structuring employee wellness programs: impact of final...

Structuring Employee Wellness Programs:

Impact of Final DOL and HHS Regulations Complying with New ACA Mandates and Navigating Other Laws

Affecting Program Design and Implementation

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TUESDAY, NOVEMBER 5, 2013

Presenting a live 90-minute webinar with interactive Q&A

Kate Saracene, Counsel, Nixon Peabody, Rochester, N.Y.

Allison Ullman, Counsel, Crowell Moring, Washington, D.C.

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Structuring Employee Wellness

Programs: Impact of Final DOL and

HHS Regulations

August 5, 2013

Presented by:

Kate Ulrich Saracene, Esq. – Nixon Peabody LLP

Allison Ullman, Esq. – Crowell Moring LLP

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Wellness Plan Overview

Kate Saracene, Esq.

6

Common Wellness Plan Components

• Health Risks

Assessments (HRAs)

• Health Coaching

• Biometric Screenings

› e.g., BMI, cholesterol,

blood pressure

• Educational Programs

• Weight Management

Programs

› e.g., Weight Watchers

• Fitness Programs

› e.g., walking, yoga, gym

memberships

• Smoking Cessation

Programs

• Disease Management

Programs

• Online behavior

modification programs

7

Common Wellness Plan Incentives

• Health plan discounts:

› Premiums

› Deductibles

› Co-pays

• Health plan surcharges:

› e.g., Smoking surcharge

• Other incentives:

› Cash

› Gift Cards

› Prizes (e.g., gym bags,

TVs, iPads)

› Fitness Center discounts

8

Sources of Regulation

• Depending on plan design, wellness plans can be subject to

regulation by numerous statutes, including:

› Employee Retirement Income Security Act (ERISA)

› Affordable Care Act (ACA) (“health care reform”)

› Health Insurance Portability and Accountability Act (HIPAA)

› Consolidated Omnibus Budget Reconciliation Act (COBRA)

› Americans with Disabilities Act (ADA)

› Genetic Information Nondisclosure Act (GINA)

› Fair Labor Standards Act (FLSA)

› Internal Revenue Code (IRC)

› National Labor Relations Act (NLRA)

› State Laws

9

The Tale of Two Wellness Plans

• Sources of regulation vary depending on the type of employer

and whether the plan is a “Group Health Plan” (“GHP”):

GHP Non-GHP

ERISA √*

ACA √

HIPAA √

COBRA √**

ADA √ √

GINA √ √

FLSA √ √

IRC √ √

NLRA √ √

State Laws sometimes √

*Church and non-

federal governmental

Group Health Plans

are exempt from

ERISA. They are

always subject to

state law.

**Church plans are

also exempt from

COBRA.

10

When isn’t a Wellness Plan a GHP?

• Generally speaking, a wellness

plan is not a GHP if it:

› Is offered to all employees

regardless of their enrollment in

the employer’s health plan, and

› Does not provide any “medical

care.”

• Example:

› A wellness program would not be

a GHP if employees receive $100

for attending a class on nutrition

or if employees receive a free

gym membership.

11

When isn’t a Wellness Plan a GHP?

• Group Health Plan: ERISA defines a group health plan as

an employer-sponsored welfare benefit plan to the extent that

the plan provides medical care (…including items and

services paid for as medical care) to employees or their

dependents directly or through insurance or otherwise.

• Medical Care: means amounts paid for:

› the diagnosis, cure, mitigation, treatment, or prevention of

disease, or amounts paid for the purpose of affecting any

structure or function of the body;

› amounts paid for transportation primarily for and essential to

medical care referred to above; and

› amounts paid for insurance covering medical care described

above.

12

When is a Wellness Plan a GHP?

