offering wellness programs after final regulations


Compliance Issues under Wellness Programs

By

Larry GrudzienAttorney at Law

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Agenda

• Review requirements under HIPAA

• Review Field Assistance Bulletin 2008-02

• Review requirements under GINA

• Review requirements ADA

• Developments

• Take your questions

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Wellness Program Requirements Under

HIPAA

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• Interim final nondiscrimination regulations published in 2001 along with proposed wellness regulations.

• Final nondiscrimination rules and wellness program rules published 12/13/2006.

• final regulations effective for plan years beginning on and after 7/1/2007.

• New proposed regulations were released in November 2012.

• New final regulations were released in June 2013, which are effective in 2014.

• Rules are a joint effort of Treasury, Labor & HHS

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Guidance Through the Years


• Group health plans and insurers cannot discriminate against participants on the basis of any health factors.

• Discrimination encompasses:

Eligibility:

▪ Enrollment, effective date, waiting periods, benefits.

Premiums or contributions:

Including discounts, rebates or differential mechanisms.

• But wellness plans are an exception.

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Fundamental Principles


• Violations of HIPAA nondiscrimination rules can result in:

Code-based excise taxes of $100 per day per person per failure.

DOL audit and civil action to enforce rules.

Private right of action under ERISA §502 to enforce rules.

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Fundamental Principles


Wellness Programs In General

• Guidance is provided in the final regulations for evaluating the permissibility of wellness programs under HIPAA’s nondiscrimination requirements.

• Separate requirements apply under HIPAA depending upon whether the wellness program is: a health-contingent program (it provides a reward that is contingent on

satisfaction of a health-contingent standard related to a health factor); or

a participation-only program (it simply rewards participation in the program regardless of whether the individual satisfies a health-contingent standard related to a health factor).

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• In a nutshell, if the program is health-contingent-based, the final regulations require the program to meet five specific conditions.

• If the program is participation-only, the final regulations require only that the program be available to all similarly situated individuals.

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• A wellness program can take many forms (and might not even be called a wellness program), but its defining feature is usually a reward to encourage healthier lifestyles—reduced premiums or co-pays in exchange for quitting smoking or reducing bad cholesterol levels, for example.

• Employers and insurers hope that by encouraging healthier lifestyles, health care costs can be contained or reduced.

• HHS has recommended that employers “consider providing health promotion or wellness programs and disease management programs for employees as part of their health benefits.”

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• Some wellness programs simply make their services available to those who wish to use them, but others target individuals who have specific medical conditions, such as asthma or diabetes, and make special help available to them.

• For example, the program may provide case managers who will help monitor compliance with medication protocols and schedule appointments with physicians or therapists; special educational opportunities; newsletters; and discounts on co-pays for required medications.

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• The rewards offered by wellness programs can vary greatly, from T-shirts or water bottles to significant reductions in premiums, co-pays, or deductibles.

• In addition, the Health-Contingents necessary to qualify for the reward can vary greatly, from actually quitting smoking or lowering cholesterol to merely attending a smoking-cessation class or signing a certification that weekly exercise sessions have been completed.

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• HRAs are often used by wellness programs to identify the individuals who can benefit the most from the wellness programs and who represent the greatest opportunities for cost containment.

• In addition, health risk assessments can be used by plan participants and beneficiaries to identify areas of possible concern and to set health-related goals.

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Health Risk Assessments (HRAs)


• HRAs can also be much more hands-on and can range from basic screenings at the employee’s worksite (e.g., blood pressure, cholesterol, body mass index, blood sugar, and bone density) to complete physical examinations at a doctor’s office or a hospital.

• Often the initial HRA is used as a baseline against which subsequent assessments are measured to track progress toward health-related goals.

• An employer cannot make taking HRAs mandatory to receive coverage.

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Health Risk Assessments (HRAs)


• Wellness programs that do not condition eligibility for a reward upon a participant’s ability to meet a health Health-Contingent are permissible if participation in the programs is available to all similarly situated individuals.

• Examples of participation-only programs include: incentives to participate in a health fair or testing (regardless of outcome);

waiver of co-payment/deductible for well-baby visits;

reimbursement of health club membership;

reimbursements for smoking cessation programs (regardless of outcome); and

a program that rewards employees who complete a health risk assessment, without further action related to health issues identified as part of the health risk assessment.

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Participation-Only Programs


• Health-contingent wellness programs require individuals to satisfy a health-contingent standard related to a health factor as a condition for obtaining a reward.

