does your wellness plan need a compliance check?

Polsinelli PC. In California, Polsinelli LLP

Does Your Wellness Program Need a Compliance Check-up? The EEOCThinks So!

W. Andrew Douglass and Anne Prenner Schmidt

real challenges. real answers. sm

Topics Covered Today

� General overview of wellness programs, including a discussion of health screening features, premium incentives, and other common plan designs

� Compliance issues for wellness programs under the Americans with Disabilities Act (ADA), Affordable Care Act (ACA), and other federal laws

� Discussion of the EEOC’s recent lawsuits brought against employers and expectations for the EEOC’supcoming regulations for wellness programs

� Action items for companies to navigate the uncertainties and risks in offering wellness programs to their employees


Wellness Plans

� These are lifestyle programs designed to improve long-term employee well-being and might include weight loss, smoking cessation, exercise and stress management


Why do companies offer wellness programs to their employees?

� Improves overall health and fitness of employees

� Potential cost savings for employers on group health plan costs– According to recent studies, company’s return

on investment (ROI) as high as 6:1 -- i.e., $6 in savings for every $1 invested in wellness program


Types of Wellness Programs

� Part of employer-sponsored medical plan or stand-alone plan administered by employer or third-party administrator

� On-site or off-site locales or online� Ongoing interactive program, single activities or

education seminars� May provide various types of rewards as

incentives to encourage certain behaviors, including contributions to health savings accounts, cash, promotional items, etc.


Wellness Program Examples

� Health Risk Assessments� Biometric Testing� Health Promotion Programs, including

annual physicals and goal setting� Discounts on fitness club

memberships� Smoking cessation programs


Incentives

� Monetary rewards� Reduced health insurance premium

contributions� Gifts� Reduced gym membership fees� Raffles to win trips


HIPAA Nondiscrimination & Wellness Rules

� The Basic Rule is that group health plans cannot discriminate against an individual based on a health status factor relating to:1. Eligibility for plan coverage2. Premium and contribution amounts

� Remember every rule has an exception…– Plans may establish premium discounts or rebates or

modify copays and deductibles in return for the establishment of wellness programs i.e. “programs of health and disease prevention.”


How does HIPAA define a wellness plan?

It is a broad term-” any program designed to promote health or prevent disease”

� Disease management

� “Well-baby” programs

� Gym discounts

� Lactation counseling

� Smoking cessation

Wellness exception is for “rewards.”

� A discount on a premium or a contribution

� A waiver of any mechanism of cost sharing

� the value of the benefit that otherwise would not be provided under the plan.


Participatory Wellness Plans

� The reward is based on an action not related to health status, or the program does not have a reward attached to it

� Program is available to all similarly situated individuals

� Program is automatically covered by the wellness plan exception

� Program does not have to meet additional criteria to qualify


Health Contingent Wellness Programs

Activity Based

• Only requires an individual to perform or complete an activity to obtain an award

Outcome Based

• Requires an individual to maintain or attain a specific health outcome


Additional Requirements for Certain Wellness Programs

1. Reward limited to 30% of the cost of coverage (50% if tobacco is included)

2. Reasonable program design3. Must be able to qualify at least annually4. Reasonable alternative standard5. Disclosure of reasonable alternative


Reasonable Design

� Must be reasonably designed to promote wellness and prevent disease

� Not a large hurdle does not require scientific analysis

� The program must:1. Have a reasonable chance of improving health or

preventing disease2. Cannot be overly burdensome3. Cannot be a subterfuge for discrimination


Reasonable Alternative Standard

How does the plan ensure that rewards are made available to similarly-situated individuals?Activity Based� Must provide alternative for individual for whom it is

unreasonably difficult due to a medical condition to satisfy the standard or medically inadvisable to attempt the standard

� If reasonable under the circumstances the plan may request verification from the participant’s personal physician of why the standard is inadvisable


Reasonable Alternative Standard

Outcome based� Must provide 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

� Alternative required regardless of participants medical condition

Other Factors� Decided on a case by case basis� Could conceivably require multiple alternatives


Must Disclose the Alternative Standard

� Plan materials describing wellness programs must disclose in writing that an alternative standard is available ( do not have to describe what it is in the plan materials)

� The regulations include sample language� If the plan materials just mention that a wellness

reward is available without describing the terms, they are not required to disclose the alternative standard.


ACA Penalties and Grandfathered Plans

� ACA imposes immediate reforms for group health plans, with certain exceptions for grandfathered plans. Grandfathered plans – generally plans (as they existed) as of March 23, 2010.

