HIPAA/HITECH

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In clear and unambiguous terms, the U.S. Departments of Labor (“DOL”) and Health and Human Services and the Internal Revenue Service (“IRS”) (the “Agencies”) drove a stake into the heart of two suspect health insurance strategies that have been promoted to business owners across the country.    In addition, the guidance may spell trouble for a common reimbursement strategy used by employers for executives and other key employees.

For much of 2013, group health plan sponsors have been gearing up for the compliance challenges associated with the Affordable Care Act. There is no doubt that much of the planning, focus and energy trained on the next round of effective dates under the Affordable Care Act is warranted. Nevertheless, plan sponsors must be certain not to overlook the other compliance challenge for 2013 – HIPAA/HITECH. On January 25, 2013, the Department of Health and Human Services (“HHS”) issued fairly significant regulations modifying the HIPAA Privacy, Security and Enforcement rules (the “Final Rule”). The Final Rule is generally effective March 26, 2013. However, covered entities (including group health plans) and business associates (i.e., service providers that conduct business with a covered entity that involves the use or disclosure of individually identifiable health information) must comply with the new provisions by September 23, 2013. Although the Final Rule includes a multitude of signification changes, some of the most pressing compliance obligations facing plan sponsors of group health plans and their business associates impact the security breach notification rules, business associate agreements, limitations on protected health information (“PHI”), and HIPAA Notice of Privacy Practices (“NPPs”).

On May 29, 2013, the Departments of Health and Human Services, Labor and Treasury (the “Departments”) issued final regulations on implementing and expanding employment-based wellness programs. The rules set forth in the final regulations remain largely unchanged from the proposed rules issued on November 20, 2012. For example, as provided for in the proposed rules, the final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20 percent to 30 percent of the cost of coverage. The final regulations also increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use. http://www.proskauer.com/publications/client-alert/new-guidance-on-wellness-programs-issued/.  However, a few points and clarifications are particularly noteworthy: