Employer wellness programs need a HIPAA checkup

July 18, 2008

Excerpted from Oklahoma Employment Law Letter and written by attorneys at the law firms of Doerner, Saunders, Daniel & Anderson, LLP

by Anita K. Chancey

In a never-ending quest to lower health care costs, more and more employers are offering on-site health clinics and wellness programs. In this article, we’ll focus on the application of the Health Insurance Portability and Accountability Act (HIPAA) to wellness programs.

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Corporate wellness programs and the DOL
Employer wellness programs seek to help employees with a variety of health issues, including quitting smoking, losing weight, or managing chronic disease. Any program that promotes health or seeks to prevent disease, regardless of its label, is a wellness program and may be subject to a variety of laws and regulations, including the non-discrimination rules under HIPAA.

Recently, the U.S. Department of Labor (DOL) issued a "Wellness Program Checklist" to help employers determine whether their program is in compliance with the HIPAA regulations.

In determining the application of HIPAA to their company's wellness program, employers must answer a series of questions on the checklist. The questions may be broken down into two basic categories:

• Is the wellness program part of a group health plan and therefore subject to HIPAA's non-discrimination rules?
• If the program is subject to HIPAA, what rules must it follow?

The program may simply be an employment program or policy and not part of the health plan. If so, it isn't subject to HIPAA. For instance, an employer may offer a flu shot program that is a general benefit of employment but isn't part of the employer's group health plan. Therefore, the program wouldn't be subject to HIPAA.

The DOL reminds employers, however, that other laws may still apply, including parts of the Employee Retirement Income Security Act, state laws, and/or the Americans with Disabilities Act (ADA).

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Any program that's part of the group health plan is subject to HIPAA. Employers must then answer questions on the checklist to determine whether the program discriminates based on a health factor. A program discriminates based on a health factor if it requires an individual to meet a standard related to the factor to obtain a reward (or face a penalty).

Health factors may relate to an individual's health status, medical condition (including both physical and mental illnesses), claims experience, receipt of medical care, medical history, genetic information, evidence of insurability, or disability. For example, if a program offers a 10% health plan premium discount for employees who meet a cholesterol target, then the reward (the premium discount) is conditioned on meeting a health-related standard.

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For programs that discriminate based on a health factor, the next step on the checklist is to determine whether the discrimination is "benign." HIPAA permits discrimination based on a health factor that's in favor of an individual. An example of benign discrimination would be participation-based discrimination.

For instance, a group health plan may waive the plan's annual deductible for diabetic participants if they attend educational classes. The reward (the waiver of the annual deductible) is conditioned on participation and doesn't require the achievement of a particular health standard. HIPAA allows a group plan to limit who receives the reward in this circumstance even though it's based on a health factor.

For all other wellness programs that discriminate based on a health factor, you must evaluate whether the following five HIPAA criteria are being met:

1. The cost of the wellness program mustn't exceed 20% of the cost of coverage under the group health plan. When calculating the 20%, you must include all of the plan's wellness programs that require individuals to meet a health-related standard.
2. The program must be reasonably designed to promote health or prevent disease.
3. Individuals must have a chance to qualify for the reward at least once a year.
4. The reward must be available to all similarly situated individuals and must provide a reasonable alternative standard for obtaining the reward for individuals for whom it's unreasonably difficult to satisfy the standard because of a medical condition.
5. All group health plan materials that describe the wellness program must disclose the availability of a reasonable alternative standard.

The DOL provides sample language in the checklist that may be used to satisfy the final criterion: "If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, call us at [insert telephone number] and we will work with you to develop another way to qualify for the reward." The disclosure doesn't have to identify what the reasonable alternative standard is, which allows the program to tailor the standard for each individual.

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Do your own checkup
In light of this recent guidance, employers should do a checkup of their group health plans and employment practices to see whether any wellness program is subject to and follows HIPAA. At the same time, the program should be reviewed to determine compliance with other federal or state laws, such as the ADA.

The author may be reached at achancey@dsda.com.

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Copyright 2008 M. Lee Smith Publishers LLC. OKLAHOMA EMPLOYMENT LAW LETTER . OKLAHOMA EMPLOYMENT LAW LETTER does not attempt to offer solutions to any individual problems or to provide legal advice to its readers. Rather, the OKLAHOMA EMPLOYMENT LAW LETTER seeks to provide information about current developments in Oklahoma employment law. Questions about individual problems or requests for legal advice should be addressed to an employment law attorney of your choice.

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