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Preventing Employers From Making Health Coverage More Costly For Unhealthy Workers

Armen Hareyan's picture

The Department of Labor's Employee Benefits Security Administration last month issued rules that "[i]neffect" will "close a legal loophole that could have allowedemployers to make health insurance more expensive for unhealthy workers thanfor their colleagues," the WallStreet Journalreports. The rules apply to employers who offer wellness programs thatincorporate a form of supplemental coverage, under which workers can earn"wellness credits" to offset the cost of copayments and deductiblesin high-deductible health insurance policies.

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The regulations set four standards that supplemental coverage must meet inorder to be exempt from Health Insurance Portability and Accountability Actrules, which require that all employees covered under the same health plan paythe same premiums regardless of health. HIPAA contains certain exceptions forwellness programs, including allowing employers to offer financial incentivesof up to 20% of the cost of an employee's policy. However, under HIPAA, ifemployers offer financial incentives for meeting a health standard, they alsomust provide a "reasonable alternative" way to earn the incentivesfor 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 assuch," DOL said last month. DOL said a supplemental coverage policy thatis acting as a group health insurance policy "must not differentiate amongindividuals in eligibility, benefits or premiums based on any health factor ofan individual." Health factors include health status, medical conditionsand genetic information. DOL said it might bring "enforcement actions"against companies that violate HIPAA equality rules through their supplementalinsurance, but it did not name specific companies.

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

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.