wellness program design and compliance
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This UBA Employer Webinar Series is brought to you by United Benefit Advisorsin conjunction with Jackson Lewis
For a copy of this presentation, please go to www.UBAbenefits.com. Go to the Wisdom tab and scroll down to HR Webinar Series and click. Under
Employer Series click the Registration and Presentation link. Click the red Presentation button to see the slides.
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Wellness Program Design and Compliance
Presented by:
Joseph Lynett, Esq.LynettJ@jacksonlewis.com
Joseph J. Lazzarotti, Esq., CIPPLazzarottiJ@jacksonlewis.com
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About the Firm
Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation.
750 attorneys in 55 locations nationwide.
Current caseload of over 6,500 litigations and approximately 415 class actions.
Founding member of L&E Global.
Strategically Located Throughout the Nation to Serve Employers’ Needs
454 Locations Nationwide
Disclaimer
This presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances. Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, ADA, GINA, etc.).
The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors.
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Agenda
When the HIPAA nondiscrimination rules apply
Analyze different approaches to health-contingent programs
Limits on allowable wellness incentives, how to calculate them, and penalties
Satisfying “reasonable alternative requirements”
Whether you can have smoker and non-smoker rates without a formal wellness program
Impact of GINA, ADA and other laws on wellness programs
Taxation of wellness incentives
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Employers are Spending More on Wellness Programs2013 Survey by the National Business Group on Health (NBGH) indicates:o Employers planned to spend 15% more on wellness programs
per employee in 2014 compared to 2013.
o 95 percent of companies plan to offer some kind of health improvement program, with 74% offering incentives to participate, an increase from 57 percent in 2009.
o 93 percent of companies plan to expand or maintain funding for their program over the next three to five years
o 4 out of 10 employers plan to extend programs to spouses and domestic partners
http://www.fidelity.com/inside-fidelity/employer-services/health-care-survey-finds-spending
Meanwhile … Wellness Programs are Increasingly Regulated
Wellness Programs
ACA/
HIPAA
ERISA/
IRC
ADA
GINA
Title VII and
Other EEO
Risks
NLRA
State Laws
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Wellness Programs -- On the Brink of Major Changes?
May 8, 2013: EEOC announces wellness programs must be reviewed to avoid discrimination:o “To date, the Commission has not spoken clearly and definitely on the myriad of legal
issues that can arise under these laws for wellness programs.” EEOC Commissioner Chai Feldblum
May 29, 2013: Obama Administration issues Final Regulations governing wellness programs under Affordable Care Act.
May 23, 2014: EEOC announces plans to issue regulations concerning wellness program
August 20, 2014: EEOC files first lawsuit against employer concerning wellness program
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ACA/HIPAA:To which wellness programs
do these rules apply?
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HIPAA Non-Discrimination
Historical perspective (2006-2012): HIPAA, ADA, GINA, PPACA.
Basic Nondiscrimination Rule: Group health plans and issuers cannot discriminate with regard to eligibility or benefits on the basis of a health factor (health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability).
Practice Tip – A program not connected to the company’s group health plan (or itself a group health plan) not subject to HIPAA.
HIPAA Non-Discrimination
Wellness programs subject to HIPAA:
o Health plan premium discount for non-smokers
o Deductible under health plan eliminated for persons who satisfy certain biometric measurements
Wellness programs NOT subject to HIPAA:o Biggest loser competition with cash reward for winner.
o Points-based program where participants earn points for participating in certain activities and redeem for products, services, gift certificates
Practice Tip – When HIPAA does not apply, program is not subject to 30/50% limitation on rewards, but ADA and state law concerns remain.
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HIPAA: Basic Regulatory Approach
Effective plan years beginning on or after 1-1-14
Two program types: participatory and health contingent
Two types of health contingent programs:
o Activity-only (reasonable alternative under old rules)
o Outcome-based (reasonable alternative for all)
Incentive limit: 30% employee-only premium; 50% for tobacco prevention programs.
Updated reasonable alternative notice
Practice Tip – Participatory programs not subject to incentive limits.
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What program do we have:Participatory, Activity-only, or
Outcome-based programs
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“Participatory” Programs Under the ACA/HIPAA
Definition: Programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based satisfying a standard related to a health factor.
Participatory programs must be made available to all similarly situated individuals, regardless of health status.
Distinctions between individuals must be based on bona fide employment-based classifications consistent with employer’s usual practice (e.g., geographical).
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“Participatory” Programs
Examples:o Reimburses cost for membership in a fitness center.
o Reward for participation in diagnostic testing regardless of outcomes.
o Waiver of co-payment or deductible to encourage preventive care (e.g., prenatal care or well-baby visits).
o Reimburses costs of smoking cessation programs regardless of outcomes.
o Reward for attending monthly health education seminar.
o NEW: Reward for completing 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.
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Health Contingent Programs:
Definition: 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: o Walking, diet, or exercise programs.
o Some individuals may be unable to participate in or complete (or have difficulty participating in or completing) program due to a health factor, such as severe asthma, pregnancy, or a recent surgery.
Activity-Only
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Health Contingent Programs:
Definition: Program that requires an individual to attain or maintain a specific health outcome in order to obtain a reward.
Examples: o Stop smoking, satisfy “healthy” ranges for certain biometric
screenings, being identified to work with a health coach.
o Typically two-tiers:
• Tier one. Measurement, test, or screening is applied and, if satisfied, individual earns reward. If not, individual moves to tier two…
• Tier two. Individual takes additional steps to earn the same reward, such as meeting health coach, taking health/fitness course, complying with a walking or exercise program, or complying with a health care provider’s plan of care.
Outcome-based
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Applying these definitions…
Participatory Programs:
Joining a fitness center
Receiving preventive care
Attending monthly nutrition education seminar
Health Contingent: “Activity-Only” Programs
Participating in an exercise program, regardless of outcomes
Keep up with all recommended preventive care
Participating in a diet program, regardless of outcomes
Applying these definitions…
ProgramFeature
Analysis
Flu shot Preventive in nature, no particular outcome required so participatory, right? But a medical condition/health factor could prevent an individual from getting a flu shot, so health contingent?
Complete up to 5 calls with health coach
Activity only requires calling health coach, so participatory, right. What if calls are longer for persons with certain health factors? Is this now health contingent? What if program requires 3 calls for all participants and 5 calls for other participants identified as higher risk based on results of health risk assessment? This is health contingent.
Complete health risk assessment
Seems participatory – go on-line, answer 20 questions, and get reward regardless of answers to questions. What if the participant is blind, or has a learning disability, or a language barrier exists?
Keep up with preventive care
Participatory only? Maybe. But what if individual’s health condition qualifies her to receive more preventive services?
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HIPAA/ACA Requirements:Activity-Only Programs
Requirements:o Annual qualification: Provide opportunity to qualify at least 1x/year.
o Reward limit: 30% taking into account all health contingent programs; 50% for tobacco prevention programs.
o Reasonably designed: (i) reasonable chance of improving health or preventing disease, (ii) not overly burdensome, (iii) is not a subterfuge for health factor discrimination, and (iv) is not highly suspect in method chosen. Facts and circumstances determination.
o Uniform availability to similarly situated individuals: Provide a reasonable alternative standard or waiver for individuals who have difficulty meeting the standard due to a medical condition.
o Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver. Sample language included in regulations.
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HIPAA/ACA Requirements:Outcome-based Programs
Requirements:o Annual qualification: Same as activity-only.
o Reward limit: Same as activity-only.
o Reasonably designed: Same as activity-only, except a reasonable alternative also must be provided to any individual who does not meet the initial standard (tier one) based on a measurement, test, or screening that is related to a health factor.
o Uniform availability to similarly situated individuals: Same as activity-only, except provide a reasonable alternative standard (or waiver) as described above.
o Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver.
“Reasonably Designed”
“Activity-Only” Program
“This determination is based on all the relevant facts and circumstances.”
“Outcome-Based” Program
“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 paragraph (f)(4)(iv) of this section.”
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Rewards, Incentives Penalties
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Application of New Reward Limits
Not applicable to participatory programs
No more than 30%/50% of cost of applicable premium
Practice Tip – Consider effect of incentive on ACA minimum value and affordability requirements.
Example for employee-only program: o Annual premium (ER and EE portion) for employee-only tier of coverage =
$6,000.
o Employer’s wellness program has 3 components:
• participatory on-line assessment - $500 annual reward
• outcome-based biometric screening program - $600 annual reward
• tobacco prevention program - $2,000 annual reward
o Total annual reward - $3,100
Application of New Reward Limits
Result:
Reward limit – 50% of annual premium = $3,000 per year.
Does total reward ($3,100) exceed 50% limit? o NO – rewards for participatory programs (here, $500) not included in
calculation. Total reward for purposes of the reward limit is $2,600.
