On December 13, 2006, the U.S. Department of Labor, Internal Revenue Service, and Department of Health and Human Services jointly issued final rules relating to the prohibition against discrimination based on a health factor for group health plans and issuers of health insurance coverage (the “2006 Rules”). The 2006 Rules, which became effective on December 12, 2006, finalized interim rules that were published by the agencies in 2001.

ACTIVELY-AT-WORK. Generally, actively-at-work clauses are prohibited. These clauses establish a rule for eligibility, or set premiums based on, an individual’s ability to engage in normal life activities or based on his or her confinement to a hospital or other health care institution. The 2006 Rules provide the following example of a prohibited actively-at-work clause:

Under a group health plan, an employee generally becomes eligible to enroll 30 days after the first day of employment. However, if the employee is not actively at work on the first day after the end of the 30-day period, then eligibility for enrollment is delayed until the first day the employee is actively at work.

The above clause causes the plan to violate the 2006 Rules. However, the plan would not violate the 2006 Rules if, under the plan, an absence due to any health factor were considered being actively at work.

SOURCE-OF-INJURY EXCLUSIONS. Under the 2001 interim rules, a plan that provides benefits for a particular injury may not deny benefits otherwise provided for treatment of the injury due to the fact that the injury results from a medical condition or an act of domestic violence. The 2001 interim rules included two examples to illustrate this provision--injuries resulting from an attempted suicide due to depression and injuries resulting from bungee jumping. The 2006 Rules retain these examples and make clear that benefits may not be denied for injuries resulting from a medical condition even if the medical condition was not diagnosed before the injury.

WELLNESS PROGRAMS. The 2006 Rules clarify some of the ambiguities in the proposed rules, make some changes in terminology and organization, and add a description of wellness programs that are not required to satisfy additional standards. The 2006 Rules provide that a plan can provide for premium discounts or rebates for individuals who participate in health promotion and disease prevention programs if the nondiscrimination requirements are satisfied. However, the 2006 Rules set forth the following wellness programs that are deemed to comply with the nondiscrimination requirements without having to satisfy the additional standards (assuming participation in the program is made available to all similarly situated individuals):
. Reimbursement for fitness centers;
. A diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes;
.A program that encourages preventive care through the waiver of the co-payment or deductible requirement under a group health plan for the costs of, for example, prenatal care or well-baby visits;
. A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking; and
. A program that provides a reward to employees for attending a monthly health education seminar.

If a wellness program does not fall into one of the above categories, it must satisfy the following five requirements in order not violate the nondiscrimination rules under HIPAA:

. The maximum allowable reward or total of rewards must be limited to 20% of the cost of employee-only coverage under the plan (with additional provisions related to rewards that apply also to classes of dependents);
. The program must be reasonably designed to promote health or prevent disease;
. The program must give eligible individuals the opportunity to qualify for the reward at least once per year;
. The program must be available to all similarly situated individuals; and
. The materials describing the program standards must disclose the availability of reasonable alternative standards.

If you have any questions regarding employee benefit plan matters, please contact Day Pitney’s Benefits Group.

Susan M. Szafranski