Health plan surcharges pose litigation risks for employers

Many employers implement wellness programs into their employee health plan offers. Wellness programs have varying designs but commonly offer premium discounts to participants who are tobacco-free or achieve certain biometric thresholds encouraging healthy living (LDL cholesterol, glucose, blood pressure, BMI). Noncompliant programs have become a frequent target for employees’ lawyers, arguing certain designs violate nondiscrimination requirements of the Health Insurance Portability and Accountability Act (HIPAA). Bass Pro Shops recently settled a lawsuit for nearly $5 million, but employers of all sizes are at risk.

Premium discounts

HIPAA generally prohibits charging higher premiums based on a health factor (like tobacco use or the health metrics mentioned above). A safe-harbor exception permits premium discounts/surcharges for programs that promote good health and disease prevention. Health-contingent, outcomes-based wellness programs—which require participants to meet certain health outcomes to earn the discount—must satisfy multiple requirements under HIPAA: