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Questions Answered on the Smoker Surcharge

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

"Health-care overhaul law"

A federal appeals court on Wednesday upheld the most contentious provision of the health-care overhaul law, ruling that Congress can require Americans to carry insurance coverage.

In backing the individual mandate, the U.S. Court of Appeals for the 6th Circuit in Cincinnati became the first appellate court to rule on President Obama's signature domestic initiative. The decision also marked the first time a Republican-appointed judge has sided with the administration in evaluating the law's constitutionality.

"We find that the minimum coverage provision is a valid exercise of legislative power by Congress under the Commerce Clause," Judge Boyce F. Martin Jr., a Democratic appointee, wrote for the majority. He was joined by Republican appointee Jeffrey Sutton.

The 2 to 1 ruling was hailed by the Justice Department and administration allies, who called it an important bipartisan test of the law's ability to withstand numerous legal challenges. Opponents of the health-care act disputed the ruling's significance, calling it one incremental step in a legal struggle widely expected to wind up at the Supreme Court.

"It's an unfortunate decision," said David Rivkin, a lawyer representing 26 states in a Florida-based lawsuit that also challenges the law. "By the time this gets to the Supreme Court, it's not going to matter which decision was first or second," added Rivkin, who predicted that the law will be overturned.

The differing interpretations reflected the deep divisions over a measure that has provoked vehement opposition and equally strong support among the public and politicians alike. More than 30 lawsuits have been filed since the Patient Protection and Affordable Care Act was pushed through Congress by Democrats in March 2010, resulting in several rulings by lower-court judges that, until now, have cleaved along partisan lines.

As a result, the ultimate fate of the statute, which aims to bring about the broadest changes to the nation's health-care system in several decades, may not be known for a year or more. Lawyers for the plaintiffs in the 6th Circuit case said they will appeal directly to the Supreme Court but acknowledged that the justices probably will not take the case right away.

Most contested provision

The health-care law seeks to extend medical coverage to 30 million uninsured Americans and make major changes in public and private health insurance. By far the most contested provision is the individual mandate, which requires most Americans to purchase at least a minimum level of health insurance starting in 2014 and imposes a tax penalty if they don't.

Like other legal challenges, the lawsuit filed by the Thomas More Law Center - a Christian-oriented law firm in Michigan - says Congress overstepped its constitutional authority to regulate commerce.

A three-judge panel of the 6th Circuit disagreed. The mandate is constitutional, Martin wrote, because "Congress had a rational basis to believe" that the provision would affect interstate commerce and that it was "essential" to the law's broader goals of reforming the health-care market.

Judge James Graham, a Republican appointee, dissented, but it was the concurrence of Sutton - a George W. Bush appointee and former law clerk for conservative Supreme Court Justice Antonin Scalia - that was most noteworthy.

Sutton wrote that "the government has the better of the arguments" and that "Congress did not exceed its power" in passing the individual mandate. But he also appeared to acknowledge that his word would not be final, writing, "The Supreme Court has considerable discretion in resolving this dispute."

And in a phrase that heartened conservative opponents of the law, Sutton questioned whether the legislation will have other, perhaps unintended, consequences. "That brings me to the lingering intuition - shared by most Americans, I suspect - that Congress should not be able to compel citizens to buy products they do not want," he wrote.

"If Congress can require Americans to buy medical insurance today, what of tomorrow? Could it compel individuals to buy health care itself in the form of an annual check-up or for that matter a health-club membership?"

Tracy Schmaler, a Justice Department spokeswoman, said that the government welcomed the ruling "and its finding that Congress acted within its authority in passing this landmark health-care reform law." She vowed that the department will continue to "vigorously defend" the law and said department officials believe that efforts to challenge it will fail.

Her words were echoed by a variety of Democrats and supporters of the law.

"Congress clearly has the authority to regulate the health insurance market, including protecting consumers from insurance industry abuses," said Ethan Rome, executive director of Health Care for America Now. "Every step of the way, the health-care debate has been polluted by partisan politics. Today's decision, made by judges appointed by both Republican and Democratic presidents, is immune to that criticism."