• Common things that will cause a wellness plan to become

a Group Health Plan:

› Providing “medical care”

– Health Risk Assessments (i.e. health surveys) that provide

advice and analysis with personalized coaching

– Immunizations (e.g., flu shots)

– Blood pressure screenings

– Biometric screenings (e.g., BMI, cholesterol)

› Premium Discounts or Surcharges:

– Example: Providing a medical premium discount to

employees who complete health screenings.

13

ERISA Compliance

• If the wellness plan is a Group Health Plan and the

employer is subject to ERISA, then it must comply with all

other aspects of ERISA, including:

› Plan document;

› Summary Plan Description (“SPD”);

› Claims procedures; and

› Form 5500 filings.

• Requirements can be satisfied by incorporating a

description of the wellness program in the major medical

plan, or by creating a separate plan with cross-references

to the medical plan document.

14

Affordable Care Act (ACA)

• Under the ACA, all Group Health Plans must meet certain

requirements, such as:

› Providing free preventive care for a mandatory list of services

(unless plan is grandfathered);

› Providing participants with a Summary of Benefits and

Coverage describing the plan; and

› Complying with the HIPAA/ACA wellness program rules.

• It is important that if your wellness plan is a GHP, that it is

carefully structured to comply with these rules.

› In most cases, this means that non-grandfathered wellness

plans that are GHPs should limit participation to those

enrolled in the employer’s medical plan.

15

Health Insurance Portability

and Accountability Act (HIPAA)

• A wellness plan is subject to HIPAA if it is a GHP.

› HIPAA Portability Rule:

– Non-discrimination requirements based on health status;

– Certificates of creditable coverage.

› HIPAA Administrative Simplification Rules:

– Privacy rule; and

– Security rule.

• Even if a wellness plan is not subject to HIPAA,

state privacy rules might apply.

16

HIPAA Non-Discrimination Requirements

• HIPAA generally prohibits a GHP

from discriminating among similarly

situated individuals based on their

health status.

• This means, among other things, that

plans usually cannot charge

individuals different premiums based

on the presence or absence of a

health factor.

› Generally, it makes no difference

whether a monetary incentive tied to a

wellness program is expressed as a

premium “discount” or a “surcharge.”

17

HIPAA Non-Discrimination Requirements

• If wellness programs comply with HIPAA’s non-

discrimination rules, they fall within an exception to

HIPAA's general non-discrimination requirement.

› The HIPAA non-discrimination rules are the primary set of

regulations governing wellness program requirements.

› These rules have been expanded and updated by the

Affordable Care Act (“ACA”). These new rules apply to:

– Grandfathered and non-grandfathered plans;

– Whether self-insured or insured;

– For plan years beginning on or after January 1, 2014.

Wellness Programs: Final Regulations

Allison Ullman November 5, 2013

Wellness Programs under the ACA: Final Regulations

• ACA codified much of the 2006 regulations

• Tri-agency final regulations (DOL, HHS, Treasury) promulgated on June 3, 2013 (26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 146-47)

– Applicable beginning on January 1, 2014

• Largely reflect the 2006 regulations under HIPAA but important differences – Reward limit increased from 20% to 30%, and 50% for programs

to prevent tobacco use

– Clarifications regarding the reasonable design of health-contingent wellness programs and reasonable alternatives to avoid prohibited discrimination

19


• Requirements apply broadly

– Group health plans and health insurance issuers offering group coverage

– Grandfathered and non-grandfathered plans

– Final regulations do not apply to individual market, although ACA extends non-discrimination protections to that market

20


• Creates two categories of permissible nondiscriminatory wellness programs:

– Participatory wellness programs

– Health-contingent wellness programs (two types):

• Activity-only wellness program

• Outcome-based wellness program

• Provides that a “reward” under wellness programs includes both providing a reward (such as a discount or rebate of a premium or contribution) and imposing a penalty (such as a surcharge)

21


• Participatory Wellness Programs

• None of the conditions for obtaining a reward is based on satisfying a standard relating to a health factor; or

