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June 28, 2007    DOL
> EBSA > Frequently
Asked Questions

FAQs About The HIPAA
Nondiscrimination Requirements

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Under HIPAA, an individual
cannot be denied eligibility for benefits or charged more for
coverage because of any health factor. What are the “health
factors”?
They are:

health status;

medical condition, including both
physical and mental illnesses;

claims experience;

receipt of health care;

medical history;

genetic information;

evidence of insurability; and

disability.

The term “evidence of insurability” includes
conditions arising from acts of domestic violence, as well as
participation in activities such as motorcycling, snowmobiling,
all-terrain vehicle riding, horseback riding, skiing, and other
similar activities.

Can a group health plan
require an individual to pass a physical examination in order to be
eligible to enroll in the plan?
No. A group health plan
may not require an individual to pass a physical exam for
enrollment, even if the individual is a late enrollee.

Can a plan require an
individual to complete a health care questionnaire in order to
enroll?
Yes, provided that the health information is not
used to deny, restrict, or delay eligibility or benefits, or to
determine individual premiums.

Can plans exclude or limit
benefits for certain conditions or treatments?
Group
health plans may exclude coverage for a specific disease, limit or
exclude benefits for certain types of treatments or drugs, or limit
or exclude benefits based on a determination that the benefits are
experimental or medically unnecessary - but only if the benefit
restriction applies uniformly to all similarly situated individuals
and is not directed at individual participants or beneficiaries
based on a health factor they may have. (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 are not considered to be
directed at individual participants and beneficiaries.)

Compliance with HIPAA’s nondiscrimination
provisions does not in any way reflect compliance with any other
provision of ERISA (including COBRA and ERISA’s fiduciary
provisions). Nor does it reflect compliance with other State or
Federal laws (such as the Americans with Disabilities Act).

Can a plan deny benefits
otherwise provided for the treatment of an injury based on the
source of that injury?
If the injury results from a
medical condition or an act of domestic violence, a plan may not
deny benefits for the injury - if it is an injury the plan would
otherwise cover.

For example, a plan may not exclude coverage for
self-inflicted injuries (or injuries resulted from attempted
suicide) if the individual’s injuries are otherwise covered by the
plan and if the injuries are the result of a medical condition (such
as depression).

However, a plan may exclude coverage for injuries
that do not result from a medical condition or domestic violence,
such as injuries sustained in high risk activities (for example,
bungee jumping). But the plan could not exclude an individual from
enrollment for coverage because the individual participated in
bungee jumping.

Can a plan charge individuals
with histories of high claims more than similarly situated
individuals based on their claims experience?
No. Group
health plans cannot charge an individual more for coverage than
other similarly situated individuals based on any health factor.

How are groups of similarly
situated individuals determined?
Distinctions among groups
of similarly situated participants in a health plan must be based on
bona-fide employment-based classifications consistent with the
employer’s usual business practice. Distinctions cannot be based on
any of the health factors noted earlier.

For example, part-time and full-time employees,
employees working in different geographic locations, and employees
with different dates of hire or lengths of service can be treated as
distinct groups of similarly situated individuals, with different
eligibility provisions, different benefit restrictions, or different
costs, provided the distinction is consistent with the employer’s
usual business practice.

In addition, a plan generally may treat
participants and beneficiaries as two separate groups of similarly
situated participants. The plan also may distinguish between
beneficiaries based on, for example, their relationship to the plan
participant (such as spouse or dependent child) or based on the age
or student status of dependent children.

In any case, a plan cannot create or modify a
classification directed at individual participants or beneficiaries
based on one or more of the health factors.

Is it permissible for a health
insurance issuer to charge a higher premium to one group health plan
(or employer) that covers individuals, some of whom have adverse
health factors, than it charges another group health plan comprised
of fewer individuals with adverse health factors?
Yes. In
fact, HIPAA does not restrict a health insurance issuer from
charging a higher rate to one group health plan (or employer) over
another. An issuer may take health factors of individuals into
account when establishing blended, aggregate rates for group health
plans (or employers). This may result in one health plan (or
employer) being charged a higher premium than another for the same
coverage through the same issuer.

Can a health insurance issuer
charge an employer different premiums for each individual within a
group of similarly situated individuals based on each individual’s
health status?
No. Issuers may not charge or quote an
employer or group health plan separate rates that vary for
individuals (commonly referred to as “list billing”), based on any
of the health factors.

This does not prevent issuers from taking the
health factors of each individual into account when establishing a
blended, aggregate rate for providing coverage to the
employment-based group overall. The issuer may then charge the
employer (or plan) a higher overall rate, or a higher blended
per-participant rate.

While HIPAA prohibits list billing based on health
factors, it does not restrict communications between issuers and
employers (or plans) regarding the factors considered in the rate
calculations.

Can a group health plan impose
a nonconfinement clause (e.g., a clause stating that if an
individual is confined to a hospital at the time coverage would
otherwise take effect, coverage would not begin until that
individual is no longer confined)?
No. A group health plan
may not deny or delay an individual’s eligibility, benefits, or the
effective date of coverage because that individual is confined to a
hospital or other health care facility. In addition, a health plan
may not set an individual’s premium rate based on that person’s
confinement.

