2. Monthly Webinar Series August 18, 2010 9/3/2015 Contents are proprietary and confidential. Copyright 2008 Benefits Advisor Network

3. HIPAA Non-Discrimination & Wellness Rules: What Benefit Designs Are Legal? 9/3/2015 Contents are proprietary and confidential. Copyright 2008 Benefits Advisor Network Presented by: Dr. David Rearick, BAN’s Medical Director Stacey Barrow, Associate Attorney to BAN’s Compliance Director

4. August 18, 2010 3 Nondiscrimination & Wellness Programs In December 2006, DOL, IRS and HHS jointly issued final regulations on group health plan nondiscrimination provisions and wellness programs New rules were effective for plan years beginning on or after July 1, 2007 The Patient Protection and Affordable Care Act codified HHS’ wellness regulations

5. August 18, 2010 20081906_1 4 Background Health Insurance Portability and Accountability Act of 1996 (HIPAA) added Part 7 of ERISA to counter certain discriminatory practices by group health plans and health insurance issuers On January 8, 2001, the DOL, IRS and HHS jointly issued interim final nondiscrimination rules and proposed regulations for wellness programs The final rules make few substantive changes, but do clarify how the nondiscrimination rules apply in specific benefit situations

6. August 18, 2010 20081906_1 5 General Nondiscrimination Rules Individuals cannot be denied eligibility for benefits or charged more for coverage because of any “health factor,” including: ­ Health status ­ Medical condition (both physical and mental) ­ Claims experience ­ Receipt of health care ­ Medical history ­ Genetic information ­ Evidence of insurability ­ Disability

7. August 18, 2010 20081906_1 6 General Nondiscrimination Rules (cont.) “Evidence of Insurability” includes conditions arising from acts of domestic violence, as well as participation in high risk activities (e.g., motorcycling, snowmobiling, horseback riding, skiing, etc.) Health questionnaires OK, as long as not used to deny, restrict or delay eligibility or determine individual premiums

8. August 18, 2010 20081906_1 7 Uniform Application Plans can exclude/limit benefits as long as applied on a uniform basis for all “similarly situated individuals” and not directed at individual participants based on a health factor Plan amendments that apply to all individuals in a group of similarly situated individuals and that are effective no earlier than the first day of the next plan year after the amendment is adopted is not considered to be directed at individual participants

9. August 18, 2010 20081906_1 8 Source of Injury Rules If injury results from medical condition or act of domestic violence, a plan may not deny benefits for the injury (if plan otherwise covers such injury) ­ Example: Coverage cannot be denied for injuries from suicide attempt resulting from depression Plan may exclude/limit coverage for high-risk activities (e.g., bungee jumping) – BUT not exclude an individual from enrollment for coverage due to individual’s participation in such high-risk activities

10. August 18, 2010 20081906_1 9 Similarly Situated Individual Determinations Distinctions among groups must be based on bona fide employment-based classifications consistent with employer’s usual practice – NOT health factors: ­ Part-time and full-time ­ Geographical location ­ Dates of hire and length of service Different groups can have different eligibility, benefits and cost provisions Participants and their beneficiaries may be in different groups

11. August 18, 2010 20081906_1 10 Nonconfinement Provisions Plans may not delay or deny eligibility, benefits or effective date of coverage, or set individual premium rates based on a person’s confinement to a hospital or other health care facility Final rules clarify the interaction with states' extension of benefits laws to deal with insurance laws that require the prior carrier to continue coverage throughout the hospital stay State law cannot change the legal obligation of the succeeding carrier under HIPAA, but any state law designed to prevent more than 100% reimbursement, such as state coordination of benefits laws, continue to apply

12. August 18, 2010 11 Actively-At-Work Provisions Plans may not refuse to provide benefits because individual is not actively at work on the day that individual would otherwise become eligible for benefits – UNLESS individuals absent due to health factors are treated as “actively-at-work” ­ Exception: First day of work limitation Some stop-loss carriers include actively-at-work provisions in the umbrella policy—DOL believes this practice is illegal

13. August 18, 2010 12 Permitted Reverse Discrimination Nothing prevents a plan from establishing more favorable rules for eligibility for benefits for individuals with adverse health factors A plan may charge higher premiums for individuals with adverse health factors IF AND ONLY IF such individuals would not otherwise be eligible for coverage were it not for the adverse health factor

14. August 18, 2010 13 Wellness Programs Program designed to promote health and prevent disease Exception to HIPAA’s nondiscrimination rules Proposed regulations were adopted in substance, except for: ­ Dropping “bona fide” language ­ Adding a few qualified programs that do not have to meet all the standards ­ Reward may not exceed 20% (30% in 2014 under PPACA)