• Wellness program does not provide a reward

• Only requirement is that participation in the program is made available to all similarly situated individuals, regardless of health status

22


• Examples of Participatory Wellness Programs – Reimbursement of fitness center membership costs

– Reward for diagnostic test regardless of outcome

– Reimbursement of cost of, or reward for, participating in smoking cessation program regardless of whether employee quits smoking

– Reward for attending a monthly no-cost health education seminar

– Reward for HRA without further action (education or otherwise) required as to health issues identified

– Program that encourages preventive care through waiver of copayment or deductible for costs of, for example, prenatal care or well-baby visits

23


• Health-Contingent Wellness Programs

– Requires an individual to satisfy a standard related to a health factor to obtain a reward; or

– Requires an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward

– There are two types of health-contingent wellness programs

• Activity-only wellness program

• Outcome-based wellness program

24


• Activity-Only Wellness Programs

– Type of health-contingent wellness 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: walking, diet, or exercise programs, which some individuals may be unable to participate in or complete (or have difficulty completing) due to a health factor, such as severe asthma, pregnancy, or a recent surgery

25


• Outcome-based wellness programs

– Type of health-contingent wellness program that requires an individual to attain or maintain a specific health outcome in order to obtain a reward

– Examples: Not smoking or attaining certain results on biometric screenings

– If a measurement, test, or screening is used as part of an initial standard, and individuals who meet the standard are granted the reward, the program is an outcome-based program

– This holds even if compliance with an educational program or an activity is offered as an alternative to achieve the same reward for individuals who do not attain or maintain the specific health outcome

26


• Health-Contingent Standards – Same over-arching standards apply to both activity-only

and outcome-based programs

– HOWEVER, the final rules impose material differences in how these standards must be administered for activity-only versus outcome-based programs (e.g., how to provide a reasonable alternative standard)

– Thus, there are some VERY important differences in how activity-only and outcome-based programs must be implemented

27

Wellness Programs under the ACA: Final Regulations Health-Contingent Standards

1. Must give individuals an opportunity to qualify for the FULL reward at least once per year

Activity-Only

Outcome-Based

28


2. The reward for all health-contingent programs with respect to a given individual may not exceed 30%

– Based on total cost (including employer and employee premium share) of self-only coverage

• If, however, spouses and dependents may participate in the wellness program, then based on total cost of coverage in which dependents and spouse are enrolled

– BUT…. If smoking cessation program, can go as high as 50%

Activity-Only

Outcome-Based

29


3. The program must be reasonably designed to promote health or prevent disease

– Must have “reasonable chance” of improving health or preventing disease

– Must not be overly burdensome

– Must not be a subterfuge for discriminating based on a health factor

– Must not be highly suspect in the method chosen to promote health or prevent disease

Activity-Only

Outcome-Based

30


4. The reward must be available to all similarly situated employees

– This is accomplished by providing a reasonable alternative standard (RAS)

Activity-Only

Outcome-Based

** Note: This is where most of the differences arise between the two types of health-contingent programs

31


5. Must provide adequate notice of availability of reasonable alternative standard

– Must disclose availability of RAS in all plan materials describing wellness program terms

– Must include contact information for obtaining a RAS

– Must include statement that the recommendations of an individual’s physician will be accommodated

– For outcome-based programs, must include RAS notice in any disclosure that individual did not satisfy initial standard

Activity-Only

Outcome-Based

32

Wellness Programs under the ACA: Final Regulations Reasonable Alternative Standards

33


34


35


• For Activity-Only:

– The plan must provide a RAS if:

1. It is medically inadvisable for the individual to attempt to satisfy the plan standard; OR

2. It is unreasonably difficult due to a medical condition for the individual to obtain the reward

– The plan is not required to determine a RAS in advance of request, but a RAS must be furnished upon request

– “If reasonable under the circumstances,” the plan may require physician verification that RAS is needed

36



– Facts and circumstances test on reasonableness of RAS, including:

• Whether required time commitment is reasonable

• If the RAS is an education program, must make such program available or assist individual in finding program – and may not require individual to bear the cost of the program

• If the RAS is a diet program, must pay cost of membership or participation fee, but not food

• If individual’s physician states that a plan standard is not medically appropriate, must provide RAS that “accommodates” the recommendations of the physician

** NEW **

37



– RAS may be participation-only, activity-only OR outcome-based program

• If RAS1 is participation-only, then participant either participates or does not; no further action is required

• If RAS1 is another activity-only program, then need to provide RAS2 to RAS1, BUT only if the activity-only RAS1 is medically inadvisable or unreasonably difficult

• If RAS1 is an outcome-based program, need to comply with rules for outcome-based programs (by providing, in part, RAS2)

38


• Example:

Plan requires individuals to walk one mile once a week

39


• Example:

Individual says they can’t meet the standard. What next? Depends…

40


• Example:

41


• Example:

Assume the plan chooses the activity-only RAS (i.e., moderate exercise once weekly of any type), but individual still says he or she can’t do it. What next? Depends…

42


• Example:

Of course, the plan can always waive an initial standard or RAS …

43


• Example:

I have the perfect solution….

44


• For Outcome-Based:

– If eligibility for reward is based on initial screening or test (such as BMI, cholesterol, blood pressure), then:

• MUST provide a RAS REGARDLESS of whether it is unreasonably difficult or medically inadvisable to achieve the outcome

• Thus, CANNOT require physician verification

– The plan is not required to determine a RAS in advance of request, but a RAS must be furnished upon request

** NEW **

45



– Facts and circumstances test on reasonableness of RAS, including:

• Whether required time commitment is reasonable

• If the RAS is an education program, must make such program available or assist individual in finding program – and may not require individual to bear the cost of the program

• If the RAS is a diet program, must pay cost of membership or participation fee, but not food

• If individual’s physician states that a plan standard is not medically appropriate, must provide RAS that “accommodates” the recommendations of the physician

46




• If RAS1 is participation-only, then participant either participates or does not; no further action is required

• If RAS1 is an activity-only program, then need to provide RAS2 to RAS1, BUT only if the activity-only RAS1 is medically inadvisable or unreasonably difficult

47


• For Outcome-Based: (Cont’d)


• If RAS1 is an outcome-based program, then the outcome-based RAS1 must comply with final rules as if it were the initial standard, i.e., the plan must provide a RAS2 to the RAS1

• Additionally, it must adhere to two “special rules”

1. The RAS cannot be a requirement to meet a different level of the same standard without additional time to comply and that takes into account individual’s circumstances

• E.g., if initial standard is BMI < 30, then cannot be required to achieve BMI <31 on same date; however, could have standard be “small amount or small percentage” of BMI reduction over a realistic period of time, such as within a year

2. An individual must be given the opportunity to comply with the recommendations of the individual’s physician as a second RAS

• Physician must “join[] in the request” for this second RAS

• The individual can make a request to involve his personal physician at any time and the physician can adjust the physician’s recommendations at any time “consistent with medical appropriateness”

48


• Example:

Initial Standard is a BMI < 30

49


• Example:

It’s not medically inadvisable or unreasonably difficult for Bob to reduce his BMI to 30 …

50


• Example:

Doesn’t matter. The new final rules require the plan to make available a RAS …

51


• Example:

Plan could offer a RAS that is participation-only, activity-only or outcome-based

52


• Example:

If choose participation-only RAS…

53


• Example:

If choose activity-only RAS …

54


• Example:

If choose activity-only RAS …

55


• Example:

If choose outcome-based RAS …

56


• Example:


57


• Example:


I have the perfect solution….

58


• So when/how does the plan “turn off the spigot to RAS”?

