The Partners Group invited legal counsel, Iris Tilley from the Barran Liebman LLP Labor and Employment Law Firm, to address legal considerations to heed when implementing a health contingent wellness program.
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There are three different bodies of legal requirements to consider when thinking about shifting to an outcomes based wellness program. This article will give you a checklist of items to review as you’re putting your program into place. If you find you’re in doubt and need further assistance, we recommend checking with your benefits consultants.
The first set of legal requirements come directly from HIPAA, which you probably know as a privacy law. However, one section of HIPAA is dedicated to discrimination based on someone’s health. Consequently, HIPAA comes into play when we’re thinking about wellness programs and the way we apply these wellness programs to particular employees. The Affordable Care Act (ACA) has also slightly modified these programs, as well as the Americans with Disabilities Act (ADA).
Outcomes Based Programs: The Five Requirements:
These requirements under HIPAA, and also under the Affordable Care Act, are designed to avoid a situation in which individual employees are discriminated against based on their health status.
1. The wellness program must give individuals the opportunity to qualify for the reward at least once a year
2. The reward must not exceed 30% of the cost of coverage
3. Reasonable Design:
A program will meet this requirement if:
• It has a reasonable chance of improving the health of or preventing disease in participating individuals;
• It is not overly burdensome;
• It is not a subterfuge for discriminating based on a health factor; and
• It is not highly suspect in the method chosen to promote health or prevent disease.
4. Uniform Availability
– Must meet general similarly-situated standard
– Must provide a reasonable alternative if participant does not meet the specified outcome
5. Notice of availability of reasonable alternative standard
– Must provide that:
• Reasonable alternatives are available
• Recommendations of a physician will be accommodated
First requirement: The program must give individuals the opportunity to enroll at least once a year. This means you should roll it out as part of your open enrollment. You have the option to offer it to new employees throughout the course of the year, but it is not required because the new employee can also enroll when that open enrollment comes around. How you choose to set this up for your organization is something you can discuss with your Partners Group consultant.
Second requirement: The reward cannot exceed 30% of the cost of coverage. We will explore the 30% requirement in more detail below when we discuss rules under the Americans with Disabilities Act. The key to this requirement is that the reward cannot be so great that someone would feel they don’t have the opportunity to say, “No, I really don’t want to be part of this program.”
Third requirement: Reasonable design. This requirement ensures your plan is designed to help someone achieve a healthy outcome. The regulations keep employers from implementing programs that are ultimately too difficult for anyone to participate in. However, the bar on what is a reasonable design is low, and the regulations use the example of aromatherapy, which is considered to be linked to promoting a healthy outcome. There are a wide variety of options to consider regarding reasonable design.
Fourth requirement: Uniform availability. Uniform availability means all similarly situated employees need to have access to the program. This means it’s OK if necessity requires you to carve your employees into different programs. However, employees who are the same from a business standpoint, meaning they’re in the same office or division, should not be hindered from participating for any business reason. All employees should have the ability to participate in the program. Ultimately, this requirement makes sense for you because it means more employees can participate in the program and potentially achieve healthy outcomes.
Second requirement under uniform availability: If you do have an outcome that an employee has to meet, whether it’s a reduction in BMI or some other item, you must make an alternative available to those employees who are not able to meet that outcome. If you have a particular employee who is not able to achieve a lower BMI, they must have another opportunity to get the premium reduction, gift card, or whatever it is you’re offering to those employees who do meet the outcome.
The fifth and final requirement under the HIPAA rules is the notice of availability of that reasonable standard. Employees with a medical reason for which they’re not able to meet the outcome or participate in the wellness program must receive notice that they have the opportunity to do something else. The notice must also state that they can notify the employer if they’re not able to meet the outcome and that if a doctor has specific requirements, those doctor’s requirements will be accommodated.
HIPAA Confidentiality Guidelines:
HIPAA also has confidentiality rules that come into play with wellness programs. For a long time, the rules were ambiguous and it was unclear how they worked in conjunction with wellness programs. In 2015, it was explained that the HIPAA rules provide clarification when an employer is a covered entity.
HHS provided additional guidance on April 16, 2015:
• Clarifies that while employers are not covered entities in their capacities as employers, they have some confidentiality obligations when a wellness program is covered by HIPAA
• The employer can only access PHI from the plan if the employer:
1) performs plan administration and
2) amends the plan documents to certify that the employer will meet HIPAA requirements reposes
There are many situations in which an employer need not worry about the HIPAA rules in relation to wellness programs. However, whether they are a covered entity for the purpose of the health plan signifies when HIPAA rules come into play. Specifically, employers don’t have access to the personal health information employees input into their wellness programs.
Imagine a situation in which your employees are filling out a health risk assessment. The typical arrangement is to use a third-party vendor who collects the data and provides you with aggregated information lacking individually identifiable information. As long as you receive the information in this way, you won’t need to worry about HIPAA safeguards. However, if you are personally collecting the information and know specifically which employee inputted which information, that’s a situation where you might consider HIPAA training. Ensuring you abide by each individual HIPPA rule is important when considering implementing wellness programs and how you’ll administer them.
Programs Covered By the ADA:
The third and final law is the Americans with Disabilities Act (ADA). New regulations came out in the summer of 2016, which take effect as of your first plan year starting on or after 1 1 17.