• A “reward” includes both an incentive in the form of a reward (e.g., premium discount, waiver of cost sharing amount, an additional benefit or any financial or other incentive) and an incentive in the form of avoiding a penalty (e.g., the absence of a premium surcharge or other financial or nonfinancial disincentive).

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Health-Contingent-Based Programs


• Health-contingent programs are further divided into activity-only programs and outcome-based programs:

Activity-only programs require individuals to complete an activity related to a health factor to obtain the reward, but the activity need not result in a specific health outcome.

▪ For example, the employer may provide a reward for a walking, diet, or exercise program.

Outcome-based programs require individuals to attain or maintain a specific health outcome in order to obtain the reward.

▪ For example, an employer could provide a reward for not smoking, for obtaining a certain result on a biometric screening, or for maintaining a certain body mass index (BMI).

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• Each health-contingent program must meet five requirements to be exempt from HIPAA nondiscrimination provisions.

The Reward Must Be No More Than 20% (30% in 2014) of the Cost of Coverage;

The Program Must Be Reasonably Designed to Promote Health or Prevent Disease;

The Program Must Give Individuals an Opportunity to Qualify for the Reward at Least Once a Year;

The Reward Must Be Available to All Similarly Situated Individuals; and

The Plan Must Disclose That Alternative Health-Contingents (Or Waivers) Are Available.

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• The Reward Must Be No More Than 20% (30% in 2014) of the Cost of Coverage

The reward, combined with any other rewards for Health-Contingent based programs provided under the same plan, must not exceed 20% (30% in 2014) of the cost of coverage.

When determining the maximum permissible reward, the full cost of the relevant coverage, including both the employer and employee-paid portions are counted.

The 30% limit on health-based incentives is increased to 50% if related to tobacco-use.

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• The Reward Must Be No More Than 20% (30% in 2014) of the Cost of Coverage

The reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as a deductible, co-payments, or co-insurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan.

If only the employee may participate in the wellness program, then the reward must not exceed 20% (30% in 2014) of the cost of employee-only coverage.

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• The Program Must Be Reasonably Designed to Promote Health or Prevent Disease

• A program meets this requirement if it:

has a reasonable chance of improving the health of, or preventing disease in, participating individuals;

is not overly burdensome;

is not a subterfuge for discriminating based on a health factor; and

is not highly suspect in the method chosen to promote health or prevent disease.

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• The Program Must Be Reasonably Designed to Promote Health or Prevent Disease There does not need to be a scientific record that the chosen method promotes

wellness, and this requirement is intended to be easy to satisfy and prohibits bizarre, extreme, or illegal requirements in a wellness program.

There are examples in in the final regulations that serve as safe harbors, so that an employer can adopt a program identical to one described as satisfying the example and be assured of satisfying the requirements in the regulations.

Wellness programs similar to the examples also would satisfy the reasonably designed requirement.

Plans or issuers should not feel constrained by the relatively narrow range of programs described by the examples but want plans and issuers to feel free to consider innovative programs for motivating individuals to make efforts to improve their health.

This determination must be based on all relevant facts and circumstances.

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• The Program Must Give Individuals an Opportunity to Qualify for the Reward at Least Once a Year.

This is a bright-line Health-Contingent that establishes a minimum frequency of qualification opportunities.

A program could offer more frequent qualification opportunities, but not less frequent opportunities.

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• The Reward Must Be Available to All Similarly Situated Individuals

It means that that both the general Health-Contingent for grouping “similarly situated individuals” must be satisfied, and that a reasonable alternative generally must be provided.

Certain groups of individuals may be treated as distinct similarly situated groups if the distinction is based on a bona fide employment classification (such as full-time versus part-time status, current employees versus former employees, and different geographic locations).

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• The Reward Must Be Available to All Similarly Situated Individuals.

A reward could be offered to a group of employees (but not retirees), or a group of employees from one location but not those from another location.

Similarly, a reward could be offered only to employees and not to spouses or dependent children, or only to employees and spouses and not to dependent children.

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• The Reward Must Be Available to All Similarly Situated Individuals.

Activity-only programs: The 2014 final regulations related to reasonable alternative standards offered by activity-only programs essentially follow the 2006 Rules, but now limit those rules to activity only programs.

Under these rules, a reward is not available to all similarly situated individuals unless the program allows a reasonable alternative standard (or waiver of the applicable standard) for any individual for whom it is either unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard or medically inadvisable to attempt to satisfy the otherwise applicable standard.