– If offer participation-only program

– If activity-only initial standard or activity-only RAS and either (i) standard/RAS is not medially inadvisable or unreasonably difficult, or (ii) individual fails to get doctor verification

– If waive initial standard or waive RAS

– If individual joins with personal physician to recommend an alternative and the plan accommodates such recommendations

• Remember: Need reasonable design!

59

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Compliance with Other Laws

Kate Saracene, Esq.

61

HIPAA – Administrative Simplification (i.e.,

Privacy and Security)

• Privacy Rule and Security Rule

› Group Health Plans are generally subject to the HIPAA

Privacy Rule and the Security Rule.

› This means that GHP wellness plans must have certain

things, including:

– Plan document language creating “firewall” between the employer

and the plan;

– Training for employees with access to Protected Health

Information;

– Notice of Privacy Practices;

– Privacy and security officers;

– Privacy, security and breach policies and procedures;

– Business Associate Agreements with plan vendors.

62

COBRA – Continuation Coverage

• (Non-Church Plan) Group Health Plans, including

wellness plans, are subject to COBRA continuation

coverage requirements:

› Initial/general COBRA notice provided to all participants;

› COBRA election notice provided upon the occurrence of a

“qualifying event” by a “qualified beneficiary”;

› Continuation coverage from 18-36 months, depending upon

the qualifying event;

› Calculation of the “applicable premium”;

› Employers with fewer than 20 employees are exempt.

63

Americans with Disabilities Act (ADA)

• Prohibits covered entities from denying, on the basis of

disability, qualified individuals with disabilities an equal

opportunity to participate in, or receive benefits under,

programs or activities conducted by those entities

64

ADA – Reasonable Accommodation

• A wellness or program that requires disabled individuals to

participate in order to attain benefits equal to those offered

to nondisabled individuals might be found to violate the

ADA in some circumstances.

› Examples:

– participation in a 5k run/walk might be difficult due to many

disabilities;

– consider whether a mobility impaired employee will be able to

access the facility where a class is taking place;

– A reasonable alternative standard may be required when an

employee’s disability prevents them from participating in a

class or screening that is held while the employee is on

disability leave.

65

ADA – Disability-Related

Inquiries and Medical Examinations

• The ADA limits the circumstances under which an

employer may:

› Make disability-related inquiries; or

– (e.g., questions about current health status asked as part of

a Health Risk Assessment)

› Conduct medical examinations

– (e.g., biometric screenings such as blood pressure and

cholesterol screening to determine whether an employee

has achieved certain health outcomes).

66



• Employers are permitted to conduct disability-related

inquiries and medical screenings only as part of an

employee health program when:

› participation is “voluntary;”

› information is maintained according to the confidentiality

requirements of the ADA; and

› the information is not used to discriminate against an

employee (e.g., employees with disabilities should not be

required to complete additional requirements to receive

benefits that are generally available to non-disabled

individuals).

67



• The EEOC has issued guidance indicating that a wellness

program is voluntary “as long as an employer neither

requires participation nor penalizes employees who do

not participate.”

› Neither the ADA nor its regulations provide any detail

regarding how to determine whether inquiries and screenings

are “voluntary.”

› However, the EEOC has issued three opinion letters that

shed a small amount of light on the matter.

68



• First, the EEOC has indicated that participation in health

questionnaires and screenings is not voluntary where it is

a prerequisite for participation in an employer’s group

health plan or for receiving reimbursements from a

medical expense account.

› The EEOC indicated these arrangements were problematic

because individuals who did not participate would be “denied

a benefit.”

› Thus, we know that participation in a wellness program

cannot be a prerequisite for health plan coverage or for an

employer Health Reimbursement Account (HRA) contribution.

69



• Second, the EEOC indicated it was adopting the HIPAA

standards for determining whether monetary incentives affected

voluntariness.

› The EEOC later rescinded that opinion letter, however,

because this issue was not the subject of the inquiry.

› At that time, the agency indicated that it was “continuing to

examine what level, if any, of financial inducement to

participate in a wellness program would be permissible

under the ADA.”