• New ADA rules took effect January 1, 2017
• April 5, 2017: EEOC settled wellness case for $100,000 and mandatory training
– Program asked disability-related questions and required a medical exam. When the employee refused to participate, the entire cost of her medical coverage was shifted from the company to the employee, which created a penalty that exceeds the ADA rules.
Governing bodies have already been enforcing the new ADA regulations. .Earlier this month, on April 5th, 2017, the Equal Employment Opportunity Commission entered into a consent decree with a company based on a perceived violation of these regulations. The employer had a wellness program that requested information about individual employees’ personal health conditions and included disability related inquiries which put the employer’s wellness program under the ADA rules. If an individual employee opted not to participate in the program, the employee was responsible for 100% of their health premiums. If they opted to participate, the employer paid the premiums at 100%. Ultimately, a 100% reward violated the second requirement discussed above and was too high under the ADA. The EEOC ruled that the employer had to pay a $100,000 fine and enter into ADA training.
Why are we even talking about the ADA?
Often we think of the ADA as an employment law instead of a benefits law. However, ADA regulations relate directly to wellness programs. Regulations ensure individuals with disabilities never feel they don’t have a choice as to whether or not to participate in a wellness program or to share information about their disability with their employer.
“Often we think of the ADA as an employment law instead of a benefits law. However, ADA regulations relate directly to wellness programs.”
ADA regulations apply any time a wellness program asks disability related questions, such as a health risk assessment asking questions that could expose a person’s disability or require a medical exam. This applies whether the program is outcomes based, activity based, or any other type of program. Under the ADA, the program must meet three requirements, one of which overlaps the HIPAA rules.
• Wellness programs that include disability related inquiries and/or medical examinations are subject to ADA rules.
Under ADA rules, a program must:
– Be voluntary
– Meet ADA confidentiality requirements
– Be a reasonable design
What does it mean for a program to be “voluntary”?
• Maximum incentive cannot exceed ADA rules
• Program cannot be mandatory
• Employee cannot be excluded from any of employer’s health plans or benefit packages for non-participation or failure to achieve outcome
For a program to be considered voluntary under the ADA, the maximum available incentive cannot exceed 30% of employee-only coverage (slightly different from HIPAA ruling). In addition, the program cannot be mandatory. This means you can’t tell employees, “If you don’t participate in this program, you don’t get access to health insurance” or “If you don’t participate in this program, you’re going to be fired.” Participating in a wellness program cannot be a condition of employment or health care coverage.
Some employers offer three or four health plans, one of which might be a wellness program health plan that employees don’t have access to unless they participate in the wellness program. However, employers must make that health plan available to everyone if it falls under ADA rules.
Voluntariness – The maximum incentive:
• Maximum reward is 30% of the total cost of employee-only coverage (employer and employee side)
• Three key differences from the HIPAA incentive rules:
– HIPAA rules look to the cost of family coverage when dependents participate in the program
– A 50% reward is available for smoking cessation programs under the HIPAA rules
– No maximum incentive cap for participation-only programs under the HIPAA rules (unless the program requires information that could reveal someone’s disability or requires a medical exam)
The ADA has specific confidentiality requirements, which differ slightly from the confidentiality requirements associated with HIPAA. The ADA rules apply whether or not you’re considered a covered entity under the HIPAA rules.
• Notice is distributed to the employee before the employee provides health information. The notice describes:
– Information to be collected
– How it will be used
– Who will receive it
– How it will be kept confidential
• Employer only gets aggregated information
• Employer may not require employee to agree to the sale, exchange, sharing, transfer, or other disclosure of medical information (except to the extent necessary to carry out the wellness program)
• Employer may not require employee to waive confidentially protections under the ADA as a condition for participating in the wellness program
A sample notice is available at https://www.eeoc.gov/laws/regulations/ada-wellness-notice.cfm. This notice is easy to modify for your own needs. Employees must be given notice before their information is collected.
“Employers are not allowed to possess identifiable information about their employees’ health information, which means they must use a third party service to collect the information, strip particular employee names or other identifiers, and then send it back.”
Employers may not require employees to agree to sell or exchange their information. This is also a rule under HIPAA. Additionally, employers may not require employees to waive those confidentiality provisions as a condition to participating in the wellness program.
If you have any questions, please feel free to get in touch with The Partners Group or Iris Tilley.
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Create an outcomes based approach to wellness with a focus on prevention: click here for article.
We’ve highlighted a particular employer and how they went down the path of implementing a workplace risk reduction strategy in this case study.
Webinar video: In this Webinar video we share ideas and strategies for implementing a workplace wellness program into your workplace. First, we focus on the benefits of a workplace wellness program, both from the employer perspective and then also from the employee perspective. We also share some tips for focusing on prevention and talk about specific risk reduction strategies that you can implement in your workplace. Then we wrap it up with what’s next in workplace wellness.
Iris K. Tilley, Partner, Barran Liebman Attorneys
Iris Tilley advises employers in all aspects of employee benefits, including the design, administration, and termination of qualified retirement plans, non-qualified deferred compensation arrangements, and health and welfare plans. Her work with health and welfare plans has included the correction of administrative errors, the implementation of plan amendments required for health care reform, and business planning for health care reform. Click for full bio.