Client Alert

The Department of Labor (“DOL”) has issued final regulations providing guidance on the requirements for a wellness program to be exempt from the nondiscrimination provisions contained in the Health Insurance Portability and Accountability Act ("HIPAA"). The final regulations become effective for plan years beginning on and after July 1, 2007.

The nondiscrimination provisions of HIPAA provide that a group health plan may not establish rules for eligibility to enroll in the plan based upon any health factor, and may not require an individual to pay a greater contribution or premium based on a health factor that relates to the individual or a dependent. Health factors include: health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.

The DOL regulations provide two exceptions to the HIPPA nondiscrimination rules for wellness programs which are designed to promote health or prevent disease. First, if a wellness program is offered to all similarly situated individuals and does not condition obtaining a reward under the program on an individual satisfying a standard related to a health factor, the program will not violate the HIPAA nondiscrimination provisions.

Second, if a wellness plan conditions a reward upon an individual satisfying a standard related to a health factor, it does not violate the HIPAA nondiscrimination rules if it meets the following criteria:

• The amount of the reward offered under the plan is limited to 20% of the cost of group health plan coverage;
• The plan is reasonably designed to promote health or prevent disease;
• The plan offers eligible individuals a chance to qualify for the reward at least annually;
• The plan is available to all similarly situated individuals; and
• The plan provides an alternative standard for obtaining the reward for any individual for whom it is unreasonably difficult or medically inadvisable to attempt to satisfy the otherwise applicable standard, and the availability of an alternative standard is publicized in all plan materials.

Employers with wellness plans should review their plans to determine whether they meet the DOL’s requirements for exemption from the HIPAA nondiscrimination rules. If modifications to an employer's wellness plan are necessary, employers should amend their plans to comply with the regulations for plan years beginning on and after July 1, 2007.

If you have any questions, or if we can be of assistance, please contact any of the following attorneys in Womble Carlyle's Employee Benefits Group or the Womble Carlyle attorney with whom you regularly work.