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Benefits

Health Plan Fiduciaries Liable for Restitution and Penalties Relating to Tobacco Surcharge

EBIA  

EBIA  

Acosta v. Dorel Juvenile Grp., Inc., Case No. 1:18-cv-02993-JRS-MJD (S.D. Ind. 2018)

Consent Order and Judgment

News Release

A federal court has entered a consent order requiring the fiduciaries of a group health plan to repay over $145,000 to participants who, as tobacco users, were required to pay health insurance premium surcharges as part of the plan’s wellness program. The DOL brought the lawsuit following an investigation in which it determined that, over a five-year period, the wellness program required employees to pay tobacco-use surcharges without offering reasonable alternative standards or waivers as required by HIPAA and the Affordable Care Act. As background, wellness programs that offer a reward to employees meeting a standard related to a health factor—such as not using tobacco—must (among other things) provide a reasonable alternative standard that is not related to a health factor—such as smoking-cessation classes (see our Checkpoint Question of the Week)—that will allow employees to earn the full reward.

In addition, the plan sponsor agreed to pay penalties to the DOL of almost $15,000—an amount reflecting a DOL compromise and penalty reduction of 50%. The employer also revised its wellness program to comply with the HIPAA rules prohibiting group health plans from discriminating against individuals in eligibility for benefits or in individual premium rates based on a health-status related factor. A DOL news release about the settlement suggests that those with questions on medical and other employee benefits contact the DOL’s Employee Benefits Security Administration (EBSA) for compliance assistance.

EBIA Comment: Although portions of the EEOC’s wellness program regulations have been vacated as of January 1, 2019 (see our Checkpoint article), the HIPAA rules prohibiting discrimination based on health factors and requiring reasonable alternative standards remain in full effect. This case is a timely reminder of the importance of complying with those rules. For more information, see EBIA’s Consumer-Driven Health Care manual at Section VI.D.2 (“HIPAA Considerations: Nondiscrimination Exception for Wellness and Disease-Management Programs”) and EBIA’s HIPAA Portability, Privacy & Security manual at Section XI.I (“Wellness Programs Must Meet Specific Nondiscrimination Requirements”). You may also be interested in our recorded webinar “Time for a Check-Up: Wellness Program Design & Administration” (recorded on 3/8/2018).

Contributing Editors: EBIA Staff.

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