Legal Considerations When Developing an Employer-Sponsored Wellness Program. Sarah Marble

Transcription

1 Legal Considerations When Developing an Employer-Sponsored Wellness Program Sarah Marble

2 Session Overview Legal Issues to Consider Explore the Big Picture What is a Wellness Program Federal laws that impact wellness programs Employee Retirement Income Security Act (ERISA) Health Insurance Portability and Accountability Act (HIPAA) o Nondiscrimination and wellness rules o Privacy restrictions Americans with Disabilities Act (ADA) Internal Revenue Code, Ch. 1 (Tax) Title VII of Civil Rights Act o Employment discrimination based on gender and racial, ethnic, national and religious minorities Age Discrimination in Employment Act (ADEA) Genetic Information Nondiscrimination Act (GINA) Family Medical Leave Act of 1993 (FMLA) 2

3 The Big Picture: What s Happening to Healthcare Costs Basic Facts Healthcare spending in the U.S. accounts for 17.6% of GDP and costs have been rising at more than double the rate of inflation over the past decade. (CDC) In a study of employees and retirees the average healthcare costs are $1,850 higher for the obese and $5,500 for the morbidly obese than for normal-weight individuals. (ACOEM) In the same study, average costs for smokers was $1,275 higher than non-smokers. Annual premiums for employer-sponsored family health coverage increased to $15,073 in 2011, up 9 percent from 2010, and significantly faster than workers wages (2.1 percent) and general inflation (3.2 percent). (Kaiser Family Foundation Survey) 92% of employers with 200 or more employees report offering a wellness program, with programs targeting exercise (63%), smoking (60%), and weight loss (53%). (Kaiser Family Foundation Survey) Chronic diseases are estimated to account for over 75% of health expenditures, with chronic conditions in working-age adults increasing by 25% in ten years to 58 million people. (DOL and DHHS) Companies spend up to 52% more in annual healthcare costs on overweight employees than they do on employees at a healthy weight (Journal of Occupational Environmental Medicine) 3

4 Wellness Programs - Generally What exactly is a wellness program? What are some of the reasons an employer may decide to sponsor a wellness program? Increase productivity Reduce health care expenditures Improve company image Attract and retain talent Increase company morale 4

5 Employee Perceptions & Communication Communication and Education leads to buy-in. Consistency of message What s in it for me? You re discriminating against me Penalty or Incentive? Premium differentials look like a penalty for those who don t receive it Educating employees about the use of HRA and claims data Identify and explain the intended outcome: Lower cost trend? Reduced risk factors? Cultural shift? Employee engagement? Know if employees will use the programs and services without incentives or continue if incentives were discontinued 5

6 Wellness Programs Keys to Success Have a plan: Communicate (clearly, often, consistently) Characterize population Identify risks and cost drivers Invest in programs that match needs Measure outcomes (what s credible?) Adjust based on outcomes Obtain senior management support Leverage meaningful incentives Permit wellness activities in the workplace during work time 6

7 A Wellness Story Mr. Bottom-Line, the CEO of Big Profit Company, is very unhappy with the annual budget. How can health care cost so much! Mr. Bottom-Line orders his business team to come up with a solution. He wants to have the healthiest company around (and make Big Profit Company even Bigger). CEO The business people get busy and develop a host of cutting-edge wellness programs. They proudly present them to Mr. Bottom- Line, who thinks they are fabulous. 7

8 A Wellness Story Big Profit Company wants to identify employees who need help Big Profit Company requires employees to answer a health risk assessment (HRA) questionnaire that asks about family history, recent treatments, and habits. To encourage participation the HRA is mandatory; employees who do not complete the HRA cannot enroll in the health plan. As a further incentive, there is a $25 cash payment for completing the HRA on time. Then, the Plan's insurer/tpa will search its claims data and provide a list of employees having conditions with high treatment costs, such as diabetes or asthma. 8

9 A Wellness Story Armed with claims data and the HRA results, the business group comes up with 5 innovative programs. 9

10 Announcing: Big Profit Company's New Wellness Programs 1. Education Send educational materials, such as tips on exercising and eating healthy, to employees with problem areas indentified by the HRA process. 2. Stop Smoking Program Impose a 30% premium surcharge on anyone who smokes! 10

11 Announcing: Big Profit Company's New Wellness Programs 3. Rewards for Good Behavior Reward employees whose first HRA results show ideal weight, BMI, and cholesterol with a 30% discount off health insurance premiums 4. Chronic Disease Management Encourage employees with chronic disease, such as diabetes, asthma or coronary artery disease, to join a Disease Management program ASAP. Reward participation with an additional 10% discount on health premiums for as long as they are participating. 11

