As the 2014 plan year nears, plan sponsors are still sifting through the recently finalized changes to HIPAA’s nondiscrimination rules on wellness programs. The rules, issued June 3 (78 Fed. Reg. 33158), legally took effect Aug. 2 and must be met for plan years beginning on or after Jan. 1, 2014.
Along with raising the limits on permissible rewards, the final wellness rules clarified the design differences between “participatory” and “health-contingent” wellness programs, and the “reasonable alternative standard” required for the health-contingent programs that are “outcome-based,” noted Sally Doubet King of McGuireWoods in Chicago.
Participatory programs, those that do not offer a reward based on a health factor, need only be made available to all similarly situated individuals at least once a year, said Elena Lynett of the U.S. Department of Labor’s Employee Benefits Security Administration. Groups of individuals may be treated differently from one another based on “bona fide employment-based” classifications, which would include treating participants differently from beneficiaries, she added.
The new rules retain the 2006 HIPAA nondiscrimination rules’ basic framework. Wellness incentives based on a health-related factor must offer a reasonable alternative. For health-contingent programs that are “activity-only,” the new rules look much like the old ones. The plan may ask for a doctor’s note to verify that performing the activity is impossible or inadvisable; if an alternative is required, the plan may make it up ad hoc for that individual, or may simply waive the standard.
For the reasonable alternative, “the full value of the reward needs to be available,” whether it is prorated or made retroactive, Lynett said. For example, if a six-month walking program is the alternative to meeting a certain body-mass index as of Jan. 1, completing the program still must yield the full year’s benefit, she said. However, new hires during a calendar year need not be allowed to qualify retroactively; they may be treated as a separate bona fide employment category until the next annual opportunity to qualify rolls around.
If the reasonable alternative to an outcome-based standard is itself outcome-based (such as having to meet a more lenient BMI), the individual also gets the option of simply following the advice of his or her own treating physician, Lynett said. “That’s probably been the most controversial part of the regs,” noted Stephen Tackney, deputy division counsel with the Internal Revenue Service.
This deference to the doctor now must be included in the required disclosure notice, Lynett added. Another rule change is that the disclosure must be included in any notice to the individual that he or she has failed to meet the health-based standard.
Lynett was asked about a wellness program’s recourse against an employee who is found to have misrepresented his or her own behavior to obtain a reward. “That would be grounds for recoupment of the reward,” and the plan would not have to follow the full procedure that the Patient Protection and Affordable Care Act now requires for rescinding coverage, she replied.
King, Lynett and Tackney spoke Sept. 26 at the 24th Annual National Institute on Health and Welfare Benefit Plans, presented in Arlington, Va., by the American Bar Association’s Joint Committee on Employee Benefits.
HIPAA, PPACA and other rules that affect employee wellness programs are detailed in the Employer’s Guide to HIPAA.