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CCH® BENEFITS — 12/19/06

HIPAA Nondiscrimination And Wellness Guidelines Left Largely Intact In 2006 Final Regulations

from Spencer’s Benefits Reports: On December 13, the Departments of Labor, Health and Human Services, and Treasury jointly released final rules regarding nondiscrimination and wellness programs under the Health Insurance Portability and Accountability Act (HIPAA).

The 2006 final rules in general do not change the 2001 interim nondiscrimination or the proposed wellness rules.

As was true with the interim and proposed rules, the final 2006 rules do the following:

Changes In 2006

Among the changes made in the final rules are these:

Health Reimbursement Arrangements (HRAs). To address discrimination concerns that the maximum reimbursement available under HRAs may vary based on the claims experience of the employee, the final rules include an example under which the carryforward of unused employer-provided reimbursements to later years does not violate the HIPAA nondiscrimination requirements, even though the maximum reimbursement for a year varies among employees based on prior claims experience.

In the example, an employer sponsors a group health plan under which medical care expenses are reimbursed up to an annual maximum. The maximum reimbursement is a uniform amount multiplied by the number of years the employee has participated in the plan, reduced by the total reimbursements for prior years. Because employees who have participated in the plan for the same length of time are eligible for the same total benefit over that length of time, the example concludes that the arrangement does not violate the HIPAA nondiscrimination requirements.

Source-Of-Injury Exclusion. Under the 2001 interim rules, if a plan provides benefits for a particular injury, it may not deny benefits otherwise provided for treatment of the injury due to the fact that the injury results from a medical condition or an act of domestic violence. Two examples in the 2001 interim rules illustrate the application of this rule to injuries resulting from an attempted suicide due to depression and to injuries resulting from bungee jumping.

These final regulations clarify that benefits may not be denied for injuries resulting from a medical condition even if the medical condition was not diagnosed before the injury.

The Relationship Of The Prohibition On Nonconfinement Clauses To State Extension-Of-Benefits Laws. Plan provisions that deny benefits based on an individual’s confinement to a hospital at the time coverage would otherwise become effective are called nonconfinement clauses. Under the laws of some states, a prior insurer has the obligation to provide health care benefits to an individual confined to a hospital beyond the nominal end of the policy only if the hospitalization is not covered by a succeeding issuer.

The final rules clarify that state law cannot change the succeeding issuer’s obligation under HIPAA; a prior issuer also may have an obligation; and in a case in which a succeeding issuer has an obligation under HIPAA and a prior issuer has an obligation under state law to provide benefits for a confinement, any state laws designed to prevent more than 100% reimbursement, such as state coordination-of-benefits laws, continue to apply.

Wellness Programs That Satisfy Nondiscrimination Requirements. Programs that comply with the nondiscrimination requirements without having to satisfy any additional standards are those under which obtaining a reward is not based on satisfying a standard related to a health factor or under which no reward is offered. The final regulations include the following list to illustrate the wide range of programs that would not have to satisfy any additional standards to comply with the nondiscrimination requirements:

Wellness Program Reward Limit. The total reward that may be given to an individual under the plan for all wellness programs is limited. Under the proposed rule, three alternative percentages (10%, 15%, and 20%) were suggested as limits that the reward could not exceed (as a specified percentage of the cost of employee-only coverage under the plan). The final regulations provide that the amount of the reward may not exceed 20% of the cost of coverage.

Effective Dates

The final regulations apply for plan years beginning on or after July 1, 2007.

For further information contact the following:

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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