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For activity-only programs, it is permissible for a plan to require verification (such as a statement from the individual’s personal physician) that the individual has such a medical condition, but only if it is reasonable under the circumstances.

The 2014 final regulations specify that it would be reasonable to require such verification if medical judgment is required to evaluate the validity of a request for a reasonable alternative standard.

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Outcome-based programs: The 2014 final regulations related to reasonable alternative standards offered by outcome based programs are significantly changed from the 2006 Rules.

If an individual does not meet a plan’s target standards for out come based programs based on a measurement, test, or screening related to a health factor, the individual must be provided with a reasonable alternative standard, regardless of any medical condition or other health status, to ensure that outcome based initial standards are not a subterfuge for discrimination or underwriting based on a health factor.

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For outcome-based program, the reasonable alternative standard cannot be a requirement to meet a different level of the same standard without additional time to comply that takes into account the individual’s circumstances.

An individual must be given the opportunity to comply with the recommendations of the individual’s personal physician as a second reasonable alternative standard to meeting the reasonable alternative standard defined by the plan, but only if the physician joins in the request.

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• The Reward Must Be Available to All Similarly Situated Individuals Under outcome-based programs, it is not reasonable to require verification that a

health factor makes it unreasonably difficult or it is medically inadvisable for the individual to satisfy the otherwise applicable standard.

However, if the reasonable alternative standard to an outcome based program is an activity-only program, then the plan may seek such verification, if reasonable under the circumstances, with respect to the activity-only portion of the program.

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• The Reward Must Be Available to All Similarly Situated Individuals The determination of whether a plan has provided a reasonable alternative standard

is based on the facts and circumstances.

The 2014 final regulations provide that the following factors, among others, should be taken into account in determining whether a plan has provided a reasonable alternative standard:

If the reasonable alternative standard is completion of an educational program, the plan must make the educational program available or assist the employee in finding such a program, and may not require an individual to pay for the cost of the program.

The time commitment required must be reasonable.

If the reasonable alternative standard is a diet program, the plan is not required to pay for the cost of food but must pay any membership or participation fee.

If an individual’s personal physician states that any plan standard (including the recommendations of the plan’s medical professional) is not medically appropriate for that individual, the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual’s personal physician with regard to medical appropriateness.

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• The Reward Must Be Available to All Similarly Situated Individuals To the extent that a reasonable alternative standard is, itself, a health-contingent

wellness program, it must satisfy the requirements in the 2014 final regulations for either activity only or outcome-based programs.

For health-contingent alternatives, plans must continue to offer a reasonable alternative standard, whether it is the same or different, and cannot limit the number of times a reasonable alternative standard is offered.

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• The Reward Must Be Available to All Similarly Situated Individuals Plans may always waive the otherwise applicable standard instead of providing a

reasonable alternative standard.

Additionally, plans do not need to establish a particular reasonable alternative standard in advance of an individual’s specific request for one, as long as one is provided upon request.

Reasonable alternative standards may be provided for a class of individuals or on an individual-by-individual basis.

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• The Reward Must Be Available to All Similarly Situated Individuals The full reward under either an activity-only or an outcome-based program must be

available to all similarly situated individuals.

Individuals who qualify by satisfying a reasonable alternative standard must be provided the same, full reward that is provided to individuals who qualify by satisfying the otherwise applicable standard.

This same, full reward must be provided even if an individual takes some time to request, establish, and satisfy a reasonable alternative standard.

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• The Plan Must Disclose That Alternative Health-Contingents (Or Waivers) Are Available

A health plan must disclose, in all plan materials describing the health-contingent-based wellness program, that reasonable alternative health-contingents (or the possibility of waiver of the otherwise applicable health-contingent) are available.

The disclosure must also include a statement that recommendations of an individual’s personal physician will be accommodated.

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• The Plan Must Disclose That Alternative Health-Contingents (Or Waivers) Are Available For outcome-based wellness programs, a similar notice must be included in any

communication that any individual did not satisfy an outcome-based standard Sample language to satisfy the notice requirement is provided in the 2014 final

regulations If the plan materials merely mention the availability of the wellness program

without describing its terms, then the reasonable alternatives do not need to be described in the plan materials.

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• A wellness benefit that does not qualify either as an “eligible medical expense” under Code § 213(d) or a “fringe benefit” under Code §132 is taxable to the employee.

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Taxation Issues


Review of Field Assistance Bulletin

2008-02

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• Ms. Beth Baum:

E-mail: [email protected]

Phone: 202-693-8345

Fax: 202-219-1942

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DOL Contact on Wellness Questions


• It depends.

