Incentives Under State Law

[Guest chloe]

HIPAA permits plans to offer incentives such as smoker vs. non-smoker rates, paying a monetary incentive (through cash contributions to an FSA/HRA or lower cost-sharing) for participating in certain programs such as weight loss, tobacco cessation, disease management, etc., as long as they are done through a bona fide wellness program. However, we've heard that certain states prohibit some of these practices, but we're unable to locate anything. Does anyone know of a resource (online or printed) that could lead me to these types of state laws?

[Don Levit]

Chloe:

I am curious if you have any other information regarding some states prohibiting these types of incentives.

I understand there are specific federal guidelines for appropriate bona fide wellness programs.

What legal authority would states have to justify abolishing this type of federal incentive plan?

Don Levit

[GBurns]

Don,

What are these specific guidelines?

Chloe,

You might want to look under your state insurance regulations both the statutes and the Administrative Code. What you are referring to, if I understand you correctly, might be under the sections that address rebates, incentives, inducements and unfair business practices.

If this is a small employer (under 50 employees) there might also be something else under your state Small Group Health Insurance laws that prohibits any form of reimbursement and incentives or inducements.

Whether a prohibition against rebates, incentives to buy insurance, inducements or reimbursements is applicable in this particular case could very well be a facts and circumstances issue. Sometimes it all depends on how it is done.

[Don Levit]

George:

HIPAA provides 4 requirements for a bona fide wellness program:

1. The total reward for complying must be no more than 20% of the total cost of the coverage.

2. The reward must be available to all similarly situated individuals.

3. The program must be reasonably designed to promote good health or prevent disease.

4. Materials describing the terms of the program must disclose alternatives to comply with the standards.

Don Levit

[KED]

The reference to state law issues may be to certain state laws that prohibit employers from discriminating against employees for certain lawful behaviors, such as smoking.

[Guest chloe]

I'm not looking at this specific to any size employer. It would be for any size.

These state issues are not in the insurance laws. We are expecting they are employer anti-discrimination laws. I can search through all the employment laws of every state, but that will take quite a bit of time. I was hoping maybe there was some resource available that had already done this research.

[Kirk Maldonado]

chloe:

Have you tried using the search function in BenefitsLink? I seem to recall that there was an article right on point in the past month in Benefits in the News.

[Don Levit]

Chloe:

From what I understand you saying, we are discussing 2 types of employee discrimination.

The first deals with hiring and firing issues; the second with an employer's ability to structure a plan with health and wellness incentives.

Both of these areas are under state jurisdiction, except for those issues in which the federal laws would preempt state laws.

Why would HIPAA not preempt state laws which were written before the health and wellness incentives were provided under federal legislation?

Even if one could make a legal case for state authority, how would we address the federal legislation regarding a bona fide wellness program?

We wouldn't merely say, "Well, this federal legislation is nothing other than a suggestion, would we?"

Don Levit

[Guest ERISA Litigator]

The state laws could be in various state statutes - from labor and employment statutes, insurance statutes (if your plan is fully insured) or even other civil statutes. There are also state common law actions that could arise, like invasion of privacy. It just depends on the state. But why would you have to check every state? Unless you have employees in every state.

I have taken a close look at the ERISA preemption here and I determined there are some things you can do and be protected by ERISA preemption, but clearly there are some things you could do and not be protected by ERISA preemption. I highly recommend you consult an ERISA lawyer to advise you on this matter. The alternative is to just take the risks state by state, employee by employee.