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HIPAA Nondiscrimination Rules - August 2017
The Health Insurance Portability and Accountability
Act (HIPAA) prohibits group health plans and group health insurance issuers
from discriminating against individuals with regard to eligibility, premiums or
coverage based upon a health status-related factor.
In addition, the Affordable Care Act (ACA) made a
number of important changes to the HIPAA nondiscrimination provisions. Many of
these ACA changes became effective for plan years beginning on or after Jan. 1,
2014. However, some ACA changes, such as the prohibition on preexisting
condition exclusions for enrollees under age 19, became effective in prior
the HIPAA nondiscrimination rules are not new requirements for group health
plans, employers should take the opportunity to regularly review their health
plans to confirm they do not violate any of the provisions within the HIPAA
nondiscrimination rules, as amended by the ACA.
- The Department of
Labor has a self-compliance
tool that includes a checklist for compliance with HIPAA’s
regulations on HIPAA’s nondiscrimination rules for wellness programs.
Health Status-Related Factors
HIPAA identifies these as health status-related factors:
- Health status;
- Medical condition (both physical and mental
- Claims experience;
- Receipt of health care;
- Medical history;
- Genetic information;
- Evidence of insurability; and
The ACA added the following broad, “catch all” category to
the list of health status-related factors: any other health status-related
factor determined appropriate by the Department of Health and Human Services
Similarly Situated Individuals
The HIPAA nondiscrimination rules generally apply within a
group of similarly situated individuals. As a general rule, employers that
offer health insurance benefits to their employees may not treat individuals
within a group of similarly situated individuals differently. However, certain
individuals may be treated as distinct groups of similarly situated individuals
for purposes of the HIPAA nondiscrimination rules.
For example, an employer may provide different health
benefits for employees in different groups if the distinction between the
groups is based upon a bona fide employment-based classification.
following employment classifications may reflect bona fide business practices:
- Full-time versus part-time employees;
- Date of hire;
- Geographic location;
- Membership in a collective bargaining unit;
- Length of service; and
- Current versus former employees.
Discrimination in Eligibility
Employers and health insurance issuers may not
discriminate with respect to eligibility between similarly situated employees
based upon a health factor. Eligibility rules include those related to
enrollment, the effective date of coverage and eligibility for benefit
packages. Employers may not require an employee to pass a physical examination
in order to be eligible to enroll in the health plan, even if the individual is
a late enrollee, or exclude individuals from coverage because they participate
in dangerous activities or have a history of high health claims.
Discrimination in Premiums
Employers may not charge an individual within a group of
similarly situated individuals a different rate for coverage based upon that
individual’s health factors. However, if an employer has a wellness program in
place that complies with HIPAA’s requirements governing wellness plans, an
employer may establish premium contribution rates that vary based upon an
individual’s participation in the wellness program.
HIPAA does not prohibit a health insurance issuer from
considering all relevant health factors of the applicants in order to establish
aggregate rates for coverage provided under a group health plan. However, the
issuer is required to blend the individual-by-individual rates into an overall
group rate and provide a per participant rate to the employer. Employers may
not charge an individual within a group of similarly situated individuals a
different rate for coverage based upon that individual’s health factors.
A group health plan or issuer may include benefit
limitations within their health plan so long as they apply uniformly to all
similarly situated individuals under the health plan. For example, coverage may
be denied for treatment that is not medically necessary. While limits or
exclusions applicable to all similarly situated employees are permissible under
the HIPAA nondiscrimination rules, employers and issuers must also determine
whether the plan design violates laws such as the Americans with Disabilities
Act (ADA) and the Pregnancy Discrimination Act.
In the event an employer or issuer implements a plan design
change effective at the beginning of the plan year, it will not be considered
to be directed at any one individual. However, a plan design change implemented
in the middle of the plan year will be reviewed under a facts and circumstances
test to determine if the changes were made in anticipation of a specific
individual’s claim for treatment—which violates the HIPAA nondiscrimination
Limitations and Exclusions
While HIPAA allowed the use of preexisting condition
limitations and exclusions, it applied certain restrictions and required that
the limitation or exclusion be applied uniformly to all similarly situated
individuals. Effective for plan years beginning on or after Sept. 23, 2010, the
ACA prohibited a plan or issuer from imposing preexisting condition exclusions
for enrollees under age 19. Effective for plan years beginning on or after Jan.
1, 2014, preexisting condition exclusions for all enrollees are prohibited.
An employer or issuer may not delay enrollment in the health
plan until an employee is actively at work, unless individuals who are absent
from work due to any health factor are treated, for purposes of health
coverage, as if they are actively at work.
