Section 2001.9 Prohibiting Discrimination Against Participants and Beneficiaries Based on Health Status

TITLE 50: INSURANCE

CHAPTER I: DEPARTMENT OF INSURANCE

SUBCHAPTER z: ACCIDENT AND HEALTH INSURANCE

PART 2001 CONSTRUCTION AND FILING OF ACCIDENT AND HEALTH INSURANCE POLICY FORMS

SECTION 2001.9 PROHIBITING DISCRIMINATION AGAINST PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS

Section 2001.9  Prohibiting Discrimination

Against Participants and Beneficiaries Based on Health Status

a)         Health Factors

1)         The

term health factor means, in relation to an individual, any of the following

health status-related factors:

A)        Health

status;

B)        Medical

condition (including both physical and mental illnesses), as defined in 45 CFR

144.103;

C)        Claims

experience;

D)        Receipt

of health care;

E)        Medical

history;

F)         Genetic

information, as defined in 45 CFR 146.122(a);

G)        Evidence

of insurability; or

H)        Disability.

2)         Evidence

of insurability includes:

A)        Conditions

arising out of acts of domestic violence; and

B)        Participation

in activities such as motorcycling, snowmobiling, all-terrain vehicle riding,

horseback riding, skiing, and other similar activities.

3)         The

decision whether health coverage is elected for an individual (including the

time chosen to enroll, such as under special enrollment or late enrollment) is

not, itself, within the scope of any health factor. (However, under 45 CFR 146.117,

a plan or issuer must treat special enrollees the same as similarly situated

individuals who are enrolled when first eligible.) (45 CFR 146.121)

b)         Prohibited Discrimination

in Rules for Eligibility

1)         In General

A)        A

group health plan, and a health insurance issuer offering health insurance

coverage in connection with a group health plan, may not establish any rule for

eligibility (including continued eligibility) of any individual to enroll for

benefits under the terms of the plan or group health insurance coverage that

discriminates based on any health factor that relates to that

In General

A)        A

group health plan, and a health insurance issuer offering health insurance

coverage in connection with a group health plan, may not establish any rule for

eligibility (including continued eligibility) of any individual to enroll for

benefits under the terms of the plan or group health insurance coverage that

discriminates based on any health factor that relates to that individual or a

dependent of that individual. This rule is subject to the provisions of subsection

(b)(2) (explaining how this Section applies to benefits), subsection (b)(3)

(allowing plans to impose certain preexisting condition exclusions), subsection

(d) (containing rules for establishing groups of similarly situated

individuals), subsection (e) (relating to nonconfinement, actively-at-work, and

other service requirements), subsection (f) (relating to wellness programs),

and subsection (g) (permitting favorable treatment of individuals with adverse

health factors).

B)        For

purposes of this Section, rules for eligibility include, but are not limited

to, rules relating to:

i)          Enrollment;

ii)         The

effective date of coverage;

iii)        Waiting

(or affiliation) periods;

iv)        Late

and special enrollment;

v)         Eligibility

for benefit packages (including rules for individuals to change their selection

among benefit packages);

vi)        Benefits

(including rules relating to covered benefits, benefit restrictions, and

cost-sharing mechanisms such as coinsurance, copayments, and deductibles), as

described in subsections (b)(2) and (b)(3);

vii)       Continued

eligibility; and

viii)      Terminating

coverage (including disenrollment) of any individual under the plan. (45 CFR

146.121)

C)        This subsection

ges);

vi)        Benefits

(including rules relating to covered benefits, benefit restrictions, and

cost-sharing mechanisms such as coinsurance, copayments, and deductibles), as

described in subsections (b)(2) and (b)(3);

vii)       Continued

eligibility; and

viii)      Terminating

coverage (including disenrollment) of any individual under the plan. (45 CFR

146.121)

C)        This subsection

(b)(1) is illustrated by the examples appearing in 45 CFR 146.121(b)(1)(iii).

2)         Application

to Benefits

A)        General

Rule

i)          Under

this Section, a group health plan or group health insurance issuer is not

required to provide coverage for any particular benefit to any group of

similarly situated individuals.

ii)         However,

benefits provided under a plan or through group health insurance coverage must

be uniformly available to all similarly situated individuals (as described in subsection

(d)). Likewise, any restriction on a benefit or benefits must apply uniformly to

all similarly situated individuals and must not be directed at individual

participants or beneficiaries based on any health factor of the participants or

beneficiaries (determined based on all the relevant facts and circumstances).

Thus, for example, a plan or issuer may limit or exclude benefits in relation

to a specific disease or condition, limit or exclude benefits for certain types

of treatments or drugs, or limit or exclude benefits based on a determination

of whether the benefits are experimental or not medically necessary, but only

if the benefit limitation or exclusion applies uniformly to all similarly

situated individuals and is not directed at individual participants or

beneficiaries based on any health factor of the participants or beneficiaries

or certain types

of treatments or drugs, or limit or exclude benefits based on a determination

of whether the benefits are experimental or not medically necessary, but only

if the benefit limitation or exclusion applies uniformly to all similarly

situated individuals and is not directed at individual participants or

beneficiaries based on any health factor of the participants or beneficiaries.

In addition, a plan or issuer may impose annual, lifetime or other limits on

benefits and may require the satisfaction of a deductible, copayment,

coinsurance or other cost-sharing requirement in order to obtain a benefit if

the limit or cost-sharing requirement applies uniformly to all similarly

situated individuals and is not directed at individual participants or

beneficiaries based on any health factor of the participants or beneficiaries.