• To the extent that a wellness program provides medical benefits, it will likely be treated as a group health plan subject to the special ERISA rules.

• In the DOL Information Letter to Joseph Dunn (November 17, 1993), the DOL indicated that a wellness program will be considered providing "medical care" if it provides programs that are diagnostic or preventive, or that "coach" for certain identified health risks.

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Wellness Programs and ERISA


• Underwriting purposes include changing deductibles or other cost-sharing mechanisms or providing discounts, rebates, payments in kind or other premium differential mechanisms in return for activities such as completing a health risk assessment (“HRA”) or participating in a wellness program.

• Family history or other genetic information can be collected if the purpose of such collection is neither for underwriting purposes nor prior to or in connection with enrollment.

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GINA & Wellness Programs


• Genetic information includes the collection of family medical history.

• Any wellness program that provides rewards for completing HRAs that request genetic information, including family medical history, violates the prohibition against requesting genetic information for underwriting purposes.

• This is the result even if rewards are not based on the outcome of the assessment.

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• Genetic information can be collected as long as no rewards are provided (and if the request is not made prior to or in connection with enrollment).

• A group health plan or health insurer can provide rewards for completing a HRA as long as the HRA does not collect genetic information.

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• Employers should review their group health plans to ensure that eligibility to enroll in a plan and the benefits provided under a plan are not dependent on genetic testing or genetic information.

• Employers should also watch for upcoming regulations from the EEOC with respect to the employment nondiscrimination requirements, and from the DOL, Treasury, and HHS with respect to the health insurance provisions.

• Employers should prepare to review and act on that guidance when it is issued.

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What Should Employers do to Comply?


• The Americans with Disabilities Act (ADA) prohibits employers from asking disability-related questions in a health risk assessment that employees are required to complete as prerequisite to receiving monies from an employer-funded health reimbursement arrangement, according to an informal discussion letter released by the US Equal Employment Opportunity Commission (EEOC) on October 6, 2009.

• In a letter dated August 10, 2009, the EEOC indicated that an employer's requirement that employees complete a health risk assessment in order to receive medical expense reimbursements from the employer's health reimbursement arrangement (HRA) violated the ADA.

• In addition to the ADA violation, the letter mentioned in a footnote that, as of November 21, 2009, the employer's health risk assessment will likely also violate GINA if it continued to ask about an employee's family medical history (since family medical history is genetic information).

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Health Risk Assessments & ADA


• EEOC noted that Title I of the ADA prohibits all disability-related inquiries before a job offer is extended.

• However, after a conditional offer is made, employers may ask disability-related questions and require medical exams provided it does so for all entering employees in the same job category.

• After employment commences, an employer may make disability-related inquiries and require medical exams only when they are job-related and consistent with business necessity.

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• Disability-related inquiries and medical exams are also permissible when they follow up on a request for reasonable accommodation, or when the exam or other monitoring, is conducted under particular circumstances, such as periodic medical exams that are required of employees performing jobs that affect public safety.

• Lastly, disability-related inquiries and medical exams are permitted as part of a voluntary wellness program.

• "A wellness program is voluntary if employees are neither required to participate nor penalized for non-participation.”

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• Grandfathered status:

• The various federal agencies caution that penalties related to wellness programs (such as cost-sharing surcharges) should be examined carefully as they could jeopardize the plan's grandfather status-for example, by decreasing the employer's contribution percentage by more than 5 percentage points below the contribution rate on March 23, 2010.

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Developments


• Employer Mandate:

To avoid the employer mandate penalty, premiums for coverage may not exceed 9.5% of the employee’s household income in 2015.

The IRS has proposed that the affordability of an employer-sponsored plan is determined by assuming that each employee fails to satisfy the requirements of a wellness program, except the requirements of a nondiscriminatory wellness program related to tobacco use.

The affordability of a plan that charges a higher initial premium for tobacco users will be determined based on the premium that is charged to non-tobacco users, or tobacco users who complete the related wellness program, such as attending smoking-cessation classes.

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Developments


Questions?

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Contact InformationContact Information

• Larry Grudzien:

Phone: 708-717-9638

Email: [email protected]

Website: www. larrygrudzien.com

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offering wellness programs after final regulations

Recruiting & HR

body mass index

similarly situated individuals

benefit express services

individuals personal physician

reasonable alternative standard

family medical history

health risk assessment

final regulations require