Recognizing that unhealthy lifestyles affect people of all ages, including those in the workforce, employers are using legally sanctioned incentives in an attempt to change behavior toward better and healthier choices through Workplace Wellness Programs. The expected collateral benefits are reduced costs to the employer due to healthier employees who use fewer health services, employees who are more productive at work and employees who lose less time from work. Specifically, these programs are designed to promote health and prevent disease by reducing or eliminating a sedentary lifestyle, bad eating habits, tobacco use and alcohol consumption and in so doing reduce or eliminate chronic diseases, such as: diabetes, heart disease, respiratory conditions, etc. The Patient Protection and Affordable Care Act (ACA) promotes Workplace Wellness Programs; some large employers have already implemented Workplace Wellness Programs, but their positive impact on employee health and employer costs is disputed at this time and may require more time to accurately assess.
New Regulations:
https://www.federalregister.gov/articles/2013/06/03/2013-12916/incentives-for-nondiscriminatory-wellness-programs-in-group-health-plans
New regulations were issued jointly by the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Department of the Treasury (Treasury) on May 29, 2013, titled “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans” (26 CFR Part 54; 29 CFR Part 2590; 45 CFR Parts 146-147, June 3, 2013). The regulations were effective August 2, 2013 and apply to group health plans for plan years beginning on or after January 1, 2014. These final regulations are designed to ensure nondiscrimination in their application, and to provide comprehensive guidance with respect to the general requirements for Workplace Wellness Programs while providing plans and issuers with flexibility to encourage innovations. Future subregulatory guidance will be forthcoming as necessary.
Who Must Comply?:
The regulations apply to insured, self-insured, grandfathered and non-grandfathered group health plans. These Workplace Wellness Programs are administered by employers directly, through a vendor, through group health plans or through a combination, and all must comply.
Noncompliance can result in a civil action by regulators and/or a lawsuit by individual employees.
Overview of Compliant Wellness Plans:
Workplace Wellness Programs are divided into two types of programs: the Participatory Programs and the Health-Contingent Programs.
1. Participatory Programs:
The most popular programs adopted by employers, these plans will be deemed nondiscriminatory and in compliance with the ACA if they are made available to all similarly situated employees without regard to their health status. They are characterized by having either no reward or the reward not being conditioned on satisfying any standard that is related to a health factor. In other words, if a reward is given, it is not based on outcome.
Examples of Participatory Programs include gym membership, filling out a risk assessment, attending a health education seminar, or participating in diagnostic testing without the requirement of a specific result.
2. Health-Contingent Programs:
Health-Contingent Programs are defined as those programs that require employees to satisfy a standard related to a health factor to earn a reward or to avoid a penalty. The new regulations create two separate categories for Health-Contingent Programs: Activity Only and Outcome-Based.
Activity Only:
The employee is required to perform or complete an activity related to a health factor, regardless of the outcome, to attain the reward or avoid the penalty. Stated otherwise, the programs do not require an individual to attain or maintain a specific health outcome.
Examples include walking, dieting, attending an exercise program or attending a nutrition class. The employee need only complete the program to obtain the reward or avoid the penalty.
An alternative standard must be provided to individuals for whom it is unreasonably difficult because of a medical condition or medically inadvisable to meet the standard; for example, an individual is unable to participate in a walking program due to recent surgery or pregnancy, or as a result of asthma. The regulations provide safeguards to ensure individuals are given a reasonable opportunity to qualify for the reward. For those employees unable to perform or complete this program, their doctor may provide verification of the employee’s medical condition that makes it unreasonable or dangerous for the employee to meet the standard. The doctor may also suggest an alternative standard, or the employer may choose to waive the standard and just provide the reward. A plan or issuer may seek verification, such as a statement from the individual’s personal physician that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy the otherwise applicable standard in an activity-only wellness program, if reasonable under the circumstances.
Outcome-Based:
The employee is required to possess or achieve a specific health outcome to attain the reward or avoid the penalty. Generally, these programs have progressive levels: first, a measurement, test, or screening as part of an initial standard; and, then a larger program that targets individuals who do not meet the initial standard with wellness activities.
Examples include achieving a normal body mass index (BMI); attending an antismoking program and discontinuing smoking, attaining certain levels for cholesterol or glucose screenings, and meeting targets for exercise. The tools used to achieve the goals include using a health coach, taking a health fitness course, adhering to a health improvement action plan or complying with a health care provider’s plan of care.
An alternative standard must be provided to any employee who does not meet the initial standard. For example, an education program or activity may be substituted. This is to ensure that the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status. The employer cannot require an employee to provide physical verification of a need for an alternative standard under an outcome-based wellness program. However, if an individual’s personal physician states that a standard is not medically appropriate for the individual, the plan or issuer must provide a reasonable alternative standard that accommodates the recommendations of the individual’s physician with regard to medical appropriateness.
Additionally, Health-Contingent Plans are required to:
1. Give all eligible employees an opportunity to qualify for the reward or avoid the penalty at least once a year;
2. Provide a reward or absence of a penalty surcharge not in excess of 30%, or 50% if the program is designed to prevent or reduce tobacco use, calculated on the total cost of coverage (the combined total of the employer’s and employee’s contribution for employee-only coverage) under the employer’s health plan; if dependents are eligible and participate, the percentage is calculated on the cost of coverage for dependents as well;
3. Be reasonably designed to promote health and prevent disease. The plan cannot be overly burdensome and cannot be used as a subterfuge for discrimination based on a health factor;
4. Make the full reward available to all similarly situated individuals, which requires provision of a reasonable alternative standard or waiver of the original standard—another way to achieve the full reward for those individuals for whom it is unreasonably difficult or medically inadvisable to satisfy the standard due to a medical condition. Alternative standards may be individualized or apply to an entire class of persons and may be themselves health-contingent, but they must be reasonably based on all facts and circumstances and the guidance of the regulations; and,
5. Reasonably disclose the availability of an alternative standard, or possible waiver, in program materials. The final rules provide sample language for alternative standards, including the availability of an alternative standard and required contact information.