In the case of a cost-sharing requirement, see also subsection (b)(2)(B), which

permits variances in the application of a cost-sharing mechanism made available

under a wellness program. (Whether any plan provision or practice with respect

to benefits complies with this subsection (b)(2)(A) does not affect whether the

provision or practice is permitted under any other provision of ERISA, the

Americans With Disabilities Act (42 USC 12101 et seq.), or any other law,

whether State or federal.)

iii)        For

purposes of this subsection (b)(2)(A), a plan amendment applicable to all

individuals in one or more groups of similarly situated individuals under the

plan and made effective no earlier than the first day of the first plan year

after the amendment is adopted is not considered to be directed at any

individual participants or beneficiaries.

iv)        This subsection

federal.)

iii)        For

purposes of this subsection (b)(2)(A), a plan amendment applicable to all

individuals in one or more groups of similarly situated individuals under the

plan and made effective no earlier than the first day of the first plan year

after the amendment is adopted is not considered to be directed at any

individual participants or beneficiaries.

iv)        This subsection

(b)(2)(A) is illustrated by the examples appearing in 45 CFR

146.121(b)(2)(i)(D).

B)        Exception

for Wellness Programs

A group health plan or group

health insurance issuer may vary benefits, including cost-sharing mechanisms

(such as a deductible, copayment or coinsurance), based on whether an

individual has met the standards of a wellness program that satisfies the

requirements of subsection (f).

C)        Specific

Rule Relating to Source-of-Injury Exclusions

i)          If a

group health plan or group health insurance coverage generally provides

benefits for a type of injury, the plan or issuer may not deny benefits

otherwise provided for treatment of the injury if the injury results from an

act of domestic violence or a medical condition (including both physical and

mental health conditions). This subsection (b)(2)(C)(i) applies in the case of

an injury resulting from a medical condition even if the condition is not

diagnosed before the injury.

ii)         This

subsection (b)(2)(C) is illustrated by the examples appearing in 45 CFR

146.121(b)(2)(iii)(B).

3)         Relationship

to 45 CFR 146.111

A)        A

preexisting condition exclusion is permitted under this Section if it :

i)          Complies

with 45 CFR 146.111;

ii)         Applies

uniformly to all similarly situated individuals (as described in subsection

(d)); and

iii)        Is

not directed at individual participants or beneficiaries based on any health

factor of the participants or beneficiaries. For purposes of this subsection

A

preexisting condition exclusion is permitted under this Section if it :

i)          Complies

with 45 CFR 146.111;

ii)         Applies

uniformly to all similarly situated individuals (as described in subsection

(d)); and

iii)        Is

not directed at individual participants or beneficiaries based on any health

factor of the participants or beneficiaries. For purposes of this subsection

(b)(3)(A)(iii), a plan amendment relating to a preexisting condition exclusion

applicable to all individuals in one or more groups of similarly situated

individuals under the plan and made effective no earlier than the first day of

the first plan year after the amendment is adopted is not considered to be

directed at any individual participants or beneficiaries. (45 CFR 146.121)

B)        This subsection

(b)(3) is illustrated by the examples appearing in 45 CFR 146.121(b)(3)(ii).

c)         Prohibited Discrimination

in Premiums or Contributions

1)         In General

A)        A

group health plan, and a health insurance issuer offering health insurance

coverage in connection with a group health plan, may not require an individual,

as a condition of enrollment or continued enrollment under the plan or group

health insurance coverage, to pay a premium or contribution that is greater

than the premium or contribution for a similarly situated individual (described

in subsection (d)) enrolled in the plan or group health insurance coverage based

on any health factor that relates to the individual or a dependent of the

individual.

B)        Discounts,

rebates, payments in kind, and any other premium differential mechanisms are

taken into account in determining an individual's premium or contribution rate

tion for a similarly situated individual (described

in subsection (d)) enrolled in the plan or group health insurance coverage based

on any health factor that relates to the individual or a dependent of the

individual.

B)        Discounts,

rebates, payments in kind, and any other premium differential mechanisms are

taken into account in determining an individual's premium or contribution rate.

(For rules relating to cost-sharing mechanisms, see subsection (b)(2)

(addressing benefits).)

2)         Rules Relating

to Premium Rates

A)        Group Rating

Based on Health Factors Not Restricted Under This Section

Nothing in this Section restricts

the aggregate amount that an employer may be charged for coverage under a group

health plan. But see 45 CFR 146.122(b), which prohibits adjustments in group

premium or contribution rates based on genetic information.

B)        List Billing

Based on a Health Factor Prohibited

However, a group health insurance

issuer, or a group health plan, may not quote or charge an employer (or an

individual) a different premium for an individual in a group of similarly

situated individuals based on a health factor. (But see subsection (l)

permitting favorable treatment of individuals with adverse health factors.)

C)        This subsection

(c)(2) is illustrated by the examples appearing in 45 CFR 146.121(c)(2)(iii).

3)         Exception

for Wellness Programs

Notwithstanding subsections (c)(1)

and (c)(2), a plan or issuer may vary the amount of premium or contribution it

requires similarly situated individuals to pay based on whether an individual

has met the standards of a wellness program that satisfies the requirements of subsections

s illustrated by the examples appearing in 45 CFR 146.121(c)(2)(iii).

3)         Exception

for Wellness Programs

Notwithstanding subsections (c)(1)

and (c)(2), a plan or issuer may vary the amount of premium or contribution it

requires similarly situated individuals to pay based on whether an individual

has met the standards of a wellness program that satisfies the requirements of subsections

(f) through (k). (45 CFR 146.121)

d)         Similarly Situated Individuals

The requirements of this Section

apply only within a group of individuals who are treated as similarly situated

individuals. A plan or issuer may treat participants as a group of similarly

situated individuals separate from beneficiaries. In addition, participants may

be treated as two or more distinct groups of similarly situated individuals and

beneficiaries may be treated as two or more distinct groups of similarly

situated individuals in accordance with this subsection (d). Moreover, if

individuals have a choice of two or more benefit packages, individuals choosing

one benefit package may be treated as one or more groups of similarly situated

individuals distinct from individuals choosing another benefit package.

