Federal Rules Head Off Cost Hikes for Unhealthy Workers

The Department of Labor's Employee Benefits Security Administration last month issued rules that "[i]n effect" will "close a legal loophole that could have allowed employers to make health insurance more expensive for unhealthy workers than for their colleagues," the Wall Street Journal reports.

The rules apply to employers who offer wellness programs that incorporate a form of supplemental coverage, under which workers can earn "wellness credits" to offset the cost of copayments and deductibles in high-deductible health insurance policies.

The regulations set four standards that supplemental coverage must meet in order to be exempt from Health Insurance Portability and Accountability Act rules, which require that all employees covered under the same health plan pay the same premiums regardless of health. HIPAA contains certain exceptions for wellness programs, including allowing employers to offer financial incentives of up to 20% of the cost of an employee's policy.

However, under HIPAA, if employers offer financial incentives for meeting a health standard, they also must provide a "reasonable alternative" way to earn the incentives for employees who cannot achieve the goals, according to Sharon Cohen of Watson Wyatt Worldwide.

Although supplemental insurance is exempt from HIPAA, not all coverage "being marketed as similar supplemental coverage actually qualifies as such," DOL said last month. DOL said a supplemental coverage policy that is acting as a group health insurance policy "must not differentiate among individuals in eligibility, benefits or premiums based on any health factor of an individual."

Health factors include health status, medical conditions and genetic information.

DOL said it might bring "enforcement actions" against companies that violate HIPAA equality rules through their supplemental insurance, but it did not name specific companies.

Andy Anderson at Morgan, Lewis & Bockius said, "The DOL's release ensures that supplemental health coverage can't or won't become an end run around the HIPAA wellness rules" (Knight, Wall Street Journal, 1/16).