Take a Closer Look at the HIPAA Nondiscrimination Rule’s Prohibition of Actively-at-Work Clauses
The HIPAA nondiscrimination rule states that an employer cannot, “refuse to provide benefits because an individual is not actively at work on the day that individual would become eligible for benefits.” Yet, actively-at-work clauses, which require an individual to be actively at work on the day their benefits become effective, remain a standard practice in many medical and group life insurance policies. For life insurance policies, this issue is easily reconciled by the fact that life insurance policies are not subject to HIPAA.
For medical and other group health plan policies subject to the HIPAA nondiscrimination rules, however, a more careful analysis is necessary.
Under HIPAA, an employer is prohibited from denying eligibility for benefits or otherwise treating an individual differently with respect to their benefits based on a health factor. A health factor includes physical and mental medical conditions, claims experience, receipt of healthcare, medical history, genetic information and disability.
The prohibition of actively-at-work clauses is part of the HIPAA nondiscrimination rule’s effort to protect employees from discrimination based on a health factor.
Impermissible Actively-at-Work Clause
If the actively-at-work clause denies entry into the plan because the employee is not actively at work due to a health factor on the day he or she would otherwise enter the plan, the clause is prohibited under HIPAA.
Example: Employer Z hires Employee A on March 15 as a regular, full-time employee. Employer Z has a waiting period of first of the month following 60 days of service, which Employee A satisfies on June 1. Due to a recent back injury, however, Employee A is on sick leave and not actively at work on June 1. Despite Employee A’s absence being based on a health factor, Employer Z denies enrollment to Employee A until Employee A returns from sick leave.
This action, without provisions, would violate HIPAA nondiscrimination rules.
Permissible Actively-at-Work Clause
An employer may have an actively-at-work provision that does not violate the HIPAA nondiscrimination rules if:
The plan treats the absent employee as if they were actively at work for purposes of health coverage;
Example: Employer Z hires Employee A on March 15 as a regular, full-time employee. Employer Z has a waiting period of first of the month following 60 days of service, which Employee A satisfies on June 1. Due to a recent back injury, however, Employee A is on sick leave and not actively at work on June 1. Because Employee A’s absence is based on a health factor, Employer Z enrolls Employee A on June 1 as if Employee A was actively at work that day.
The clause only requires that the employee report for their first day of work before coverage becomes effective; or
Example: Employer Y hires Employee B as a regular, full-time employee with a March 15 start date. Employer Y has no waiting period, which Employee B will satisfy on the first day of work. Due to physical injuries from a car accident the day before, however, Employee B is unable to start work until March 18. Because Employee B did not report for the first day of work until March 18, Employer Y denies enrollment to Employee B until March 18.
The clause is only applied to absences not related to a health factor.
Example: Employer X hires Employee C on April 15 as a regular, full-time employee. Employer X has a waiting period of first of the month following 30 days of service, which Employee C satisfies on June 1. June 1, however, is a Saturday and Employer X is not open on Saturdays. Because Employee C’s absence on June 1 was not based on a health factor, Employer X denies enrollment until June 3 when Employee C is actively at work the following Monday.
If you’re interested in learning more about the actively-at-work provisions of the HIPAA nondiscrimination rule or have specific questions regarding the permissibility of the clause, reach out to your OneDigital consultant.