1)         Participants

Subject to subsection (d)(3), a

plan or issuer may treat participants as two or more distinct groups of

similarly situated individuals if the distinction between or among the groups

of participants is based on a bona fide employment-based classification

consistent with the employer's usual business practice. Whether an

employment-based classification is bona fide is determined on the basis of all

the relevant facts and circumstances. Relevant facts and circumstances include

whether the employer uses the classification for purposes independent of

qualification for health coverage (for example, determining eligibility for

other employee benefits or determining other terms of employment)

s practice. Whether an

employment-based classification is bona fide is determined on the basis of all

the relevant facts and circumstances. Relevant facts and circumstances include

whether the employer uses the classification for purposes independent of

qualification for health coverage (for example, determining eligibility for

other employee benefits or determining other terms of employment). Subject to

subsection (d)(3), examples of classifications that, based on all the relevant

facts and circumstances, may be bona fide include full-time versus part-time

status, different geographic location, membership in a collective bargaining

unit, date of hire, length of service, current employee versus former employee

status, and different occupations. However, a classification based on any

health factor is not a bona fide employment-based classification unless the

requirements of subsection (l) are satisfied (permitting favorable treatment of

individuals with adverse health factors).

2)         Beneficiaries

A)        Subject

to subsection (d)(3), a plan or issuer may treat beneficiaries as two or more

distinct groups of similarly situated individuals if the distinction between or

among the groups of beneficiaries is based on any of the following factors:

i)          A

bona fide employment-based classification of the participant through whom the

beneficiary is receiving coverage;

ii)         Relationship

to the participant (for example, as a spouse or as a dependent child);

iii)        Marital

status;

iv)        With

respect to children of a participant, age or student status; or

v)         Any

other factor if the factor is not a health factor.

B)        Subsection

employment-based classification of the participant through whom the

beneficiary is receiving coverage;

ii)         Relationship

to the participant (for example, as a spouse or as a dependent child);

iii)        Marital

status;

iv)        With

respect to children of a participant, age or student status; or

v)         Any

other factor if the factor is not a health factor.

B)        Subsection

(d)(2)(A) does not prevent more favorable treatment of individuals with adverse

health factors in accordance with subsection (g).

3)         Discrimination

Directed at Individuals

Notwithstanding subsections (d)(1)

and (d)(2), if the creation or modification of an employment or coverage

classification is directed at individual participants or beneficiaries based on

any health factor of the participants or beneficiaries, the classification is

not permitted under this subsection (d) unless it is permitted under subsection

(g) (permitting favorable treatment of individuals with adverse health

factors). Thus, if an employer modified an employment-based classification to

single out, based on a health factor, individual participants and beneficiaries

and deny them health coverage, the new classification would not be permitted

under this Section. (45 CFR 146.121)

4)         This

subsection (d) is illustrated by the examples appearing at 45 CFR

146.121(d)(4).

e)         Nonconfinement and Actively-at-Work

Provisions

1)         Nonconfinement

Provisions

A)        General

Rule

Under subsections (b) and (c), a

plan or issuer may not establish a rule for eligibility (as described in

subsection (b)(1)(B)) or set any individual's premium or contribution rate

based on whether an individual is confined to a hospital or other health care

institution

(4).

e)         Nonconfinement and Actively-at-Work

Provisions

1)         Nonconfinement

Provisions

A)        General

Rule

Under subsections (b) and (c), a

plan or issuer may not establish a rule for eligibility (as described in

subsection (b)(1)(B)) or set any individual's premium or contribution rate

based on whether an individual is confined to a hospital or other health care

institution. In addition, under subsections (b) and (c), a plan or issuer may

not establish a rule for eligibility or set any individual's premium or

contribution rate based on an individual's ability to engage in normal life

activities, except to the extent permitted under subsections (e)(2)(B) and

(e)(3) (permitting plans and issuers, under certain circumstances, to

distinguish among employees based on the performance of services).

B)        Subsection

(e)(1)(A) is illustrated by the examples appearing at 45 CFR 146.121(e)(1)(ii).

2)         Actively-at-Work

and Continuous Service Provisions

A)        General

Rule

i)          Under

subsections (b) and (c) and subject to the exception for the first day of work

described in subsection (e)(2)(B), a plan or issuer may not establish a rule

for eligibility (as described in subsection (b)(1)(B)) or set any individual's

premium or contribution rate based on whether an individual is actively at work

(including whether an individual is continuously employed), unless absence from

work due to any health factor (such as being absent from work on sick leave) is

treated, for purposes of the plan or health insurance coverage, as being

actively at work.

ii)         Subsection

ction (b)(1)(B)) or set any individual's

premium or contribution rate based on whether an individual is actively at work

(including whether an individual is continuously employed), unless absence from

work due to any health factor (such as being absent from work on sick leave) is

treated, for purposes of the plan or health insurance coverage, as being

actively at work.

ii)         Subsection

(e)(2)(A)(i) is illustrated by the examples appearing at 45 CFR

146.121(e)(2)(B).

B)        Exception

for the First Day of Work

i)          Notwithstanding

the general rule in subsection (e)(2)(A), a plan or issuer may establish a rule

for eligibility that requires an individual to begin work for the employer

sponsoring the plan (or, in the case of a multiemployer plan, to begin a job in

covered employment) before coverage becomes effective, provided that such a

rule for eligibility applies regardless of the reason for the absence.

ii)         This

subsection (e)(2)(B) is illustrated by the examples appearing at 45 CFR

146.121(e)(2)(ii)(B).