No 'ringing endorsement'

But Rivkin, citing some of the wording in Sutton's concurrence, said the decision is "not at all a ringing endorsement of the constitutionality of the individual mandate." And David Yerushalmi, a lawyer for the Thomas More Law Center, said that while the ruling was "disappointing," Sutton "essentially kicked this thing upstairs to the Supreme Court."

Yerushalmi said he is already drafting a petition asking the high court to hear the case, though he acknowledged that the justices will probably "put it aside" until other appellate court decisions are issued.

Two other federal appellate courts - the Richmond-based 4th Circuit and the 11th Circuit, based in Atlanta - recently heard oral arguments in lawsuits challenging various aspects of the health-care law's constitutionality, and they are expected to issue decisions in the coming weeks or months. The U.S. Court of Appeals for the District of Columbia Circuit has scheduled oral arguments for September.

Three U.S. district judges have ruled in favor of the administration on the constitutionality of the individual mandate, while two district court judges have said it is unconstitutional. Those decisions were all along partisan lines, with Democratic-appointed judges supporting the administration and Republican appointees opposing it. 

Information About the CLASS Benefit Plan

If you think you or someone you know needs assistance living in home assistants or nursing home care, this article is for you.

Health & Human Services (HHS) released a series of frequently asked questions on the Class (Community Living Assistance Services and Supports) Act. 

These questions and answers follow below:

About CLASS and long term care

What is CLASS?

CLASS (Community Living Assistance Services and Supports) is a new voluntary, federally administered insurance program created under the Affordable Care Act (ACA).

Most working adults age 18 or older will be able to voluntarily enroll in this new program either directly or through their employers, without answering questions about their health.

Those who enroll and meet the benefit eligibility requirements will receive benefits to purchase long-term services and supports such as (but not limited to) personal assistance, homemaker services, specialized transportation and assistive technology to help them address their care needs.

When will CLASS be available?

The Affordable Care Act (ACA) states that the Secretary of Health and Human Services has until October 1, 2012 to designate the CLASS benefit plan. Enrollment will not take place before the plan is announced, and no one will pay premiums until after they enroll.

Is CLASS an entitlement program?

No. CLASS is not an entitlement program. Some people will not be eligible to enroll and some people who enroll will never meet the requirements to receive benefits.

Enrollment in CLASS will be voluntary and will be available to most working adults. Pre-existing medical conditions will not disqualify someone from enrolling. Individuals who enroll will be eligible to receive benefits if they meet specific requirements regarding functional limitation, earnings, and premium payment. Enrollees pay the premiums. Benefits will be paid from premiums and earnings on those premiums. Taxpayer funds will not be used to pay benefits.

How is CLASS different from long term care insurance offered through an insurance company?

CLASS will be administered and insured through the Federal government. Enrollment will be available to most working adults. Unlike most long term care insurance offered by private insurers, pre-existing medical conditions will not disqualify someone from enrolling. In addition, CLASS enrollees will have to meet specific requirements regarding functional limitation, earnings, and premium payment in order to receive benefits. Details about these requirements will be announced by the HHS Secretary no later than October 1, 2012.

What is long term care?

Long term care refers to care that individuals may need for a long time because they are unable to take care of themselves due to an illness, disease, the aging process, or cognitive impairment (for example, Alzheimer's disease).

Most long term care is non-skilled personal care, such as help with everyday tasks, called Activities of Daily Living (ADLs):

Bathing,

Dressing,

Using the toilet,

Transferring (moving to or from a bed or chair),

Caring for incontinence, and

Eating.

The goal of long term care is to provide help with routine functions when being fully independent is not possible. Long term care can be provided at home, in a community setting or in an institution. Most people prefer to receive long term care at home.

Who needs long term care?

The need for long term care can strike anyone at any age. While many people who need long term care are age 65 or older, a person can need long term care services at any age. Forty percent of people currently receiving long term care are adults 18 to 64 years old.

Factors that increase your risk of needing long term care include:

Age - The risk generally increases as you get older.

Marital Status - Single people are more likely to need care from a paid provider.

