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Employers Put Regulations To The Test
The rising cost of health coverage has led some companies to push harder for preventive health in hopes that healthier employees will equate to lower health care costs and better working environments.
In other cases, companies have taken it a step further, adopting a philosophy of healthier living altogether, said Mary Bauman, an attorney with law firm Miller Johnson who specializes in employee benefits and executive compensation.
Still other companies have displayed more aggressive behavior to cut costs.
“There are really two laws that employers need to be aware of,” said Bauman. “The first is HIPPA. HIPPA is what I refer to as an octopus with many tentacles. We’ve got the HIPPA privacy rules, another set of rules that are HIPPA called the portability rules that deal with things like pre-existing conditions, and then we’ve got the wellness program rules, which are part of the nondiscrimination rules. Those rules basically say I really can’t discriminate against somebody based on their health status when it comes to any cost sharing arrangement under my health plan.”
However, the HIPPA wellness rules state that there cannot be a financial incentive, or difference, that is worth more than 20 percent of the total cost of coverage. For instance, if a person’s total premium cost for the year is $3,600, the incentive cannot be more than $720.
“I could say, ‘If you smoke you have to pay an additional $10 a week for coverage,’” said Bauman. “I could do that, but the second really key requirement is that if I do have a medical condition, I have to qualify for the incentive too, if I satisfy a reasonable alternative. So for a smoker, the classic reasonable alternative would be that I participate in a smoking cessation class. So I would get the $10 price break if I was a smoker and I participated in that class, even if I didn’t stop smoking.”
Bauman also noted that the “reasonable alternative” must be something the employee can participate in.
“In other words, if it’s an exercise class, but I can’t do the exercise class because I have asthma, the employer has to work with me to come up with some reasonable alternative that fits within my medical restrictions. So it can’t just be, ‘You have to do this particular exercise class’; it has to be, ‘Well, if you can’t do that, we’ll work with you and your doctor to come up with something you can do.’”
Bauman said that the line tends to become hazy when it comes to how that 20 percent difference between plans is calculated. The difference in maximum out-of-pocket costs in terms of deductibles and co-insurance and co-pays for a person who is really sick versus a person who is relatively healthy — and on two different plans — could be well more than 20 percent.
However, Bauman said she has seen an insurance company take the average value of the two plans for the average participant to bring the difference within 20 percent and make it appear OK. That company said that it has had informal conversations with the federal government’s Department of Labor and claims the DOL said that averaging the two plans is probably within HIPPA rules. According to Bauman, the department has not OK’d this procedure.
The Americans with Disabilities Act is the second law Bauman said employers should be aware of. The ADA states that if an inquiry is made about the condition of an employee’s health, in particular about a disability that the employee might have, the question must be asked in a way that the employee responds voluntarily, and any information that is obtained is then kept confidential and separate from the employee’s personnel file.
“Well, the question is, when I do these various incentives, is that really voluntary?” said Bauman.
“One of the classic examples you’re seeing now is employers that are saying you can’t even enroll in my health plan unless you complete a health risk assessment or health risk appraisal that kind of says what your health status is. And the EEOC (Equal Employment Opportunity Commission) is the federal agency that oversees the ADA, and they have not issued regulations, but they have said numerous times that they believe that conditioning enrollment in a health plan by supplying a health risk assessment is involuntary and runs foul of this law. Now, having said that, employers are doing it.
“My interpretation is that even though we do have these regulations that are HIPPA, we don’t have a lot of guidance; we have no case law because employees aren’t suing and because of that, employers are being somewhat aggressive. And I think they are doing it because they desperately want to control their health plan costs, and so you’re seeing some aggressive behavior out there.”
Keeping health costs down are not the only reason employers are implementing wellness plans. Many employers have realized that healthier employees equate to better retention and better morale, and other positives that Bauman pointed to.
“I think a lot of employers are recognizing that there are many benefits to encouraging the health of their employees,” said Bauman. “It’s not just one reason. And there are a lot of employers who look at this like this is an important philosophical thing that we want to do because it’s part of our whole human resources culture.”
These other benefits are apparently significant to employers, as wellness incentives do not immediately translate into health cost savings.
“When you look at a wellness incentive, it’s not really to reduce your costs as it is to contain them, to prevent significant increases. And also, the difficulty with wellness incentives is that it does not bring an immediate return on investments,” said Bauman.
“Typically, employers start out slow. So they might not say, ‘You know what, we’re going to charge you more if you’re a smoker.’ Instead they might say, ‘We would like you to engage in the health risk appraisal process or we would like you to have a physical this year, and if you don’t do that, maybe we’ll charge you $50 more. Or if you do do that, we might give you $50, but we’re not going to make it very punitive.’ My experience is that employers typically start slow and then they may add on requirements as they go to make them more significant.
“The other thing that I should tell you that HIPPA regulations allow is discrimination in favor of those with health conditions.”
Bauman said that in some cases, HIPPA allows for “reverse discrimination.” Those who may have certain health issues could have their deductibles waived in order to acquire prescription drugs to treat their conditions, depending on their plan.
“It’s easy to reward the person who is unhealthy who becomes healthy,” said Bauman. “But if they’re already healthy when the program starts, typically they don’t get anything more for becoming healthier. On the other hand, if your incentive is you get a $50 credit on your health premium for not smoking … and you achieve all those things and you get that credit year after year, that would be sustained. Or if you have one health option and another health option and you continue to do well on your scoring, you can stay in the better health option.” HQX
Under current Michigan law, it is OK to fire or not hire someone because they are a smoker. This is not the case in all states.
Smokers are protected under the HIPPA wellness rules when it comes to health plan coverage, but they are not protected under the Americans with Disabilities Act. The ADA protects people who may be overweight or have high blood pressure, etc., but it does not protect smokers.
“If I’m protecting somebody based on disability, often times it’s a disability that is viewed as outside of their control,” said Mary Bauman, employee benefits and executive compensation attorney with Miller Johnson.