Because o total reward for biometric screening and tobacco prevention program
($2,600) is less than 50% reward limit ($3,000), and
o total reward for biometric screening program ($600) is less than 30% reward limit ($1,800)
o reward limit requirement is satisfied.
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Application of New Reward Limits
Example for employee and spouse program: o Annual premium (ER and EE portion) for family tier of coverage
= $12,000.
o Employer’s wellness program has 3 components:
• participatory on-line assessment - $500 annual reward each
• outcome-based biometric screening program - $300 annual reward per person per metric for meeting a healthy cholesterol level and a healthy BMI level, total reward $1,200
• tobacco prevention program - $4,000 annual reward if neither smokes. If one smokes, no reward.
o Total annual reward - $6,200
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Application of New Reward Limits
Reward limit – 50% of annual premium = $6,000 per year.
Does total reward ($6,200) exceed 50% limit? o NO – rewards for participatory programs (here, $1,000) not included in
calculation. Total reward for purposes of the reward limit is $5,200.
Because o total reward for biometric screening and tobacco prevention program
($5,200) is less than 50% reward limit ($6,000), and
o total reward for biometric screening program ($1,200) is less than 30% reward limit ($3,600)
o reward limit requirement is satisfied.
Consider allocation of reward for tobacco prevention program, reasonable methods permitted.
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Speaking of Penalties…
Non-compliant programs could be subject to penalties under the Internal Revenue Code or the Public Health Services Act of up to $100 per day.
Department of Labor has updated its group health plan audit inquiries to include wellness programs.
Reasonable Alternatives
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Reasonable Alternative:
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Activity-Only
Must give individuals opportunity to meet a reasonable alternative standard (or waive standard) if: o due to a medical condition, it is unreasonably difficult for
individual to meet the wellness program standard, or
o it is medically inadvisable to attempt to meet the standard
Plan sponsor may seek verification from individual’s physician
Practice Tip – Be prepared to allow multiple attempts to meet standard, have different alternatives ready to go.
Reasonable Alternative:
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Activity-OnlyWhen is “reasonable alternative” reasonable?o “Facts and circumstances” determination, including the following:
• Education program alternatives – program must pay for and provide or assist individual in finding program.
• Diet program alternatives – program must pay for program or membership fee, but not food.
• Time commitment – must be reasonable.
• Personal physician’s recommendations – must be taken into account if physician determines standard is medically inappropriate.
o If alternative also is an “activity-only” program, it too must meet these requirements.
Reasonable Alternative:
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Outcome-Based
Must provide an alternative for any individual who does not meet the initial standard based on a measurement, test or screening that is related to a health factor, regardless of health condition.
Plan sponsor may NOT seek verification from individual’s physician
For reasonableness of alternative, follow same rules as activity-only
What if “Reasonable Alternative” is another Outcome-based Program?
Alternative must meet basic requirements for outcome-based programs, PLUS:o If it is a different level of same standard, program must provide
additional time to comply, taking into account the individual’s circumstances.
o Give individual opportunity to comply with his Dr.’s recommendations as a second alternative to meeting the plan’s reasonable alternative, but only if the Dr. “joins in the request.” Individuals can inject Dr.’s recommendations at any time, and Dr. can adjust recommendations any time, as medically appropriate.
May not seek physician verification, unless the reasonable alternative is activity-only.
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ERISA and Tax Issues
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ERISA Considerations
General rule: ERISA applies to plans established or maintained by employers to provide, among other things, medical, surgical, or hospital care or benefits.
A wellness program can be:o part of an ERISA group health plan; or
o an ERISA plan itself.
If subject to or part of an ERISA plan, basic ERISA rules apply, as well as HIPAA and ACA implications.
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ERISA Issues
ERISA preemption can blunt state laws relating to the group health plan/wellness program, but watch fully insured plans.
ERISA Section 510 prohibits employers from disciplining, discharging or discriminating against a plan participant for the purpose of interfering with the participant’s right to attain a benefit under the plan.
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IRS: No Freebies
Wellness program rewards outside of group health plan context are taxable under IRS “fringe benefit” rule unless…
De minimis:o Occasional or unusual in frequency;
o Of little value;
o Cannot be disguised compensation.
IRS de minimis standard difficult to meet (http://www.irs.gov/Government-Entities/Federal,-State-&-
Local-Governments/De-Minimis-Fringe-Benefits)
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ADA and GINA:Impacts on Wellness
Programs
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Theories of Potential ADA Violations
Disparate treatment: o Under “actual disability” “record of” or “regarded as” theories.
Consider potential coverage of hypertension, diabetes, obesity, heart disease, cancer, and nicotine addiction under the ADAAA.
