Resources for Health Insurance Portability and Accountability Act (HIPAA)

Are Health Incentives Illegal?

www.worldhealthcareblog.org

A logical and frequently used method for giving employees incentives to manage their health and risks or diseases better is the use of higher premiums for the unhealthy and lower for the healthy, or with high-deductible health insurance, higher deductibles for the unhealthy and lower for the healthy. Premium carrots/sticks are limited by HIPAA regulations to 20% of the costs of covering employees, so there is plenty of “wiggle room” there. But the Employee Benefits Security Administration recently issued guidelines indicating that group health insurance: “…must not differentiate among individuals in eligibility, benefits, or premiums based on any health factor of an individual”. [V. Knight “Wellness Programs May Face Legal Tests” Wall Street Journal Online Jan 16, 2008]

This merely closes what had been a loophole or way around the HIPAA guidelines, rather than further restricting the use of incentives. It also clearly shows that so-called “positive” incentives, or “carrots” such as reduced premiums or deductibles for the healthy amounts to “negative” incentives or “sticks” for the unhealthy. Many employers, for example, have raised employee premium contributions for all employees, then offered ways that healthy employees can gain rebates or reductions by meeting certain healthy behavior, wellness participation, or health status standards.

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