Employer-Sponsored Wellness Programs Changes Coming Your Way
If you provide incentives to encourage employees to participate in wellness programs, such as discounting the cost of the medical insurance coverage for being tobacco-free, changes may soon be necessary as a result of the US Equal Employment Opportunity Commission (EEOC) proposed rules that were issued on April 20, 2015. While it is true these rules are in proposed form, we recommend that employers review their current wellness program offerings to determine whether any changes would be necessary if the proposed rules are finalized. In particular, employers should review how employees are notified of the program, the health information privacy protections that are in place, and how much of an incentive is provided. The period to comment on the proposed ended on June 19, 2015, and EEOC has indicated that it will finalize the rules following evaluation of the comments. This likely means the rules will be finalized before the end of this year.
What Is an Employer-Sponsored Wellness Program?
Wellness programs take a variety of forms, ranging from payment for health club dues or informational brochures about health or prevention to complex programs that give medical insurance cost reductions to employees if they participate in health risk assessments, coaching or consultation with case managers or nutritionists, or achieve some health-related outcome such as lowering their cholesterol. No matter the type of program, the goals are generally the same: to improve health, build workforce morale, and reduce health insurance costs. Regardless of the type of program, it is important to remember that various laws apply to them; one of those laws, the Americans with Disabilities Act (ADA), will be impacted by the EEOC proposed rules that change existing ADA regulations. It is also important to remember that compliance with one law does not necessarily mean compliance with other applicable laws: each wellness program feature must be analyzed under each law.
What Are the Main Laws that Apply to Wellness Programs?
HIPAA: Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), medical plans, referred to by all of the laws as “group health plans,” are prohibited from discriminating against an individual (e.g., charging a different premium for health coverage) based on a health status-related factor, such as a physical or mental condition. However, group health plans that contain programs of “health promotion and disease prevention,” a.k.a. “wellness programs,” may discriminate with respect to the benefits provided if the program meets certain conditions. Only one HIPAA wellness condition applies to a participatory program: it must be available to all similarly situated individuals, regardless of their health status. Example: a tobacco cessation program that does not require an employee to quit is made available to all employees. If the wellness program is a “health contingent” program, which means it requires an individual to complete an activity or satisfy a standard related to a health factor in order to obtain a reward, four other conditions must be met: (1) an employee must be given an opportunity once per year to qualify for the reward or penalty; (2) the reward or penalty cannot exceed 30 percent of the cost of coverage (including employer and employee contributions), or, if the incentive is tobacco-related, up to 50 percent; (3) the program must be reasonably designed; and (4) there must be a reasonable alternative standard based on whether the feature is “activity only” or “outcome based.”
A good rule of thumb—HIPAA always applies if an employer gives a reduction in the cost of the medical coverage it provides for participating in wellness activities or for achieving a health-related outcome, such as not smoking.
GINA: The Genetic Information Nondiscrimination Act of 2008 (GINA) applies to wellness program features that ask for genetic information. If an employer asks or requires its employees to take health risk assessments as part of a group health plan incentive (e.g., waiving a deductible), GINA Title I applies. Under GINA Title I, a group health plan cannot request, require, or purchase “genetic information,” which includes an individual medical history, either for (1) underwriting purposes or (2) prior to or in connection with enrollment in a group health plan. If, however, an employer gives cash to employees for completing a health risk assessment and does not in any way tie the health risk assessment to the group health plan, GINA Title II applies. GINA Title II generally prohibits employers from requesting, requiring, or purchasing genetic information except in limited circumstances. The limited circumstances include voluntary wellness programs that meet certain conditions.
The Internal Revenue Code: Under the “Code,” cash and cash equivalents, such as gift cards, are always taxable income to the employee and subject to withholding requirements. This is true even if an employer’s wellness program service provider gives the cash equivalent to employees.
ADA: Under the ADA, employers are restricted from obtaining medical information from employees, generally by prohibiting employers from making disability-related inquiries or requiring medical examinations, unless the inquiry or medical examination is “voluntary” and part of a workplace wellness program. Until April 20, there was no clear guidance from the EEOC, which is the federal agency responsible for regulating the ADA, on what constituted “voluntary,” especially when group health plan incentives were offered. There was always a question as to whether such a program affected the “voluntary” nature of a wellness program and whether such a program complied with the ADA.
The EEOC’s Proposed Rules
The EEOC proposes the following conditions for wellness programs that provide group health plan incentives in order for such programs to be “voluntary” under the ADA: (1) reasonable design—the program must be reasonably designed to promote health or prevent disease, (2) confidentiality—medical information that is collected can only be shared in aggregate terms that do not disclose, and are not reasonably likely to disclose, participant identities except as needed to administer the health plan, and (3) the program must be voluntary.
Such a program meets the “voluntary” requirement if it does not require participation, does not deny coverage in any or all of an employer’s benefit offerings as a result of nonparticipation, does not take employment action or retaliate against employees within the meaning of the ADA, provides notice to employees about the program, and does not have an incentive cap that exceeds 30 percent of the cost of employee-only health insurance coverage (which includes both employer and employee contributions). Note that HIPAA requirements differ—30 percent is an acceptable maximum incentive for family coverage, and all tobacco-related programs can use a 50 percent threshold. If the EEOC’s proposed rules are finalized, employers that offer an incentive for both their employees and the employees’ dependents’ participation that is 30 percent of the cost of medical coverage, the employer will have to engage in a complex calculation to determine whether the incentive complies.A
Melanie K. Curtice is a partner with Stoel Rives LLP, a US law firm, operating out of twelve offices, including Anchorage. Curtice regularly assists Alaska employers with their employee benefit law needs. She may be reached at firstname.lastname@example.org, (907) 277-1900, or (206) 386-7651.
This article is provided for educational purposes only. It is not a substitute for legal counsel.
This article first appeared in the August 2015 print edition of Alaska Business Monthly.