Disparate impact.
Failing to provide reasonable accommodations.
Unlawful medical inquiries or medical examinations.
Breach of medical confidentiality.
Could be broad, class action claims.
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EEOC Opinion Letter on Meaning of “Voluntary”
January 6, 2009 Informal Opinion Letter: o Voluntary = HIPAA’s 20%.
March 6, 2009 Informal Opinion Letter: o 20% rule rescinded;
o Confirms can’t condition receipt of coverage on completion of HRA.
May 8, 2013 EEOC Public Meeting:o Confirmed there are viable claims under the ADA;
o EEOC may issue guidance but may also wait for courts to resolve.
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ADA Wildcard
ADA Section 501(c).
Title V – “Miscellaneous Provisions.”
Safe Harbor for Insurance:o Equal access is key goal;
o If insurance plan contains “disability-based distinctions”, employers must show that distinctions are justified by generally accepted principles of risk classifications and are not a “subterfuge” to evade purposes of the ADA.
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ADA Litigation
Seff v. Broward County*:
o ADA class action challenging surcharge for health risk appraisal;
o Summary judgment granted to employer;
o Affirmed on appeal to 11th Circuit.
*Steff v. Broward County, 778 F. Supp. 2d 1370 (S.D. Fla. 2011), aff’d, 691 F.3D 1221 (11th Cir. 2012)
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GINA
Title II of GINA, enforced by EEOC, prohibits discrimination on basis of genetic information.
Genetic information includes family medical history, including medical history of spouse and adopted children.
Generally bars acquisition of genetic information about applicants and employees.
Imposes strict confidentiality requirements regarding genetic information.
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GINA’s Wellness Exception
“Genetic information” may be acquired as part of a “voluntary” wellness program.
“Voluntary” means no incentives for genetic information (Title I of GINA has similar rule) and other safeguards must be observed.
EEOC Public Meeting on May 8, 2013, confirmed potential challenges to financial incentives rewarding spousal participation in wellness programs.
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Other Issues:Title VII/EEO Risks
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Potential Disparate Treatment Challenges
Multiple theories of claims:o Disparate treatment;
o Disparate impact.
Multiple protected-classes potentially embraced:o Title VII race and gender-based challenges;
o ADEA age-based challenges;
o Equal Pay Act claims.
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EEOC Meeting on Wellness Programs
Diverse panelists:o EEOC Office of Legal Counsel;
o National Partnership for Women and Families;
o Consortium for Citizens with Disabilities;
o ERISA Industry Committee (ERIC);
o Kaiser Family Foundation;
o Leslie Silverman, Former EEOC Vice Chair (2002-2008);
o American Benefits Council (ABC).
Meeting transcript available at http://www.eeoc.gov/eeoc/meetings/5-8-13/index.cfm
What’s clear: Employee representatives have set their sights on wellness programs.
Federal Contractors Beware
Challenges to wellness programs also possible by OFCCP:o Executive Order 11246;
o Section 503.
Agency is uniquely situated to investigate because compliance reviews are not complaint driven.o Be careful about providing specific leave and wellness policies,
handbook table of contents, or entire handbook to the OFCCP.
o Remember that OFCCP has a work-sharing agreement with EEOC!
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EEOC Lawsuits
This year the EEOC filed two lawsuits challenging whether participation in wellness programs was truly voluntary.
Both lawsuits initiated by the EEOC’s Chicago district office.
ADA prohibits medical examination and medical inquiries in connection with a wellness program, only if participation in the program is voluntary.
If the medical examination or medical inquiries are not part of a voluntary wellness program, then they must be job-related and consistent with business necessity to be lawful under the ADA.
EEOC’s position is that a wellness program is “voluntary” if it neither requires participation nor penalizes an employee for not participating.
Standard is elusive, but seems to focus on the size of the reward for participating as the cases illustrate.
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EEOC Lawsuits
EEOC v. Flambeau, Inc., Civil Action No. 3:13-cv-00638) was filed in U.S. District Court for the Western District of Wisconsin. Filed October 31, 2014
EEOC’s complaint alleges that when employee Dale Arnold did not complete the biometric testing and health risk assessment required by the wellness program, Flambeau cancelled his medical insurance and shifted responsibility for payment of the entire premium cost to him.
According to the Complaint, employees who had taken the biometric testing and health risk assessment, by comparison, did not have their coverage cancelled involuntarily, and were only required to pay 25% of their premium cost.