Non-confinement clauses are most often used to allocate
responsibility for coverage of individuals that are confined to a hospital at
the time an employer moves its coverage from one issuer to another. A plan or
issuer may not deny coverage or delay an individual’s effective date for
coverage because the individual is confined to a hospital.
Final regulations under HIPAA address the interaction
between HIPAA and state laws that require the prior carrier to continue to
cover expenses incurred as a result of a confinement which began while the
prior carrier insured the confined individual. The application of these state
laws allows an issuer to delay coverage to an individual who is confined
because state law requires the prior issuer to continue to pay claims related
to that confined individual until the confinement ends. The final regulations
make it clear that an issuer, regardless of state law, must make an
individual’s coverage effective even when that individual is confined to a
hospital. The regulations indicate that the state laws be used as a
coordination of benefits provision, but confirm that an individual’s effective
date under the new issuer’s health plan cannot be delayed due to confinement.
Source of Injury
An employer may not charge an employee a higher premium or
deny enrollment in the health plan based upon an employee’s participation in a
dangerous or hazardous activity (for example, skydiving or bungee jumping).
However, the health plan may exclude coverage for treatment of injuries related
to the participation in these activities.
A health plan may not exclude benefits because they are
related to an act of domestic violence or a medical condition. For example, a
health plan may not exclude coverage for treatment of self-inflicted injuries
sustained in connection with an attempted suicide if the injuries were also
caused by a medical condition such as depression. The final HIPAA 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.
Treatment of Individuals
Employers and issuers are not prohibited from establishing
more favorable rules for eligibility for individuals with an adverse health
factor, such as a disability, than for individuals without an adverse health
factor. The following example demonstrates an acceptable and common plan
provision that treats individuals with a health factor more favorably.
employer offers a health plan that provides benefits for eligible employees,
their spouses and dependents. Dependents are eligible for coverage until they
reach age 26. However, dependent children who are disabled are eligible for
coverage beyond the age of 26.
Health reimbursement arrangements (HRAs) are tax-favored
accounts intended to reimburse employees for medical expenses not otherwise
covered by the health plan. Unused funds within an HRA may be carried over from
year to year. The final regulations address whether HRAs with a carry-over
feature violate the HIPAA nondiscrimination rules by including the following
employer sponsors a group health plan that is available to all current
employees. Under the plan, the medical care expenses of each employee (and the
employee’s dependents) are reimbursed up to an annual maximum amount. The
maximum reimbursement amount with respect to an employee for a year is $1500
multiplied by the number of years the employee has participated in the plan,
reduced by the total reimbursements for prior years.
This example clarifies that even though unused
employer-provided medical care reimbursement amounts carried forward from year
to year varies among employees within the same group of similarly situated
individuals based upon prior claims experience, the HRA does not violate the
HIPAA nondiscrimination rules. 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 and the restriction on the maximum reimbursement amount is not
directed at any individual participants or beneficiaries based on any health
The Genetic Information Nondiscrimination Act of 2008 (GINA)
included provisions related to genetic information that affect the HIPAA
nondiscrimination rules. Genetic information is defined as information about
genetic tests of an individual or the individual’s family members, information
about the manifestation of a family member’s disease or disorder and an
individual’s request for or receipt of genetic services. Genetic information
also includes information about the fetus of a pregnant individual or family
member or embryo in the case of assisted reproductive technology.
Specifically, GINA prohibits a group health plan from:
- Adjusting premiums or contribution amounts based
on genetic information;
- Requesting or requiring an individual or an
individual’s family member to undergo a genetic test (this does not apply to
health care providers);
- Requesting, requiring or purchasing genetic
information prior to or in connection with enrollment in the plan; or
- Using genetic information for underwriting
However, group health plans may use the results of genetic
tests for payment purposes as defined by the HIPAA Privacy Rules, as long as
the minimum amount of information necessary is used. Also group health plans
may request genetic information for research purposes if all applicable
requirements are met.
The final HIPAA regulations provided guidance on when
wellness programs comply with the HIPAA nondiscrimination rules. The ACA
codified the HIPAA rules for nondiscriminatory wellness plans, while also
increasing the maximum permissible reward that can be offered under
health-contingent wellness programs. Effective in 2014, the wellness program
incentive limit increased to 30 percent of the premium (50 percent for wellness
programs designed to prevent or reduce tobacco use).
On June 6, 2013, final regulations were issued on the ACA’s
nondiscrimination requirements for wellness plans. These rules became effective
for plan years beginning on or after Jan. 1, 2014 and apply to both
grandfathered and non-grandfathered plans. While the final regulations generally
retain the HIPAA rules’ nondiscrimination requirements for health-contingent
wellness programs, there are some important differences that may require
changes to the design and operation of wellness plans.