3)         Relationship

to Plan Provisions Defining Similarly Situated Individuals

A)        Notwithstanding

subsection (e), a plan or issuer may establish rules for eligibility or set any

individual's premium or contribution rate in accordance with the rules relating

to similarly situated individuals in subsection (d). Accordingly, a plan or

issuer may distinguish in rules for eligibility under the plan between

full-time and part-time employees, between permanent and temporary or seasonal

employees, between current and former employees, and between employees

currently performing services and employees no longer performing services for

the employer, subject to subsection (d)

ed individuals in subsection (d). Accordingly, a plan or

issuer may distinguish in rules for eligibility under the plan between

full-time and part-time employees, between permanent and temporary or seasonal

employees, between current and former employees, and between employees

currently performing services and employees no longer performing services for

the employer, subject to subsection (d). However, other federal or Illinois

laws (including the COBRA continuation provisions and the Family and Medical

Leave Act of 1993 (29 USC 2601 et seq.)) may require an employee or the

employee's dependents to be offered coverage and set limits on the premium or

contribution rate even though the employee is not performing services. (45 CFR

146.121)

B)        Subsection

(e)(3)(A) is illustrated by the examples appearing at 45 CFR 146.121(e)(3)(ii).

f)         Nondiscriminatory Wellness

Programs – In General

A wellness program is a program of

health promotion or disease prevention. Subsections (b)(2)(B) and (c)(3)

provide exceptions to the general prohibitions against discrimination based on

a health factor for plan provisions that vary benefits (including cost-sharing

mechanisms) or the premium or contribution for similarly situated individuals

in connection with a wellness program that satisfies the requirements of subsections

(f) through (k).  The following definitions govern in applying the provisions

of subsections (f) through (k):

1)         Reward

Except where expressly provided

otherwise, references in this Section to an individual obtaining a reward

include both obtaining a reward (such as a discount or rebate of a premium or

contribution, a waiver of all or part of a cost-sharing mechanism, an

additional benefit, or any financial or other incentive) and avoiding a penalty

(such as the absence of a premium surcharge or other financial or nonfinancial

disincentive)

otherwise, references in this Section to an individual obtaining a reward

include both obtaining a reward (such as a discount or rebate of a premium or

contribution, a waiver of all or part of a cost-sharing mechanism, an

additional benefit, or any financial or other incentive) and avoiding a penalty

(such as the absence of a premium surcharge or other financial or nonfinancial

disincentive). References in this Section to a plan providing a reward include

both providing a reward (such as a discount or rebate of a premium or

contribution, a waiver of all or part of a cost-sharing mechanism, an

additional benefit, or any financial or other incentive) and imposing a penalty

(such as a surcharge or other financial or nonfinancial disincentive).

2)         Participatory

Wellness Programs

If none of the conditions for

obtaining a reward under a wellness program is based on an individual

satisfying a standard that is related to a health factor (or if a wellness

program does not provide a reward), the wellness program is a participatory

wellness program. Examples of participatory wellness programs are:

A)        A

program that reimburses employees for all or part of the cost for membership in

a fitness center;

B)        A

diagnostic testing program that provides a reward for participation in that

program and does not base any part of the reward on outcomes;

C)        A

program that encourages preventive care through the waiver of the copayment or

deductible requirement under a group health plan for the costs of, for example,

prenatal care or well-baby visits

ost for membership in

a fitness center;

B)        A

diagnostic testing program that provides a reward for participation in that

program and does not base any part of the reward on outcomes;

C)        A

program that encourages preventive care through the waiver of the copayment or

deductible requirement under a group health plan for the costs of, for example,

prenatal care or well-baby visits. (Note that, with respect to

non-grandfathered plans, 45 CFR 147.130 requires benefits for certain

preventive health services without the imposition of cost sharing.);

D)        A

program that reimburses employees for the costs of participating, or that

otherwise provides a reward for participating, in a smoking cessation program

without regard to whether the employee quits smoking;

E)        A

program that provides a reward to employees for attending a monthly, no-cost

health education seminar; and

F)         A

program that provides a reward to employees who complete a health risk

assessment regarding current health status, without any further action

(educational or otherwise) required by the employee with regard to the health

issues identified as part of the assessment. (See also 45 CFR 146.122 for rules

prohibiting collection of genetic information.)

3)         Health-Contingent

Wellness Programs

A health-contingent wellness

program is a program that requires an individual to satisfy a standard related

to a health factor to obtain a reward (or requires an individual to undertake

more than a similarly situated individual based on a health factor in order to

obtain the same reward). A health-contingent wellness program may be an

activity-only wellness program or an outcome-based wellness program

contingent wellness

program is a program that requires an individual to satisfy a standard related

to a health factor to obtain a reward (or requires an individual to undertake

more than a similarly situated individual based on a health factor in order to

obtain the same reward). A health-contingent wellness program may be an

activity-only wellness program or an outcome-based wellness program.

4)         Activity-Only

Wellness Programs

An activity-only wellness program

is a type of health-contingent wellness program that requires an individual to

perform or complete an activity related to a health factor in order to obtain a

reward but does not require the individual to attain or maintain a specific

health outcome. Examples include walking, diet or exercise programs, which some

individuals may be unable to participate in or complete (or have difficulty

participating in or completing) due to a health factor, such as severe asthma,

pregnancy or a recent surgery. See subsection (h) for requirements applicable

to activity-only wellness programs.

