Legal and Regulatory Framework

Note that a VBBD program, along with many other benefit programs, is subject to various legal compliance requirements, including the following:

  • Personal health information must meet HIPAA privacy requirements.
  • All discussions on health conditions must meet state/federal confidentiality requirements.
  • Confidentiality protection must be communicated to all employees.
  • If VBBD initiatives will involve health savings accounts (HSAs), the legality of including preventative services for chronic diseases must be investigated.9,10
    9 Chernew, M. E., Rosen, A. B., Fendrick, A. M. “Value-Based Insurance Design.” Health Affairs 26, no. 2 (2007).
    10 An IRS Private Letter Ruling (available at stated that a policy that covered a specified number of prescription drugs was not a permitted coverage or preventive care under section 223 of the Code. However, this Private Letter Ruling did not specifically address the question of whether prescriptions for chronic illnesses are preventive services.
  • Then there is the issue of discrimination, because the VBBD plan discriminates by its very nature. So far the evidence suggests that plan participants do not consider such a plan as discriminatory. Therefore, it is essential that the plan sponsor make all objectives and specific nuances of the plan known as widely as possible; employee understanding of the program is essential.

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