15. August 18, 2010 14 Wellness Programs (cont.) “Rewards” can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost- sharing mechanism (such as deductibles, copayments, or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan

16. August 18, 2010 15 Wellness Programs (cont.) Qualified programs that are NOT subject to any additional requirements: ­ Program that reimburses costs of fitness center membership ­ Diagnostic testing program that provides reward for participation, not outcome ­ Program that encourages preventative care through waiver of co-payment/deductible for certain activities ­ Program that reimburses employees for the costs of smoking cessation programs without regard to whether employees quit ­ Program that provides reward for attending a monthly health education seminar

17. August 18, 2010 16 Wellness Programs (cont.) Other wellness programs must satisfy the following: ­ Reward must not exceed 20% of cost of coverage—if dependents may participate, reward limit is measured as 20% of the cost of the family coverage ­ Reasonably designed to promote health or prevent disease ­ Opportunity to qualify at least once per year ­ Reward must be available to all similarly situated individuals ­ Do wellness incentives impact a plan’s grandfathered status under PPACA?

18. August 18, 2010 17 Wellness Programs (cont.) When is a wellness program “available to all similarly situated individuals?” ­ Program must provide for a “reasonable alternative standard” (or waiver of otherwise applicable standard) to qualify for the reward ­ if it is unreasonably difficult for an individual to satisfy the otherwise applicable standard because of a medical condition, or ­ if it is medically inadvisable for an individual to attempt to satisfy the standard

19. August 18, 2010 18 Wellness Programs (cont.) Plan may seek verification, such as a statement from individual’s physician, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard In all plan materials describing the wellness program, the availability of the reasonable alternative standard must be disclosed

20. August 18, 2010 19 Wellness Programs (cont.) While not explicitly addressed in the regulations, the cost of any “reasonable alternative standard” made available to participants (e.g., participation in a smoking cessation program in lieu of a participant’s certification of non- smoker status) must presumably be paid for by the health plan. Forcing a participant to bear this cost would deny the participant access to the full amount of the wellness program reward.

21. August 18, 2010 20 Health Risk Assessments OK—as long as not used to deny, restrict or delay eligibility or determine individual premiums

22. August 18, 2010 21 Employee Wellness Incentives Under PPACA Effective January 1, 2014, PPACA enhances wellness incentives by permitting group health plans to give reductions of up to 30% of the cost of premiums to employees who participate in such wellness programs ­ Application to Grandfathered plans? Rewards may be increased to 50% subject to the discretion of the Secretary of HHS

23. August 18, 2010 22 Small Business Wellness Grants Under PPACA PPACA establishes $200 million in wellness grant funding to be distributed to eligible small employers for fiscal years 2011 to 2015 Eligible employers are defined as those that employ less than 100 employees who work 25 hours or more per week, and also who do not have a wellness program in place as of March 23, 2010 (the date of enactment) An application for a grant must include a proposal for a “comprehensive workplace wellness program”

24. August 18, 2010 23 Small Business Wellness Grants Under PPACA (cont.) A “comprehensive workplace wellness program” must be available to all employees and include the following: ­ Health awareness initiatives (including health education, preventive screenings, and health risk assessments) ­ Efforts to maximize employee engagement (including mechanisms to encourage employee participation) ­ Initiatives to change unhealthy behaviors and lifestyle choices (including counseling, seminars, online programs, and self-help materials) ­ Supportive environment efforts (including workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity, and improved mental health)

25. August 18, 2010 24 Common Questions Good wellness programs automatically charge smokers a higher premium The best wellness programs have a single-purpose focus Wellness programs should incent healthy body weight by charging lower premiums for individuals with a lower body-mass index It makes sound business sense to charge individuals with chronic health conditions higher premiums, because they have to go to the doctor more often Best practices indicate that Health Risk Assessments can be critically analyzed to determine premium rates for individuals with more risk factors NO

26. August 18, 2010 25 Common Questions (cont.) Employers may reimburse costs of fitness center membership but only if employees agree to meet specified targets Employers may reimburse smokers for smoking cessation classes but can provide reimbursements only if employees actually quit smoking Employers are forbidden by law from waiving co-pays or deductibles for well-baby visits or pre-natal care because this discriminates in favor of pregnant women Employers may require their employees to attend a monthly wellness program NO

27. August 18, 2010 26 QUESTIONS OR COMMENTS? Stacy H. Barrow sbarrow@proskauer.com 617.526.9648 Dr. David Rearick daver@sbs-benefits.com 678.302.4995