� Penalties such as cost sharing surcharges need to be evaluated

� Certain plan design changes such as certain increases in the premium share that an employee pays or in cost sharing requirement can cause a plan to lose grandfathered status

� Plans that want to maintain grandfathered status must evaluate penalties when implementing new wellness programs or changing the incentive structure


ACA and Wellness Plans

� Easiest way to connect a wellness program to a group health plan is to limit wellness program eligibility to participants in the group health plan

� Lowest-risk course of action for employers is usually a true stand-alone wellness program– Program that is not connected in any way to a group health plan

satisfying the requirements of ACA

– Must avoid offering any benefits under the program that are in the nature of “medical care”

� Alternatively, employer can try to structure stand-alone wellness program to fit into one of the exceptions


Voluntary Wellness Programs

� A wellness program is voluntary as long as the employer neither requires participation nor penalizes employees who do not participate

� The EEOC has said that requiring completion of an health risk assessment in order to enroll in a plan or receive employer contributions is not voluntary

� Informal statements from the EEOC that incentives are effectively penalties


Americans with Disabilities Act

� Wellness programs may be subject to the Americans with Disabilities Act of 1990, as amended (“ADA”)

� ADA prohibits employers from denying, on the basis of a disability, qualified individuals with disabilities an equal opportunity to participate in, or receive benefits under programs or activities conducted by those employers.

� ADA also prohibits employers from making disability-related inquiries (any inquiry likely to elicit information about a disability) or requiring medical examinations.�Exception: The EEOC says that employers may do so

as part of a “voluntary” wellness program, subject to confidentiality requirements.


More ADA Considerations

� Employer wellness programs may be based upon an employee’s behavioral choices - but not on a disability

� Healthy behavior-related programs - focus on behavior not medical condition.– Reward participants who: attend anti-smoking

program, attend annual checkups, or comply with doctor-prescribed medicine regimen; etc.

– Weight-based programs are tricky because obesity, depending if morbid or caused by another medical condition, may be a disability.

� Care should be taken when creating these programs because the ADA may be interpreted to cover participants who are addicted to nicotine, or have a certain cholesterol or blood pressure measurement.


Age Discrimination Issues

� Age Discrimination in Employment Act (ADEA) and Title VII

� Certain health conditions may be exhibited more frequently in older employees or employees of a particular race or national origin

� Programs related to such conditions could violate the ADEA and/or Title VII


GINA and Wellness Programs

� Genetic Information Nondiscrimination Act of 2008

� Applies to group health plans� Also regulates employers by prohibiting

discrimination, including with respect to conditions of employment such as the provision of health benefits


Additional GINA Considerations

� Implicated if employer or plan is requesting or requiring the disclosure of “genetic information” or the taking of a genetic test

� Genetic information includes family medical history


Recent EEOC Lawsuits

� Three lawsuits filed by the EEOC Chicagooffice since August 2014

� Alleged ADA and GINA violations� Key issue involves the “voluntary” aspect� Challenges to biometric screening,

penalties/incentives, and other very common wellness program features


Case Study - Self v. Broward County

� Wellness Program required biometric screening and a completion of online HRA

� Failure to participate resulted in a $20 biweekly charge deducted from paycheck

� Employee claimed that program was not voluntary and violated ADA

� Court allowed to proceed as class action and then ruled for the county April, 2011


Case Study - Self v. Broward County

� Court did not address whether it was a “voluntary” wellness program

� Instead the court relied on a safe harbor that generally exempts establishing, sponsoring, administering the terms of a bona fide benefit plan based on underwriting risks, classifying risks, or administering such risks

� Court found program to be part of the group health plan and part of an effort to improve overall employee health

� No ADA violation


Other Compliance Issues

� State “Smoker’s Rights” laws�It is unclear whether these laws would

be preempted by ERISA.� COBRA� Tax treatment of rewards� Other state and federal laws that protect

employee rights


Risk Mitigation

� Reward or penalize behavior - not health conditions

� Clearly communicate program� Clearly explain incentives, discounts, and

penalties� Consistent and uniform plan administration


Polsinelli Recommendations

� Review plan documentation and SPD disclosures relating to your wellness programs– Also review metrics for evaluating program’s success

� Monitor status of EEOC lawsuits and other enforcement activities– EEOC regulations expected in February

� Diagnose potential compliance issues for your wellness programs– DOL “self-compliance” tool and other resources for

employers


Contact Information

Polsinelli PCwww.polsinelli.com

W. Andrew Douglass, [email protected]

Anne Prenner [email protected]


About Polsinelli

Polsinelli, a national law firm ranked among the Am Law 100 with over 740attorneys located in 19 offices, deliberately seeks constant improvement in allthat we do. At its inception more than forty years ago, the firm established aculture of openness and entrepreneurship that still pervades today. As thefastest growing U.S. law firm for the past six years as ranked by The AmericanLawyer*, the firm’s growth has been fueled by the recruitment of like-mindedattorneys from top law firms across the country.

Polsinelli attorneys successfully build enduring client relationships by providingpractical legal counsel infused with business insight, and with a passion forassisting General Counsel and CEOs in achieving their objectives. The firmfocuses on healthcare, financial services, real estate, life sciences andtechnology, and energy and business litigation, and has depth of experience in100 service areas and 70 industries.

*The American Lawyer 2013 and 2014 reports


Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship.

Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements.

© 2015 Polsinelli PC. In California, Polsinelli LLP.Polsinelli is a registered mark of Polsinelli PC

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