12 Announcing: Big Profit Company's New Wellness Programs 5. Serious Condition Management Mandatory case management for employees and dependents with very serious conditions, such as transplant patients, certain cancers, or premature infants. A failure to enroll will end health benefits for remainder of year. 12

13 A Wellness Story Mr. Bottom-Line is interested in "results, results, results." Quarterly reports on each division's progress will be sent out (with no names, of course). Year-end bonuses to division heads with the healthiest teams or most participation! The Bottom Line is Results, Results, Results! 13

14 A Wellness Story Mr. Bottom-Line and his crew are ready to go to print with a glitzy brochure with all these new programs when an intern asks if the Benefits Team should be involved. Fortunately, the (very smart) Benefits Team knows about: ERISA, the HIPAA nondiscrimination and privacy rules, the ADA, the federal tax laws, ADEA, Title VII of the Civil Rights Act, FMLA, and GINA. 14

15 So, what did the Benefits Team know that the business people didn't? 15

16 Questions to Ask Is the program an ERISA plan? Does the program discriminate based on health status? If so, does it comply with HIPAA s nondiscrimination and wellness rules? Are there HIPAA privacy restrictions? Does the program involve a disability or require mandatory medical exams? If so, does it comply with the ADA? Are the rewards taxable? Does the program discriminate under either Title VII or the ADEA? Are there issues under GINA? What happens to employees on FMLA leave? 16

17 Is the program an ERISA Plan? Does your wellness program provide medical care benefits? Medical care if individualized and provided by trained professionals (e.g., coaching by nurse, counseling by therapist, biometric screening). Not medical care if general education and without individual assessment (e.g., articles about health condition, weight loss class, etc.). If employer is establishes the program and it provides medical care then the program is likely to be an ERISA plan. Biggest Loser Program Initiated by employees Using health education materials provided by the employer ~May not be an ERISA Plan~ Biggest Loser Program Offered by employer with individualized coaching for participants ~Maybe an ERISA plan~ 17

18 If an ERISA Plan Implications of being subject to ERISA Plan Document Summary Plan Description Form 5500 Filing COBRA HIPAA Privacy Compliance Certificate of Creditable Coverage Plan Asset Issues plan assets can provide medical benefit rewards (not cash rewards) 18

19 HIPAA Nondiscrimination & Wellness Final Regulations Final rules issued December 13, 2006, and again on June 3, New final rules apply to plan years beginning on or after January 1, Final rules define a wellness program as any program designed to promote health or prevent disease. DOL Field Assistance Bulletin

20 HIPAA Nondiscrimination Rules Summary GENERAL RULE - Wellness programs should not discriminate in eligibility, contributions or benefits based on an individual s health factors. Discrimination includes charging different premiums based on individual health status. Discrimination does not include distinguishing among similarly situated individuals based on bona-fide employment-based classification (e.g., fulltime vs. part-time, retired vs. employed, length of service, geographic location, occupation). Health factors include medical conditions, claims experience, receipt of health care, genetic information, disability, or evidence of insurability. TWO POTENTIAL EXCEPTIONS TO ABOVE GENERAL RULE: May discriminate in favor of those with adverse health status. May discriminate as part of a HIPAA-compliant wellness program. 20

21 HIPAA Wellness Rules: When do rules apply? The HIPAA Wellness Rules apply to programs that require individuals to meet a health factor based standard for a reward or to avoid a penalty. These plans are referred to as heath contingent wellness programs and can either activity-only or outcome-based programs Health Contingent Program: HIPAA Wellness Rules Apply Plan has lower co-pay for employees with low cholesterol. Plan charges surcharge on employees who smoke. Plan rewards premium holiday to employee who meet the weight loss goal. 21

22 HIPAA Wellness Rules: When do rules not apply? The HIPAA Wellness Rules do not apply to programs if individuals only have to participate and do not need to meet a health factor based standard to receive a reward or to avoid a penalty. Participatory Programs: Outside of HIPAA Wellness Rules Plan reimburses (all or part) cost of fitness center membership Plan waives co-pay for cost of well-baby visit in order to encourage preventive care Plan reimburses smoking cessation class, regardless of whether employee stops smoking Plan rewards employee for attending monthly health education seminar Diagnostic testing program that provides a reward for participation only and is not based on outcomes 22

23 HIPAA Wellness Rules: Outcome-based plans and Activity-only plans Two types of health contingent wellness programs Activity-only wellness programs o Require the performance or completion of an activity related to a health factor o Examples: diet or exercise programs, which may be difficult for some to complete due to a health factor Outcome-based wellness programs o Use a measurement, test or screening as part of initial standard for granting an award o Require the attainment or maintenance of a specific health outcome o Examples: tests Body Mass Index, or biometric screenings for high cholesterol, blood pressure or glucose, where the reward depends on the result 23

24 HIPAA Wellness Rules: Outcome-based plans and Activity-only plans If the program provides rewards under an outcome-based or activity-only plan then the program must meet five non-discrimination requirements: Amount of reward Reasonable design Annual qualification Reasonable alternative Disclosure 24

25 Final HIPAA Wellness Rules Requirement #1 Amount of Reward Outcome-based Programs and Activity-only Programs Size of reward is limited to a percentage of the cost of the group health plan Cost of group health plan includes employer and employee contributions Cost of employee plan only, unless family members can also participate in program Flexibility to apportion the reward among family members, if method is reasonable Final regulations adopt the proposed regulations limits: Up to 30% of the cost for general health contingent wellness programs Up to an additional 20% for health contingent wellness programs designed to reduce or prevent tobacco use The limits apply to the aggregate rewards from all health contingent programs but exclude participatory programs rewards Example: 25% of cost is rewarded if employee lowers BMI to normal levels = okay Additional 10% for completing health risk assessment = okay Additional 25% for quitting smoking =? 25

26 Final HIPAA Wellness Rules Requirement #2 Reasonable Design The wellness program must be reasonably designed to promote good health or prevent disease. This is not a well defined standard. A program is reasonable if: Reasonable chance to improve health or prevent disease; Not overly burdensome (i.e., only a few people likely to accomplish); Not a subterfuge for discrimination based on health; and Not highly suspect (e.g., extreme or illegal). 26

27 Final HIPAA Wellness Rules Requirement #3 Annual Qualification Must give plan participant opportunity to qualify at least once per year. Plan cannot lock in reward based on initial health status. 27

28 Final HIPAA Wellness Rules for Activity-only Programs Requirement #4 Uniform Availability of Alternatives Full reward must be available to all similarly situated individuals Activity-only Programs Must allow a reasonable alternative or a waiver for any individual for whom, during that period, the activity is medically inadvisable or overly burdensome If reasonable under the circumstance, the program may verify medical inadvisability Whether an alternative is reasonable is a facts and circumstances determination but the program must Provide and assist with locating the alternative Pay fees and membership fees for alternative o Not food costs Have a reasonable time commitment Accommodate the recommendation of the individual s physician (always reasonable) o Can apply standard co-pay or cost sharing for recommended medical services and equipment Activity-only or an outcome-based alternatives must also provide a reasonable alternative 28

29 Final HIPAA Wellness Rules for Outcome-based Programs Requirement #4 Availability of Alternatives Full reward must be available to all similarly situated individuals If health standard is not met at initial measurement, test or screening program must allow: a reasonable alternative (not the same standard at a different level without additional time) the individual s physician s recommendation (which can change), or a waiver May not seek verification of medical difficulty in meeting standard Whether an alternative is reasonable is a facts and circumstances determination but the program must Provide and assist with locating the alternative Pay fees and membership fees for alternative Have a reasonable time commitment Accommodate the recommendation of the individual s physician (always reasonable) Activity-only or an outcome-based alternatives must also provide a reasonable alternative Outcome-based Programs 29

30 Final HIPAA Wellness Rules Requirement #5 Disclosure Outcome-based Programs and Activity-only Programs Any description of a health contingent wellness program must disclose the availability of a reasonable alternative standard, with contact information for obtaining the alternative, and a statement that recommendations of an individual s personal physician will be accommodated. Announcement of the availability of the program only, does not require disclosure The notice requirement would not be triggered by a summary of benefits and coverage that states that the cost sharing may vary based on participation in a diabetes wellness program, without describing the standards of the program The requirement is triggered if the document states that premium differential is based on tobacco use (standard) or the results of a biometric exam (outcome-based) For outcome based-wellness programs, notice of a reasonable alternative is provided to any individual who did not satisfy an initial outcome-based standard 30

31 Final HIPAA Wellness Rules Requirement #5 Disclosure and Notice Final regulations provide additional safe harbor language reflect the expansion of the reasonable alternative requirement: Sample: Your health plan is committed to helping you achieve your best health. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us [contact information] and we will work with you (and if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status. 31

32 Other Wellness Program Issues HIPAA Privacy The wellness program may need: Privacy procedures to safeguard information To provide HIPAA privacy notices participants New rules add new disclosures of individual rights, including restriction and access rights Updated notices delivered by 11/23/2013 or if posted online updated by 9/23/2013 Business associate agreements (BAA) with vendors Updated model language is available on the HHS website New agreements and contracts renewed before 9/23/2013 must have updated language by 9/23/2013 Existing agreements renewed on or after 9/23/2013, must be updated by the earlier of the next renewal or 9/23/14 Authorization to disclose PHI To employers to pay incentive or report results 32