Can a group health plan impose
an “actively-at-work” provision (e.g., a requirement that an
employee be actively at work after a waiting period for enrollment
in order to have health coverage become effective on that
day)?
No. Generally a group health plan may not refuse to
provide benefits because an individual is not actively at work on
the day that individual would otherwise become eligible for
benefits. However, plans may have actively-at-work clauses if the
plan treats individuals who are absent from work due to a health
factor (for example, individuals taking sick leave) as if they are
actively at work for purposes of health coverage.

Plans may require individuals to report for the
first day of work before coverage may become effective. In addition,
plans may distinguish among groups of similarly situated individuals
in their eligibility provisions. For example, a plan may require an
individual to work full time, such as 250 hours per quarter or 30
hours per week to be eligible for health plan coverage.

Is it permissible for a group
health plan that generally provides coverage for dependents only
until age 25 to continue health coverage past that age for disabled
dependents?
Yes, a plan can treat an individual with an
adverse health factor more favorably by offering extended coverage.

Are wellness programs allowed
under HIPAA’s nondiscrimination rules?
The HIPAA
nondiscrimination provisions generally prohibit group health plans
from charging similarly situated individuals different premiums or
contributions or imposing different deductible, copayment or other
cost sharing requirements based on a health factor. However, there
is an exception that allows plans to offer wellness programs.

If none of the conditions for obtaining a reward
under a wellness program are based on an individual satisfying a
standard related to health factor, or if no reward is offered, the
program complies with the nondiscrimination requirements (assuming
participation in the program is made available to all similarly
situated individuals). For example:

A program that reimburses all or
part of the cost for memberships in a fitness center.

A diagnostic testing program that
provides a reward for participation rather than outcomes.

A program that encourages preventive
care by waiving the copayment or deductible requirement for the
costs of, for example, prenatal care or well-baby visits.

A program that reimburses employees
for the costs of smoking cessation programs without regard to
whether the employee quits smoking.

A program that provides a reward to
employees for attending a monthly health education seminar.

Wellness programs that condition a reward on an
individual satisfying a standard related to a health factor must
meet five requirements described in the final rules in order to
comply with the nondiscrimination rules.

The wellness program rules are generally effective
for the plan year starting on or after July 1, 2007.

What are the five requirements
for wellness programs which base a reward on satisfying a standard
related to a health factor?

The total reward for all the plan’s
wellness programs that require satisfaction of a standard related
to a health factor is limited – generally, it must not exceed 20
percent of the cost of employee-only coverage under the plan. If
dependents (such as spouses and/or dependent children) may
participate in the wellness program, the reward must not exceed 20
percent of the cost of the coverage in which an employee and any
dependents are enrolled.

The program must be reasonably
designed to promote health and prevent disease.

The program must give individuals
eligible to participate the opportunity to qualify for the reward
at least once per year.

The reward must be available to all
similarly situated individuals. The program must allow a
reasonable alternative standard (or waiver of initial standard)
for obtaining the reward to any individual for whom it is
unreasonably difficult due to a medical condition, or medically
inadvisable, to satisfy the initial standard.

The plan must disclose in all
materials describing the terms of the program the availability of
a reasonable alternative standard (or the possibility of a waiver
of the initial standard).

How do the wellness program
rules apply to a group program that offers a reward to individuals
who participate in voluntary testing for early detection of health
problems? The plan does not use the test results to determine
whether an individual receives a reward or the amount of an
individual’s reward.
The plan’s program does not base any
reward on the outcome of the testing. Thus, it is allowed under the
HIPAA nondiscrimination provisions without being subject to the five
requirements for wellness programs that do require satisfaction of a
standard related to a health factor.

Can a plan provide a premium
differential between smokers and nonsmokers?
The plan is
offering a reward based on an individual’s ability to stop smoking.

Medical evidence suggests that smoking may be
related to a health factor. The Diagnostic and Statistical Manual
of Mental Disorders, which states that nicotine addiction is a
medical condition, supports that position. In addition, a report of
the Surgeon General adds that scientists in the field of drug
addiction agree that nicotine, a substance common to all forms of
tobacco, is a powerfully addictive drug.

For a group health plan to maintain a premium
differential between smokers and nonsmokers and not be considered
discriminatory, the plan’s nonsmoking program would need to meet the
five requirements for wellness programs that require satisfaction of
a standard related to a health factor.

Accordingly, under the final rules, this wellness
program would be permitted if:

The premium differential is not more
than 20 percent of the total cost of employee-only coverage (or
20% of the cost of coverage if dependents can participate in the
program);

The program is reasonably designed
to promote health and prevent disease;

Individuals eligible for the program
are given an opportunity to qualify for the discount at least once
per year;

The program accommodates individuals
for whom it is unreasonably difficult to quit using tobacco
products due to addiction by providing a reasonable alternative
standard (such as a discount in return for attending educational
classes or for trying a nicotine patch); and

Plan materials describing the terms
of the premium differential describe the availability of a
reasonable alternative standard to qualify for the lower
premium.

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