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Benefits

Can Tobacco Users Be Required to Pay More for Group Health Plan Coverage?

EBIA  

EBIA  

QUESTION: Our self-insured health plan would like to reduce required employee contributions for employees who do not use tobacco. Can the plan require employees who use tobacco to pay more than employees who do not use tobacco, even though both groups receive the same coverage?

ANSWER: Under HIPAA’s health status nondiscrimination rules, a group health plan generally cannot require an employee to pay more for coverage than another similarly situated employee if the difference is based on a health factor. (In this context, employees are “similarly situated” if they are included in the same bona fide employment classification.) However, your incentive could be designed to fit within an exception for certain wellness programs.

Under your proposal, your plan would offer a reward based on an employee’s ability to stop (or otherwise refrain from) using tobacco. This is considered an outcome-based wellness program under the HIPAA rules.

Your program would need to meet five requirements:

  1. The difference in contributions between employees who use tobacco and those who don’t may not exceed 50% of the total cost of employee-only coverage (considering both employer and employee contributions).
  2. The program must be reasonably designed to promote health and prevent disease.
  3. Employees must be given an opportunity to qualify for the incentive at least once per year.
  4. The program must provide employees who use tobacco products with a reasonable alternative standard to allow them to qualify for the incentive. For example, the reasonable alternative standard could include a requirement to attend stop-smoking classes or to try a nicotine patch.
  5. Plan materials describing the incentive would have to explain the availability of a reasonable alternative standard to qualify for the incentive.

You also need to consider how you would determine whether an employee uses tobacco. The simplest approach is to have employees certify that they do not use tobacco—but of course you are then dependent on employees’ truthfulness.

Another approach is to require employees to submit to a medical examination (e.g., a blood, saliva, or urine test) to prove they are tobacco-free. However, in that case, you must consider requirements under the Americans with Disabilities Act (ADA). The ADA rules are similar to the HIPAA wellness program rules but would need to be considered separately. For example, the amount of permissible incentives under the ADA regulations has been unclear since the EEOC vacated the incentive provisions in response to a court decision (see our Checkpoint article). Given the complexity and uncertainty surrounding the ADA incentive rules, you should have your program reviewed by legal counsel if it requires employees to undergo a medical examination.

For more information, see EBIA’s Self-Insured Health Plans manual at Section XIII.D (“Benefits Must Not Be Discriminatory”). See also EBIA’s HIPAA Portability, Privacy & Security manual at Section XI.I (“Wellness Programs Must Meet Specific Nondiscrimination Requirements”) and EBIA’s Group Health Plan Mandates manual at Section XX.F (“ADA Considerations for Wellness Programs”).

Contributing Editors: EBIA Staff.

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