Disease Management

HIPAA Sets Standards for Wellness Programs

Five Restrictions for Rewards Linked to Health Outcomes

Wellness programs that provide health plan-related rewards to employees based on the status of their health must now comply with five requirements in the Health Insurance Portability and Accountability Act (HIPAA). Types of health plan-related rewards include reductions in health insurance premiums, deductibles, coinsurance, co-payments or other covered costs.

Employers and health plans will need to be careful about how they design their incentives programs.

Finalized in December, the HIPAA regulations do not apply to wellness programs that provide rewards only for participation in programs or rewards unrelated to the health plan, such as vacations or gift certificates.

“Even before the HIPAA regulations were in place, we have always strongly encouraged our clients to avoid incentives that are tied to health factors,” says Lee Dukes, senior vice president of wellness solutions for Alere. “You want to communicate to people that you care about their wellbeing and acknowledge their efforts to take better care of themselves. People are more likely to become engaged if they feel their best interest is at heart and less likely if they think they are participating merely to save the company money.”

Excluded Programs

Examples of programs that do not need to satisfy the requirements include the following:
  • Programs that reimburse all or part of fitness center membership costs
  • Diagnostic testing programs that do not base any part of their rewards on clinical outcomes
  • Preventive programs that waive co-payments or deductibles for prenatal care or other similar care
  • Smoking cessation programs that reimburse employees even if they do not quit smoking
  • Programs that reward employees for attending monthly health education seminars

Incentives Strategy

As vice president of wellness solutions for Alere, Debi Heck works with clients to develop their program strategy, including the design of their incentives programs. “One thing we always stress is that there is a lot of research that proves engaging individuals in health programs reduces risk factors,” she says. “That’s why we encourage programs that reward people for such actions as becoming physically active or making better health choices, factors that are not related to health outcomes. We see a lot of positive changes with that strategy.”

Legal Ramifications

Alere also discourages clients from providing rewards for health outcomes to reduce legal scrutiny by the government and the possibility of legal issues. “Some states have local requirements that also must be considered when designing programs and incentive strategies on top of the HIPAA regulations,” Lee says. “We don’t pretend to give legal counsel but simply communicate to our clients what the regulations are and work with them to be compliant.”

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HIPAA Regulations

Qualifying wellness programs must adhere to the following restrictions according to the newly revised HIPAA guidelines approved by the Department of Labor, Internal Revenue Service and the Department of Health and Human Services:

  1. Discount rewards cannot exceed 20 percent of the total cost of single employee coverage, which includes both the employee and employer portions.
  2. Programs must be “reasonably designed” to promote good health, which means they must have a reasonably good chance to improve the health of participants.
  3. Qualifying individuals must be allowed to participate in the same incentives program each year it is offered.
  4. Alternative methods for obtaining a reward must be available for individuals unable to satisfy the standard for medical reasons.
  5. Finally, the alternative method for similarly situated individuals must be disclosed in all health plan materials describing the terms of the program.