The EEOC contends that the biometric testing and health risk assessment constituted "disability-related inquiries and medical examinations" that were not job-related and consistent with business necessity as defined by the ADA. The EEOC claims that the alleged actions and severe consequences for not providing prohibited information as part of the employer’s wellness program violate Title I of the ADA, which prohibits disability discrimination in employment, including making disability-related inquiries.
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EEOC Lawsuits
EEOC v. Orion Energy Systems, Civil Action 1:14-cv-01019). Filed on August 20, 2014 in U.S. District Court for the Eastern District of Wisconsin, Green Bay Division.
Program required completing an Health Risk Assessment, some blood work and some medical inquiries to determine whether the employee could use certain exercise equipment.
Complaint alleges that when employee Wendy Schobert declined to participate in the program, Orion shifted responsibility for payment of the entire premium for her employee health benefits from Orion to Schobert. Shortly thereafter, Orion fired Schobert.
Like, Flambeau, Inc., the EEOC claims that Orion Energy Systems violated Title I of the ADA by making disability-related inquiries that were not job-related and consistent with business necessity as defined by the ADA.
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EEOC Lawsuits
"Employers certainly may have voluntary wellness programs -- there's no dispute about that -- and many see such programs as a positive development," said John Hendrickson, regional attorney for the EEOC Chicago district. "But they have to actually be voluntary. They can't compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate. Having to choose between responding to medical exams and inquiries -- which are not job-related -- in a wellness program, on the one hand, or being fired, on the other hand, is no choice at all." (emphasis added)
Unclear where the EEOC is going next in challenging wellness programs that the agency believes are not voluntary.
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Other Issues:NLRA and State Laws
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Special Considerations in Unionized Workforces
Employer must bargain with the union concerning “terms and conditions of employment.” referred to as “mandatory subjects of bargaining.”
Mandatory subjects include:o Implementing or modifying benefit programs or any aspect of a benefit
program, including wellness plans;
o The financial impact on employees of such program, such as the size of the reward in a wellness plan;
o Criteria for employees to obtain the reward, including the reasonable alternative standards to be offered.
Workplace smoking policies are a mandatory subject of bargaining.
Exception: No obligation to bargain if the union has waived its right to bargain over an issue. Consider negotiating language giving the company the right to implement and modify wellness programs. 55
State Lifestyle Discrimination
Most states have “lifestyle discrimination” laws to protect the right of employees to participate in legal activities outside the workplace.
Absent ERISA preemption, these laws prohibit an employer from incentivizing healthy behavior because they protect an employee’s right to engage in unhealthy behavior.
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State Lifestyle Discrimination
Of the various state lifestyle discrimination laws:
o Some prohibit discrimination based on any lawful off duty activity (CO, CA, ND) or any lawful recreational activity (NY);
o Some prohibit discrimination based on the use of lawful consumable products (NY, IL, MN, MO, MT, NV, NC, TN, WI);
o Some specifically prohibit discrimination based on the use of tobacco products (29 States and the District of Columbia).
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Other State Law Claims to Consider
Invasion of privacy
Violation of public policy
Negligent or intentional infliction of emotional distress
Wrongful discharge
Constitutional claims (some states)
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Next StepsMoving Toward Compliance
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Wellness Checklist
Identify programs that are part of group health plans, which means they are covered by HIPAA, ERISA and ACA.
Identify if programs are “participatory” or “health contingent.”
Identify if health contingent programs are “activity only” or “outcome-based.”
Ensure “health contingent” programs satisfy ACA requirements.
Evaluate impact of incentives on ADA and GINA protections.
Evaluate potential disparate impact on women, racial minorities and older workers.
Evaluate state law risks if program is not expected to be preempted by ERISA.
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Contacts for Assistance in Reviewing Wellness Programs
Jackson Lewis Workplace Wellness Taskforce:
o Frank Alvarez: AlvarezF@jacksonlewis.com
o Joe Lazzarotti: LazzarottiJ@jacksonlewis.com
o Mike Soltis: SoltisM@jacksonlewis.com
o Joe Lynett: LynettJ@jacksonlewis.com
o Patricia Pryor: PryorP@jacksonlewis.com
For Additional Wellness Resources
Visit our Workplace Wellness Resource Center at http://www.jacksonlewis.com/wellness/
Workplace Wellness Resource Center includes links to:
o Wellness articles and blog posts written by Jackson Lewis attorneys;
o Links to relevant statutes, regulations and guidance;
o Links to significant cases.
Visit our Disability, Leave & Health Management Blog at http://www.disabilityleavelaw.com/
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