Gender - Women are at a higher risk than men, primarily because they tend to live longer

Lifestyle - Poor diet and exercise habits can increase your risk.

Health and Family History - These can also impact your risk.

Will Medicare and/or my health insurance pay for any long term care services I might need?

Generally, no. Medicare pays for nursing home care and/or home care only under limited circumstances after a hospital stay and only for a limited time period. Medicare and health insurance pay for acute care, generally needed for a defined period of time with an expectation that you will recover or your condition will improve. Long term care is chronic care (ongoing and long-lasting). It is not acute care.

Enrollment in CLASS

Can I enroll in CLASS now?

No. CLASS is not available yet. By October 1, 2012, the Secretary of Health and Human Services will announce the details of the CLASS benefit plan. Enrollment will not begin until after this announcement.

Who will be able to enroll in CLASS?

Once enrollment begins, most working adults age 18 or older will be able to enroll.

Will I have to pass underwriting to enroll in CLASS?

No. You will not be denied enrollment in CLASS because of a pre-existing condition or for any medical reason.

Will retirees be able to enroll in CLASS?

If they are fully retired (not working at all), they will not be able to enroll in CLASS.

I'm looking at private long term care insurance policies. Should I wait for CLASS instead?

It's important to plan for your potential long term care needs without delay. If you're nearing retirement, you should also note that one of the requirements to become eligible for benefits under the CLASS Program is to earn wages of a certain amount over a period of time after enrollment. Those planning to retire within the next few years may not be able to qualify for benefits under CLASS.

Should employers start withholding premiums for CLASS coverage from their employees' pay?

No. CLASS premiums will not be collected until enrollment begins. The Secretary of Health and Human Services will announce details about the CLASS benefit plan by October 1, 2012. Enrollment will not begin until after this announcement.

Will an employer have to offer CLASS participation to its employees?

No. Employers will be able to decide whether to participate in the CLASS automatic enrollment process for their employees.

Will I have to enroll in CLASS if my employer participates in the automatic enrollment process?

No. You will be able to opt-out of enrollment.

Will I be able to enroll even if my employer decides not to offer the CLASS automatic enrollment process?

Yes. If you meet the enrollment eligibility requirements, you will have the option to enroll individually.

Will I be able to enroll if I am self-employed?

Yes. If you meet the enrollment eligibility requirements, you will have the option to enroll individually. 

CLASS Benefits

How will someone become eligible to start receiving CLASS benefits?

In order to receive benefits, an enrollee must:

have an eligible functional limitation(for example, need help to perform everyday activities or have a cognitive impairment);

earn wages of a certain amount over a period of time after enrollment; and

pay premiums for at least 60 months, and comply with other premium payment requirements.

Details about all of these requirements will be announced by the HHS Secretary by October 1, 2012.

Will I be able to use my CLASS benefits to help pay for care in a nursing home or assisted living facility?

Yes. If you qualify for CLASS benefits, you will be able to use them to help cover the cost of care in a nursing home or assisted living facility, as well as care received at home. CLASS benefits can also be used for other types of supports and services, such as home modifications, assistive technologies, accessible transportation, and homemaker services, to name just a few.

How much will CLASS pay in benefits?

We have not yet determined the benefit plan. By October 1, 2012, the Secretary of Health and Human Services will designate a benefit plan, after taking into consideration the recommendations of the CLASS Independence Advisory Council. The CLASS Act requires that the benefit plan include a cash benefit averaging at least $50 per day, not subject to any lifetime limit.

What is the CLASS Independence Advisory Council?

The CLASS Independence Advisory Council is the Department's statutory public advisory body on matters of general policy in the administration of the CLASS Program. The President has not yet appointed the members of the Council. The time period for submitting nominations to the Council has ended.

Can taxpayer funds be used to pay CLASS benefits?

No. The law specifically prohibits the use of taxpayer funds to pay benefits.

CLASS Premiums

How much will CLASS coverage cost?

Premiums have not yet been established. By October 1, 2012, the Secretary of Health and Human Services will announce details of the benefit plan, including premiums, after taking into consideration the recommendations of the CLASS Independence Advisory Council.