Question:
My client wants to encourage its employees to quit smoking. For 2012, he wants to charge smokers a greater premium for health coverage. Is it possible to charge smokers a greater premium without violating the requirements of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA")?
Answer:
Yes. HIPAA generally prohibits a plan from discriminating among similarly situated individuals based on their health status. This means, among other things, that plans usually cannot charge individuals different premiums or impose different costs (i.e., through deductibles or co-pays) based on the presence or absence of a health factor. However, HIPAA also affirmatively recognizes that the nondiscrimination provisions were not meant to prevent a group health plan or an insurer from establishing premium discounts, surcharges or reduced co-payments or deductibles in return for "adherence to programs of health promotion and disease prevention," as provided under Code §9802(b)(2); ERISA §702(b)(2); PHSA §2705(b)(2). Thus, certain programs of health promotion or disease prevention (referred to as "wellness programs") are an exception to HIPAA's general nondiscrimination requirement.
In order to penalize smokers, any surcharge must be provided under a standard-based wellness program. Standard-based wellness programs that condition eligibility for a reward upon a participant's ability to meet a standard related to a health factor are permissible only if they meet the specific requirements set forth in 71 Fed. Reg. 75014 (Dec. 13, 2006).
Standard-based wellness programs must satisfy each of the following five requirements:
· The reward or penalty must be no more than 20% of the cost of coverage (30% starting in 2014);
· The program must be designed to promote health or prevent disease;
· The program must give individuals an opportunity to qualify for the reward at least once a year;
· The reward must be available to all similarly situated individuals; and
· The plan must disclose that alternative standards (or waivers) are available.
For a full explanation of each of the requirements, please review Field Assistance Bulletin No. 2008-02. A link to this bulletin is provided by clicking here