5)         Outcome-Based

Wellness Programs

An outcome-based wellness program

is a type of health-contingent wellness program that requires an individual to

attain or maintain a specific health outcome (such as not smoking or attaining

certain results on biometric screenings) in order to obtain a reward. To comply

with the rules of subsections (f) through (k), an outcome-based wellness

program typically has two tiers. That is, for individuals who do not attain or

maintain the specific health outcome, compliance with an educational program or

an activity may be offered as an alternative to achieve the same reward. This

alternative pathway, however, does not mean that the overall program, which has

an outcome-based component, is not an outcome-based wellness program

wellness

program typically has two tiers. That is, for individuals who do not attain or

maintain the specific health outcome, compliance with an educational program or

an activity may be offered as an alternative to achieve the same reward. This

alternative pathway, however, does not mean that the overall program, which has

an outcome-based component, is not an outcome-based wellness program. That is,

if a measurement, test or screening is used as part of an initial standard and

individuals who meet the standard are granted the reward, the program is

considered an outcome-based wellness program. For example, if a wellness

program tests individuals for specified medical conditions or risk factors

(including biometric screening such as testing for high cholesterol, high blood

pressure, abnormal body mass index, or high glucose level) and provides a

reward to individuals identified as within a normal or healthy range for these

medical conditions or risk factors, while requiring individuals who are

identified as outside the normal or healthy range (or at risk) to take

additional steps (such as meeting with a health coach, taking a health or

fitness course, adhering to a health improvement action plan, complying with a

walking or exercise program, or complying with a health care provider's plan of

care) to obtain the same reward, the program is an outcome-based wellness

program. See subsection (i) for requirements applicable to outcome-based

wellness programs. (45 CFR 146.121)

g)         Requirement for Participatory

Wellness Programs

A participatory wellness program,

as described in subsection (f)(2), does not violate the provisions of this Section

only if participation in the program is made available to all similarly

situated individuals, regardless of health status.

h)         Requirements for Activity-Only

Wellness Programs

A health-contingent wellness

program that is an activity-only wellness program, as described in subsection

ory wellness program,

as described in subsection (f)(2), does not violate the provisions of this Section

only if participation in the program is made available to all similarly

situated individuals, regardless of health status.

h)         Requirements for Activity-Only

Wellness Programs

A health-contingent wellness

program that is an activity-only wellness program, as described in subsection

(f)(4), does not violate the provisions of this Section only if all of the

following requirements are satisfied:

1)         Frequency

of Opportunity to Qualify

The program must give individuals

eligible for the program the opportunity to qualify for the reward under the

program at least once per year.

2)         Size of

Reward

The reward for the activity-only

wellness program, together with the reward for other health-contingent wellness

programs with respect to the plan, must not exceed the applicable percentage

(as defined in subsection (j)) of the total cost of employee-only coverage

under the plan. However, if, in addition to employees, any class of dependents

(such as spouses, or spouses and dependent children) may participate in the

wellness program, the reward must not exceed the applicable percentage of the

total cost of the coverage in which an employee and any dependents are enrolled.

For purposes of this subsection (h)(2), the cost of coverage is determined

based on the total amount of employer and employee contributions towards the

cost of coverage for the benefit package under which the employee is (or the

employee and any dependents are) receiving coverage.

3)         Reasonable

Design

The program must be reasonably

designed to promote health or prevent disease

olled.

For purposes of this subsection (h)(2), the cost of coverage is determined

based on the total amount of employer and employee contributions towards the

cost of coverage for the benefit package under which the employee is (or the

employee and any dependents are) receiving coverage.

3)         Reasonable

Design

The program must be reasonably

designed to promote health or prevent disease. A program satisfies this

standard if it has a reasonable chance of improving the health of, or

preventing disease in, participating individuals, and it is not overly

burdensome, is not a subterfuge for discriminating based on a health factor,

and is not highly suspect in the method chosen to promote health or prevent

disease. This determination is based on all the relevant facts and

circumstances.

4)         Uniform

Availability and Reasonable Alternative Standards

The full reward under the

activity-only wellness program must be available to all similarly situated

individuals.

A)        Under

this subsection (h)(4), a reward under an activity-only wellness program is not

available to all similarly situated individuals for a period unless the program

meets both of the following requirements:

i)          The

program allows a reasonable alternative standard (or waiver of the otherwise

applicable standard) for obtaining the reward for any individual for whom, for

that period, it is unreasonably difficult due to a medical condition to satisfy

the otherwise applicable standard; and

ii)         The

program allows a reasonable alternative standard (or waiver of the otherwise

applicable standard) for obtaining the reward for any individual for whom, for

that period, it is medically inadvisable to attempt to satisfy the otherwise

applicable standard

m, for

that period, it is unreasonably difficult due to a medical condition to satisfy

the otherwise applicable standard; and

ii)         The

program allows a reasonable alternative standard (or waiver of the otherwise

applicable standard) for obtaining the reward for any individual for whom, for

that period, it is medically inadvisable to attempt to satisfy the otherwise

applicable standard.

B)        While

plans and issuers are not required to determine a particular reasonable

alternative standard in advance of an individual's request for one, if an

individual is described in either subsection (h)(4)(A)(i) or (ii), a reasonable

alternative standard must be furnished by the plan or issuer upon the

individual's request or the condition for obtaining the reward must be waived.

C)        All

the facts and circumstances are taken into account in determining whether a

plan or issuer has furnished a reasonable alternative standard, including but

not limited to the following:

i)          If

the reasonable alternative standard is completion of an educational program,

the plan or issuer must make the educational program available or assist the

employee in finding such a program (instead of requiring an individual to find

such a program unassisted), and may not require an individual to pay for the

cost of the program;

ii)         The

time commitment required must be reasonable (for example, requiring attendance

nightly at a one-hour class would be unreasonable);

iii)        If

the reasonable alternative standard is a diet program, the plan or issuer is

not required to pay for the cost of food but must pay any membership or

participation fee;

iv)        If an

individual's personal physician states that a plan standard (including, if

applicable, the recommendations of the plan's medical professional) is not

medically appropriate for that individual, the plan or issuer must provide a

reasonable alternative standard that accommodates the recommendations of the

individual's personal physician with

ny membership or

participation fee;

iv)        If an

individual's personal physician states that a plan standard (including, if

applicable, the recommendations of the plan's medical professional) is not

medically appropriate for that individual, the plan or issuer must provide a

reasonable alternative standard that accommodates the recommendations of the

individual's personal physician with regard to medical appropriateness. Plans

and issuers may impose standard cost sharing under the plan or coverage for

medical items and services furnished pursuant to the physician's

recommendations.