• Third, the EEOC stated earlier this year that it “has not taken a

position on whether and to what extent a reward amounts to a

requirement to participate, or whether withholding the reward

from non-participants constitutes a penalty, thus rendering the

program involuntary.”

70



• It is not clear at this point whether monetary incentives are

permitted, and there is some risk that offering any type of

monetary incentives to participate in a wellness program

will violate the ADA.

• We think it is more likely, however, that the EEOC will

ultimately adopt the HIPAA/ACA standard, which permits

participation incentives that are tied to health plan

premiums, so long as the incentive is less than 30% of the

applicable premium (50% for tobacco programs).

› However, the EEOC might adopt the same maximum

percentage limits for participation-only programs as the

HIPAA/ACA regulations adopt for health-contingent

programs.

71

Genetic Information

Nondiscrimination Act (GINA)

• Prohibits discrimination in employment,

or under health plan, on the basis of

genetic information.

• GINA compliance standards differ

depending on whether the wellness

program is offered as part of or in

connection with a Group Health Plan

subject to ERISA.

• Before GINA, many employers solicited family medical history

information through a Health Risk Assessment (HRA).

› Some still do.

› Today these HRAs are highly regulated by GINA.

72

GINA – ERISA Wellness Plans

• Post-GINA, Group Health Plans cannot specifically

request or collect any genetic information where:

› A reward is offered for completion of an HRA, or

› The HRA is conducted prior to or in connection with

enrollment (including open enrollment).

• Genetic information is defined very broadly and includes

questions regarding family medical history, whether an

employee has undergone genetic testing, and/or whether

an employee has received genetic services.

73


• The easiest way for an ERISA wellness

plan to comply with GINA is to simply

not ask questions about genetics and

family history.

› Be careful!

– HRAs commonly ask these questions.

– If there are any open-ended questions

that could invite disclosure of genetic

information in response, the HRA must

include a disclaimer that employees

should not provide any genetic

information in their answer.

74


› Example: if the HRA included a question like “Have you had

any lab tests this year?” or “Is there any other information

about your health that would help us assess your risks?” then:

– the questions would need to be accompanied by a

statement such as “In answering these questions, you

should not include any genetic information. That is, please

do not include any family medical history or any information

related to genetic testing, genetic services, genetic

counseling, or genetic diseases for which you believe you

may be at risk.”

75


• This prohibition does not prevent you from requiring a

generic physician certification that a health factor makes it

“unreasonably difficult or medically inadvisable for an

individual to achieve or attempt to achieve a milestone,”

(as discussed above in the HIPAA section).

› However, a statement that genetic information not be

disclosed in the certification should accompany any such

documentation requests.

76

GINA – Non-ERISA Wellness Plans

• GINA provides a limited exception for non-ERISA wellness plans (that are not part of or related to an ERISA wellness plan) to inquire about genetic information, if:

› the employee provides the information voluntarily;

› the individual provides prior knowing, voluntary, and written authorization;

› individually identifiable information is provided only to the individual (or family member receiving the genetic services) and the licensed health care professionals or board-certified genetic counselors providing the services; and

› the individually identifiable information is only available for purposes of the services and is not disclosed to the employer (or other covered entity) except in aggregate terms that do not disclose the identity of specific individuals.

77


• Under the EEOC's regulations, genetic information

generally is not considered to be provided voluntarily if the

individual is required to provide the information or

penalized for not providing it.