33 Other Wellness Program Issues Americans with Disabilities Act ( ADA ) What is the ADA s impact on wellness plans? The ADA strictly limits medical examinations and disability related inquiries by an employer. HRA may be considered a medical examination and inquiry Inquiries are allowed for voluntary wellness plans The ADA safe harbor provision exempts bona fide benefit plans from the ADA s general prohibitions, including the prohibition on required medical examinations and disability-related inquiries. Seff v. Broward County. A wellness plan is voluntary if the employer neither requires participation nor penalizes employees who do not participate Reasonable accommodation is needed for individuals who are unable to meet the wellness plan s standards due to a disability. 33

34 Other Wellness Program Issues Tax Tax law impacts on wellness program rewards: Cash rewards are taxable and employers may have withholding obligations. Gift certificates/gift cards are taxable. Gifts are taxable (unless the value is de minimus). Premium holidays, lower deductibles, contribution to HRA/ HSA not taxable. 34

35 A Wellness Story: Issues Identifying employees for programs HRA generally ok, but "mandatory" HRA may violate ADA. Better to offer reward (such as $25); just remember the tax consequences, cash reward is taxable. Obtaining claims data from Plan s insurer/tpa probably ok, too, but may raise HIPAA privacy issues. Make sure it is used for treatment, payment, or health care operations (not employment). Make sure any individually identifiable health information obtained is safeguarded under HIPAA privacy procedures. 35

36 Announcing: Big Profit Company's New Wellness Programs 1. Education Send educational materials, such as tips on exercising and eating healthy, to employees with problem areas indentified by the HRA process. Education Probably ok. May not even be an ERISA plan. No reward or health goal, so no HIPAA problem. 2. Stop Smoking Program Impose a 30% premium surcharge on anyone who smokes! Smoker Surcharge OK - but offering reward for reaching health goal means HIPAA compliant wellness program Reward limit of 30% (when combined with other programs requiring health goal). Must offer at least once per year. Must offer reasonable alternative to those who cannot medically meet health goal (e.g., participation in smoking cessation class). 36

37 Announcing: Big Profit Company's New Wellness Programs 3. Rewards for Good Behavior Reward employees whose first HRA results show ideal weight, BMI, and cholesterol with a 30% discount off health insurance premiums. Reward for Good Behavior OK - but offering reward for reaching health goal, so must meet bona fide wellness program regulations. Reward limit of 30% (when combined with other programs requiring health goal). Must offer at least once per year. Must offer notice of a reasonable alternative to those who cannot medically meet health goal. 4. Chronic Disease Management Encourage employees with chronic disease, such as diabetes, asthma or coronary artery disease, to join a Disease Management program ASAP. Reward participation with an additional 10% discount on health premiums for as long as they are participating. Chronic Disease Management OK - HIPAA nondiscrimination rules allow plan to be more favorable to those with adverse health status. Reward is based on participation only (no health goal), so do not need to comply with bona fide wellness program regulations. Reward does not need to be combined with other wellness programs for purposes of 30% limit 37

38 Announcing: Big Profit Company's New Wellness Programs Mandatory case management for employees and dependents with very serious conditions, such as transplant patients, certain cancers, or premature infants. A failure to enroll will end health benefits for remainder of year. Serious Condition Management DOL Q&A: Only those with adverse health status eligible for penalty, so discriminatory. To be permissible, must meet bona fide wellness program regulations. "Penalty" cannot exceed 30% limit (when combined with other programs with health goal) If require further health goal, must offer reasonable alternative Risk if penalty too severe 5. Serious Condition Management Reporting Quarterly Results and Year End Bonuses HIPAA Privacy Issue even if names are removed, information must be "deidentified" for HIPAA purposes. Beware of employment law issues. 38

39 Other Wellness Issues Misc. Legal Considerations Civil Rights Act, Title VII Protected Classes Religious Discrimination Race Discrimination Sex Discrimination Age Discrimination in Employment Act (ADEA) Family Medical Leave Act (FMLA) Genetic Information Nondiscrimination Act (GINA) What does GINA require? Bottom Line Wellness Programs are great but... be aware of the potential legal issues! 39

40 Questions? 40

41 Sources CDC Health, United States, 2011, table 125 ( (accessed March 4, 2013) Moriarty JP, Branda ME, Olsen KD, et al. The effects of incremental costs of smoking and obesity on health care costs among adults: a 7-year longitudinal study. J Occup Environ Med. 2012;54(3): (accessed March 4, 2013) Kaiser Family Foundation/Health Research & Educational Trust 2011 Employer Health Benefits Survey, full survey results are available online at see also Kaiser Family Foundation News Release for September 27, 2011 at (accessed March 4, 2013) U.S. Department of Labor, Office of Policy and Research and the U.S. Department of Health and Human Services Office of Health Policy. (2012). A Review of the U.S. Workplace Wellness Market, at (accessed March 4, 2013) 41