D)        To the

extent that a reasonable alternative standard under an activity-only wellness

program is, itself, an activity-only wellness program, it must comply with the

requirements of this subsection (h) in the same manner as if it were an initial

program standard. (Thus, for example, if a plan or issuer provides a walking

program as a reasonable alternative standard to a running program, individuals

for whom it is unreasonably difficult due to a medical condition to complete

the walking program (or for whom it is medically inadvisable to attempt to

complete the walking program) must be provided a reasonable alternative

standard to the walking program.) To the extent that a reasonable alternative

standard under an activity-only wellness program is, itself, an outcome-based

wellness program, it must comply with the requirements of subsection (i),

including subsection (i)(4)(D).

E)        If

reasonable under the circumstances, a plan or issuer may seek verification,

such as a statement from an individual's personal physician, that a health

factor makes it unreasonably difficult for the individual to satisfy, or

medically inadvisable for the individual to attempt to satisfy, the otherwise

applicable standard of an activity-only wellness program

g subsection (i)(4)(D).

E)        If

reasonable under the circumstances, a plan or issuer may seek verification,

such as a statement from an individual's personal physician, that a health

factor makes it unreasonably difficult for the individual to satisfy, or

medically inadvisable for the individual to attempt to satisfy, the otherwise

applicable standard of an activity-only wellness program. Plans and issuers may

seek verification with respect to requests for a reasonable alternative

standard for which it is reasonable to determine that medical judgment is

required to evaluate the validity of the request.

5)         Notice

of Availability of Reasonable Alternative Standard

The plan or issuer must disclose

in all plan materials describing the terms of an activity-only wellness program

the availability of a reasonable alternative standard to qualify for the reward

(and, if applicable, the possibility of waiver of the otherwise applicable

standard), including contact information for obtaining a reasonable alternative

standard and a statement that recommendations of an individual's personal

physician will be accommodated. If plan materials merely mention that such a

program is available, without describing its terms, this disclosure is not

required. Sample language is provided in subsection (k), as well as in certain

examples of this Section. (45 CFR 146.121)

6)         The

provisions of this subsection (h) are illustrated by the example appearing at

45 CFR 146.121(f)(4)(vi).

i)          Requirements for Outcome-Based

Wellness Programs

A health-contingent wellness

program that is an outcome-based wellness program, as described in subsection

le language is provided in subsection (k), as well as in certain

examples of this Section. (45 CFR 146.121)

6)         The

provisions of this subsection (h) are illustrated by the example appearing at

45 CFR 146.121(f)(4)(vi).

i)          Requirements for Outcome-Based

Wellness Programs

A health-contingent wellness

program that is an outcome-based wellness program, as described in subsection

(f)(5), does not violate the provisions of this Section only if all of the

following requirements are satisfied:

1)         Frequency

of Opportunity to Qualify

The program must give individuals

eligible for the program the opportunity to qualify for the reward under the

program at least once per year.

2)         Size of

Reward

The reward for the outcome-based

wellness program, together with the reward for other health-contingent wellness

programs with respect to the plan, must not exceed the applicable percentage

(as defined in subsection (j)) of the total cost of employee-only coverage

under the plan. However, if, in addition to employees, any class of dependents

(such as spouses, or spouses and dependent children) may participate in the

wellness program, the reward must not exceed the applicable percentage of the

total cost of the coverage in which an employee and any dependents are

enrolled. For purposes of this subsection (i)(2), the cost of coverage is

determined based on the total amount of employer and employee contributions

towards the cost of coverage for the benefit package under which the employee

is (or the employee and any dependents are) receiving coverage.

3)         Reasonable

Design

The program must be reasonably

designed to promote health or prevent disease

rolled. For purposes of this subsection (i)(2), the cost of coverage is

determined based on the total amount of employer and employee contributions

towards the cost of coverage for the benefit package under which the employee

is (or the employee and any dependents are) receiving coverage.

3)         Reasonable

Design

The program must be reasonably

designed to promote health or prevent disease. A program satisfies this

standard if it has a reasonable chance of improving the health of, or

preventing disease in, participating individuals, and it is not overly

burdensome, is not a subterfuge for discriminating based on a health factor,

and is not highly suspect in the method chosen to promote health or prevent

disease. This determination is based on all the relevant facts and

circumstances. To ensure that an outcome-based wellness program is reasonably

designed to improve health and does not act as a subterfuge for underwriting or

reducing benefits based on a health factor, a reasonable alternative standard

to qualify for the reward must be provided to any individual who does not meet

the initial standard based on a measurement, test or screening that is related

to a health factor, as explained in subsection (i)(4).

4)         Uniform

Availability and Reasonable Alternative Standards

The full reward under the

outcome-based wellness program must be available to all similarly situated

individuals.

A)        Under

this subsection (i)(4), a reward under an outcome-based wellness program is not

available to all similarly situated individuals for a period unless the program

allows a reasonable alternative standard (or waiver of the otherwise applicable

standard) for obtaining the reward for any individual who does not meet the

initial standard based on the measurement, test or screening, as described in

this subsection (i)(4)

), a reward under an outcome-based wellness program is not

available to all similarly situated individuals for a period unless the program

allows a reasonable alternative standard (or waiver of the otherwise applicable

standard) for obtaining the reward for any individual who does not meet the

initial standard based on the measurement, test or screening, as described in

this subsection (i)(4).

