Under HIPAA, plans are permitted to impose a surcharge on or provide incentives to an employee based on the health activities or outcomes of the employee. However, the plan must offer a reasonable alternative to the primary standard. For example, the employee may be required to pay a higher premium if he uses tobacco products, but must be offered an alternative—like participation in a tobacco cessation program—to avoid that surcharge.
The DOL recently levied over $160,000 in fines against an employer who failed to comply with these wellness program regulations. In this instance, the employer implemented a surcharge against employees who used tobacco products, but the employer also offered tobacco cessation classes. However, attendance of those classes did not eliminate the extra surcharge; the only way for an employee to avoid the surcharge was to certify that he did not use tobacco products. The DOL found that this employer did not offer a reasonable alternative and therefore violated wellness program rules.
This serves as a reminder to plans to review their wellness program to confirm that all surcharges or incentives have a reasonable alternative standard.