What Constitutes a Reward?:
A reward can be an incentive or a disincentive. For example, it can be a premium discount; a rebate on a premium or contribution; additional health benefits; modification to otherwise applicable cost sharing (deductible, copayment, coinsurance); other financial incentives; or the avoidance of a penalty, a premium surcharge or other financial disincentive.
Agency Guidance:
The legal restriction of the ACA, the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) do not currently align. In order to maintain a nondiscriminatory workplace, several concerns need to be addressed by the Equal Employment Opportunity Commission (EEOC), including 1) whether in offering financial incentives/disincentives as a way to encourage participation in Workplace Wellness Programs, employers run afoul of the definition of “voluntary” in the ADA; 2) to what extent disabled, ill or older employees have the ability to secure a reasonable alternative standard to ensure eligibility for wellness program rewards; and, 3) whether disclosure of confidential qualifying health conditions employees have, including a family medical history, can be required as a condition of participation.
While the EEOC has accepted written testimony and held an open commission meeting on May 8, 2013, to discuss Workplace Wellness Programs, it has not issued guidance to employers and employees that would reconcile, clarify and/or definitively resolve current inconsistencies which exist between the ACA, the ADA and GINA. Guidance is required in order to allow employers to design and operate Workplace Wellness Programs that comply with all nondiscrimination and privacy provisions of the law and to allow employees to work in a nondiscriminatory workplace.
Judicial Rulings:
The first legal challenge to Workplace Wellness Programs has been decided in favor of the employer by way of Summary Judgment Motion and affirmed by the 11th Circuit.
In the case of Seff v. Broward Co., 691 F3d 1221 (11th Cir 2012), Broward County implemented a Workplace Wellness Program through its insurance carrier, Coventry Healthcare. The goal was to reduce health care costs. Specifically, employees were required to undergo a biometric screening exam and an online health risk assessment (HRA). Employees identified as suffering from any of five designated disease states were given access to a health coaching program. Participation was rewarded with a waiver from co-pays for medication prescribed in conjunction with the identified disease. A $20 biweekly surcharge was deducted from an employee’s salary for failure to participate in the Workplace Wellness Program.
The employees brought a class action lawsuit alleging that requiring employees to undergo medical exams and provide medical information to their health care insurance carrier violated the ADA because of the penalty imposed for nonparticipation. Broward County argued that the Workplace Wellness Program was voluntary and complied with the ADA’s safe harbor provision. The court granted Summary Judgment in favor of Broward County, ruling that the Workplace Wellness Program fell into the ADA’s safe harbor and the 11th Circuit Court of Appeals affirmed, finding that the Workplace Wellness Program was a term of the benefit plan within the safe harbor and did not have to be identified in the plan’s written documents.
A putative class action based on similar facts, that is, penalties imposed for failure of employees of the Oregon Department of Corrections and Oregon State Police to submit to an HRA, was filed in February 2012. It alleges violation of the ADA.
Employer Acceptance of Wellness Plans:
Surveys on the effectiveness of Workplace Wellness Programs have been performed over the years by Kaiser/HRET, Mercer Consulting, TowersWatson, etc. It has been reported that Workplace Wellness Programs are a common feature of employee benefit programs for large employers. According to a Rand Corporation study issued May 29, 2013, 62% of employers with 200 or more employees offer wellness programs. Unfortunately, to date, fewer than 20% of employees participate in these plans. Employers, not so much employees, believe that these programs have a positive net economic effect, namely, promoting health and preventing disease; cutting healthcare costs; decreasing the cost of employer-sponsored health insurance, as well as reducing sick leave, absenteeism, presenteeism, and Worker’s Compensation claims. The driving logic is that if the rewards are effective, health care costs will be reduced as an individual’s health improves. However, the Rand Corporation report released on May 29, 2013 reports in its research findings that wellness programs have a very limited effect on the health of employees or the reduction of health care costs.
It is clear that more formal evaluation of the impact of Workplace Wellness Programs is required. Although employers are reported to have evaluated some metrics, most employers reportedly do not know the return on investment (ROI) and/or the sustainability of results. The administration takes the position that there is currently insufficient broad-based evidence, which makes it difficult to definitively assess the impact of Workplace Wellness Programs on health outcome and cost, although overall, employers largely report that Workplace Wellness Programs in general are delivering on their intended objectives of improving health and reducing cost. While data may not yet be conclusive, the future success of Workplace Wellness Programs will be governed by employers' cost-benefit analyses.
Conclusion:
Will Workplace Wellness Programs put companies at risk for lawsuits? Claims by employees can include discrimination, violation of medical privacy, violation of benefits reporting requirements and tax obligation, and breach of collective bargaining agreements. If you’re looking to enhance or implement new and effective ways to potentially reduce your health care costs and improve the lifestyles and productivity of your workforce, please contact our Health Care Task Force with any questions you have about ensuring your Workplace Wellness Program is compliant with the ACA, HIPAA, ADA, GINA, ERISA, the PHS Act and other state and federal laws.