B)        While

plans and issuers are not required to determine a particular reasonable

alternative standard in advance of an individual's request for one, if an

individual is described in subsection (i)(4)(A), a reasonable alternative

standard must be furnished by the plan or issuer upon the individual's request

or the condition for obtaining the reward must be waived.

C)        All

the facts and circumstances are taken into account in determining whether a

plan or issuer has furnished a reasonable alternative standard, including but

not limited to the following:

i)          If

the reasonable alternative standard is completion of an educational program,

the plan or issuer must make the educational program available or assist the

employee in finding such a program (instead of requiring an individual to find

such a program unassisted), and may not require an individual to pay for the

cost of the program.

ii)         The

time commitment required must be reasonable (for example, requiring attendance

nightly at a one-hour class would be unreasonable).

iii)        If

the reasonable alternative standard is a diet program, the plan or issuer is

not required to pay for the cost of food but must pay any membership or

participation fee

may not require an individual to pay for the

cost of the program.

ii)         The

time commitment required must be reasonable (for example, requiring attendance

nightly at a one-hour class would be unreasonable).

iii)        If

the reasonable alternative standard is a diet program, the plan or issuer is

not required to pay for the cost of food but must pay any membership or

participation fee.

iv)        If an

individual's personal physician states that a plan standard (including, if

applicable, the recommendations of the plan's medical professional) is not

medically appropriate for that individual, the plan or issuer must provide a

reasonable alternative standard that accommodates the recommendations of the

individual's personal physician with regard to medical appropriateness. Plans

and issuers may impose standard cost sharing under the plan or coverage for

medical items and services furnished pursuant to the physician's

recommendations.

D)        To the

extent that a reasonable alternative standard under an outcome-based wellness

program is, itself, an activity-only wellness program, it must comply with the

requirements of subsection (h) in the same manner as if it were an initial

program standard. To the extent that a reasonable alternative standard under an

outcome-based wellness program is, itself, another outcome-based wellness

program, it must comply with the requirements of this subsection (i), subject

to the following special rules:

i)          The

reasonable alternative standard cannot be a requirement to meet a different

level of the same standard without additional time to comply that takes into

account the individual's circumstances. For example, if the initial standard is

to achieve a BMI less than 30, the reasonable alternative standard cannot be to

achieve a BMI less than 31 on that same date

lowing special rules:

i)          The

reasonable alternative standard cannot be a requirement to meet a different

level of the same standard without additional time to comply that takes into

account the individual's circumstances. For example, if the initial standard is

to achieve a BMI less than 30, the reasonable alternative standard cannot be to

achieve a BMI less than 31 on that same date. However, if the initial standard

is to achieve a BMI less than 30, a reasonable alternative standard for the

individual could be to reduce the individual's BMI by a small amount or small

percentage, over a realistic period of time, such as within a year.

ii)         An

individual must be given the opportunity to comply with the recommendations of

the individual's personal physician as a second reasonable alternative standard

to meeting the reasonable alternative standard defined by the plan or issuer,

but only if the physician joins in the request. The individual can make a

request to involve a personal physician's recommendations at any time and the

personal physician can adjust the physician's recommendations at any time,

consistent with medical appropriateness.

E)        It is

not reasonable to seek verification, such as a statement from an individual's

personal physician, under an outcome-based wellness program that a health

factor makes it unreasonably difficult for the individual to satisfy, or

medically inadvisable for the individual to attempt to satisfy, the otherwise

applicable standard as a condition of providing a reasonable alternative to the

initial standard

reasonable to seek verification, such as a statement from an individual's

personal physician, under an outcome-based wellness program that a health

factor makes it unreasonably difficult for the individual to satisfy, or

medically inadvisable for the individual to attempt to satisfy, the otherwise

applicable standard as a condition of providing a reasonable alternative to the

initial standard. However, if a plan or issuer provides an alternative standard

to the otherwise applicable measurement, test or screening that involves an

activity that is related to a health factor, then the rules of subsection (h)

for activity-only wellness programs apply to that component of the wellness

program and the plan or issuer may, if reasonable under the circumstances, seek

verification that it is unreasonably difficult due to a medical condition for

an individual to perform or complete the activity (or it is medically

inadvisable to attempt to perform or complete the activity). (For example, if

an outcome-based wellness program requires participants to maintain a certain

healthy weight and provides a diet and exercise program for individuals who do

not meet the targeted weight, a plan or issuer may seek verification, as

described in subsection (i)(4)(D), if reasonable under the circumstances, that

a second reasonable alternative standard is needed for certain individuals

because, for those individuals, it would be unreasonably difficult due to a

medical condition to comply, or medically inadvisable to attempt to comply,

with the diet and exercise program, due to a medical condition.)