› The regulations explain that this requirement prohibits an

employer from providing a financial inducement to provide


› However…

78


• An employer can offer a financial inducement to complete

an HRA that includes information about family medical

history or other genetic information, if the form:

› states that the inducement is available whether or not the

individual answers the questions regarding genetic

information;

› is written in a way that the individual is reasonably likely to

understand it;

› describes the information that will be obtained and the

general purposes for which it will be used;

› describes the restrictions that will apply to disclosure of the


79


• An employer can offer a financial inducement to complete

an HRA that includes information about family medical

history or other genetic information, if the form:

› states that the inducement is available whether or not the

individual answers the questions regarding genetic information;

– Questions must be specifically identified, such as by

segregating them into a separate section;

› is written in a way that the individual is reasonably likely to

understand it;

› describes the information that will be obtained and the general

purposes for which it will be used;

› describes the restrictions that will apply to disclosure of the


80


• Employers may use the genetic information voluntarily

provided by an individual to guide that individual into an

appropriate disease management program.

› However, if that program offers financial incentives for

participation and/or for achieving certain health outcomes, the

program must also be open to employees with current health

conditions and/or to individuals whose lifestyle choices put

them at increased risk of developing a condition.

81

FLSA

• Establishes rules regarding wage

payment and overtime pay.

• Generally, covered, non-exempt

employees must be paid for all hours

worked and must be paid not less

than time and one-half the

employee's regular rate for time

worked over 40 hours in a workweek.

82

FLSA – Compensable Time

• Although there is not clear authority, time spent

completing wellness activities (e.g., a health risk

assessment) could be regarded as compensable time

under the FLSA.

› Thus, you may want to consider the scheduling of wellness

activities (e.g., health risk assessments) during working

hours.

› It is even less clear whether yoga classes

and the like would be compensable time.

83

FLSA – Overtime Rate

• If you pay a bonus rather than provide a premium

reduction (as would typically happen with a non-GHP

wellness plan), the bonus must be included in calculating

the employee’s “regular rate” for overtime purposes.

› For example, assume an employee gets $100 for participating

in the wellness plan (i.e., essentially a $100 bonus). If the

employee works 2,000 hours during the year, he would be

entitled to an additional $.025 per hour for overtime (i.e.,

[$100/2,000 hours]*.5).

– As a result, many employers choose to offer the wellness

benefit as a premium reduction to those enrolled in the

employer’s health plan, as this will not affect the

employee’s regular rate calculation.

84

Internal Revenue Code (IRC)

• Reductions in Group Health Plan premiums, deductibles

or co-payments for wellness plan participation are

generally tax-free to employees.

• Other types of financial inducements typically associated

with non-GHP wellness plans are generally taxable.

› e.g., cash, gift cards, health club memberships.

• Self-funded GHPs must not discriminate in favor of highly

compensated employees.

• Fully-insured wellness plans must comply with the terms

of the health insurance policies.

85

National Labor Relations Act

• Unionized employers may have

to negotiate with their union

regarding introduction or

amendment of wellness plans.

› Wellness plans are an employee

benefit that would be considered a

term or condition of employment.

› Unilateral action could constitute

an Unfair Labor Practices.

86

State Law Regulation

and ERISA Preemption

• Examples:

› State laws prohibiting discrimination against employees who

use tobacco products.

› State disability discrimination laws that may be more

protective than the ADA.

› State wage & hour laws that require pay for time spent on

wellness activities.

87

State Law Regulation

and ERISA Preemption

• If a wellness plan is subject to ERISA, then state law is

generally preempted if the law “relates to” the terms of the

wellness plan.

› Most, but not all state laws will be preempted:

– e.g., state laws protecting smokers are likely preempted.

– e.g., state laws requiring wage payments are likely not

preempted.

• If the wellness plan is not subject to ERISA, then state law

always applies.

› e.g., non GHPs, Church plans, non-federal governmental

plans

88

Questions?

Kate Ulrich Saracene, Esq.

Nixon Peabody LLP [email protected]

Allison Ullman, Esq.

Crowell Moring LLP [email protected]

mailto:[email protected]

mailto:[email protected]

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The content should not be construed as legal advice, and readers should not act upon information in this

publication without professional counsel. Copyright © 2013 Nixon Peabody LLP. All rights reserved.

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