for past medical insurance coverage so they would not have to go through pre-existing condition requirements, but when you get a law that big you get a lot of other elements thrown in. But this is not what has gotten the big press, and it’s certainly possible that health promotion professionals don’t know about it."
The first problem, says Newman, is the lack of definitions and guidance provided by the law. "The first round of regulations came out in April 1997, and they just made a glancing reference to incentives; they really admitted they needed outside help on how to deal with these things," says Newman. "The problem is that puts you in limbo; yes, you can have incentives, or certain types of awards, but what’s the determining factor?"
In his article, Newman gave the example of a cholesterol reduction program in which employees are given an insurance premium discount if their cholesterol levels are less than 200. According to Newman, HIPAA would not permit this type of reward, and in fact the program would not be considered a "bona fide wellness program" because it would "impermissibly discriminate based on health status-related factors."1
Newman explains: "If somebody has a condition that causes high cholesterol, you can’t reward for the results. What you can reward for is the employee’s effort and compliance with the wellness program. In other words, if they eat those healthy meals and achieve a certain cholesterol level you can reward them, but if their cholesterol stays high you can’t punish them or fail to give them the reward if they have successfully completed the program."
Here’s another example: Let’s say instead of charging a standard contribution of $100 from nonsmokers and a $20 penalty for smokers, you make the standard contribution $120, and offer a $20 discount for nonsmokers; does that get you around the problem? Not necessarily, says Newman. "It’s changing the words, but the end result is exactly the same — if you smoke, you pay more either way."
In short, the rule is: no penalties, period. "You have to provide an award for completing the program successfully, but not necessarily based on the results," says Newman. "With issues like blood pressure and cholesterol, there’s clearly a potential problem because there can be physiological reasons for having higher than normal levels." With smoking, he says, it’s a borderline case.
What the law is looking for is "good-faith compliance" on the part of the employer. But just what is that? "Even that’s a tough point," Newman admits. "If you have an incentive program, you should take a look at it. If it’s an outright penalty — say, you charge overweight employees an extra $45 a month in premiums — that won’t make it under any definition. If you phrase the incentive in terms of a reward, maybe it will make it, or the agency may just say, Don’t do it again.’"
In general, Newman advises, you’re safest going with a true reward to employees for taking a specific wellness program and putting forth a good-faith effort.
Reference
1. Newman B. Penalties, incentives and wellness programs After HIPAA. Employee Benefits Journal 1999; 3:29-32.
[For more information, contact: Barry Newman, Aon Consulting, P.O. Box 926, Newburyport, MA 01983. Telephone: (978) 465-5374. Web site: www.aon.com.]
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