5)         Notice

of Availability of Reasonable Alternative Standard

The plan or issuer must disclose

in all plan materials describing the terms of an outcome-based wellness

program, and in any disclosure that an individual did not satisfy an initial

outcome-based standard, the availability of a reasonable alternative standard

to qualify for the reward (and, if applicable, the possibility of waiver of the

otherwise applica

ty of Reasonable Alternative Standard

The plan or issuer must disclose

in all plan materials describing the terms of an outcome-based wellness

program, and in any disclosure that an individual did not satisfy an initial

outcome-based standard, the availability of a reasonable alternative standard

to qualify for the reward (and, if applicable, the possibility of waiver of the

otherwise applicable standard), including contact information for obtaining a

reasonable alternative standard and a statement that recommendations of an

individual's personal physician will be accommodated. If plan materials merely

mention that such a program is available, without describing its terms, this

disclosure is not required. Sample language is provided in subsection (k), as

well as in certain examples of this Section. (45 CFR 146.121)

6)         This subsection

(i) is illustrated by the examples at 45 CFR 146.121(f)(4).

j)          Applicable Percentage

For purposes of subsections

(f) through (k), the applicable percentage is provided

in Section

356z.17(e)(iii) of the Code.

k)         Sample Language

The following language, or

substantially similar language, can be used to satisfy the notice requirement

of subsection (h)(5) or (i)(5): "Your health plan is committed to helping

you achieve your best health. Rewards for participating in a wellness program

are available to all employees. If you think you might be unable to meet a

standard for a reward under this wellness program, you might qualify for an

opportunity to earn the same reward by different means

sed to satisfy the notice requirement

of subsection (h)(5) or (i)(5): "Your health plan is committed to helping

you achieve your best health. Rewards for participating in a wellness program

are available to all employees. If you think you might be unable to meet a

standard for a reward under this wellness program, you might qualify for an

opportunity to earn the same reward by different means. Contact us at [insert

contact information] and we will work with you (and, if you wish, with your

doctor) to find a wellness program with the same reward that is right for you

in light of your health status." (45 CFR 146.121)

l)          More

Favorable Treatment of Individuals with Adverse Health Factors Permitted

1)         In Rules

for Eligibility

A)        Nothing

in this Section prevents a group health plan or group health insurance issuer

from establishing more favorable rules for eligibility (described in subsection

(b)(1)) for individuals with an adverse health factor, such as disability, than

for individuals without the adverse health factor. Moreover, nothing in this Section

prevents a plan or issuer from charging a higher premium or contribution with

respect to individuals with an adverse health factor if they would not be

eligible for the coverage were it not for the adverse health factor. (However,

other laws, including Illinois insurance laws, may set or limit premium rates;

these laws are not affected by this Section.)

B)        This subsection

(l)(1) is illustrated by the examples appearing at 45 CFR 146.121(g)(1)(ii).

2)         In Premiums

or Contributions

A)        Nothing

in this Section prevents a group health plan or group health insurance issuer

from charging individuals a premium or contribution that is less than the

premium (or contribution) for similarly situated individuals if the lower

charge is based on an adverse health factor, such as disability. (45 CFR

146.121)

B)        This subsection

.

2)         In Premiums

or Contributions

A)        Nothing

in this Section prevents a group health plan or group health insurance issuer

from charging individuals a premium or contribution that is less than the

premium (or contribution) for similarly situated individuals if the lower

charge is based on an adverse health factor, such as disability. (45 CFR

146.121)

B)        This subsection

(l)(2) is illustrated by the examples appearing at 45 CFR 146.121(g)(2)(ii).

m)        No Effect on Other Laws

Compliance with this Section is

not determinative of compliance with any other provision of the PHS Act

(including the COBRA continuation provisions) or any other Illinois or federal

law, such as the Americans With Disabilities Act. Therefore, although this Section

would not prohibit a plan or issuer from treating one group of similarly

situated individuals differently from another (such as providing different

benefit packages to current and former employees), other federal or Illinois

laws may require that two separate groups of similarly situated individuals be

treated the same for certain purposes (such as making the same benefit package

available to COBRA qualified beneficiaries as is made available to active

employees). In addition, although this Section generally does not impose new

disclosure obligations on plans and issuers, this Section does not affect any

other laws, including those that require accurate disclosures and prohibit

intentional misrepresentation. (45 CFR 146.121)

n)         Applicability Dates

1)         Generally

This Section applies for plan

years beginning on or after July 1, 2007

oyees). In addition, although this Section generally does not impose new

disclosure obligations on plans and issuers, this Section does not affect any

other laws, including those that require accurate disclosures and prohibit

intentional misrepresentation. (45 CFR 146.121)

n)         Applicability Dates

1)         Generally

This Section applies for plan

years beginning on or after July 1, 2007.

2)         Special

Rule for Self-Funded Nonfederal Governmental Plans Exempted Under 45 CFR

146.180

A)        If coverage

has been denied to any individual because the sponsor of a self-funded

nonfederal governmental plan has elected under 45 CFR 146.180 to exempt the

plan from the requirements of this Section, and the plan sponsor subsequently

chooses to bring the plan into compliance with the requirements of this Section,

the plan:

i)          Must

notify the individual that the plan will be coming into compliance with the

requirements of this Section, specify the effective date of compliance, and

inform the individual regarding any enrollment restrictions that may apply

under the terms of the plan once the plan is in compliance with this Section

(as a matter of administrative convenience, the notice may be disseminated to

all employees);

ii)         Must

give the individual an opportunity to enroll that continues for at least 30

days;

iii)        Must

permit coverage to be effective as of the first day of plan coverage for which

an exemption election under 45 CFR 146.180 (with regard to this Section) is no

longer in effect; and

iv)        May not

treat the individual as a late enrollee or a special enrollee.

B)        For

purposes of this subsection (n)(2), an individual is considered to have been

denied coverage if the individual failed to apply for coverage because, given

an exemption election under 45 CFR 146.180, it was reasonable to believe that

an application for coverage would have been denied based on a health factor. (45

CFR 146.121)

C)        This subsection

llee or a special enrollee.

B)        For

purposes of this subsection (n)(2), an individual is considered to have been

denied coverage if the individual failed to apply for coverage because, given

an exemption election under 45 CFR 146.180, it was reasonable to believe that

an application for coverage would have been denied based on a health factor. (45

CFR 146.121)

C)        This subsection

(n)(2) is illustrated by the examples appearing at 45 CFR 146.121(i)(2)(iii).