As published in The Self-Insurer,
I am often reminded of an unacknowledged fact that I shared with a room full of employers during a conference several years ago. Like it or not, employers are now responsible for the health and well-being of their employees. When it comes to impacting the trend of their health care spend and issues associated with absenteeism, employers are encouraged to invest in employee health engagement and health accountability to make an impact. Granted, there is an ongoing controversy surrounding the ROI when it comes to wellness programs, however, I think we can all agree that doing nothing or simply dabbling in wellness will have little to no impact.
The U.S. departments of HHS, Labor and the Treasury recently issued the final regulations on employment-based wellness programs in compliance with the Patient Protection and Affordable Care Act (PPACA), effective for plan years beginning on or after January 1, 2014, and applicable to both grandfathered and non-grandfathered health plans.
Correspondingly, wellness programs are not only permitted, they are encouraged, and employers across the country are becoming creative and utilizing a variety of different wellness approaches in their attempts at addressing health care costs and the health and well-being of their employees. However, the regulations governing wellness programs have many nuances that come into play when tailoring a wellness program and if not done carefully they may actually become landmines.
Pursuant to the final regulations we still have two variations of wellness programs, par ticipatory wellness programs and health- contingent wellness programs, and the basic requirements that existed in the proposed regulations are still applicable in the final regulations. However, there are some distinct
differences and the requirements var y between the two sub-categories of health-contingent wellness programs, activity-based (AB) wellness programs and outcome-based (OB) wellness programs, par ticularly when it comes to availability and the reasonable alternative standard, that I believe are wor thy of clarification.
To simplify matters, wellness program regulations can be broken down into five categories: Frequency; Size; Purpose; Availability; and Disclosure.
For both AB and OB wellness programs, eligible individuals must be given the opportunity to qualify for the reward and/or penalty avoidance under the program at least once per year. If an eligible individual declines the opportunity at open enrollment, the Plan is not required to provide another opportunity until next year’s enrollment.
Combined health-contingent rewards cannot be in excess of 30% (or 50% if designed to prevent and/ or reduce tobacco use) of the cost of coverage based on the total amount of employer and employee contributions paid towards the benefit package under which the individual is receiving coverage. This is an enrollment specific analysis.
The AB and OB wellness programs must be reasonably designed to promote health and prevent disease. This will be satisfied so long as the program is not: overly burdensome; a subterfuge for discriminating based on a health factor ; or highly suspect in the method chosen to promote health or prevent disease. Requiring an employee to complete a one-hour nutrition class each week for an entire year in order to obtain the reward is not likely to satisfy the required purpose.
The full reward must be available to all similarly situated individuals. This requires reasonable alternatives be made available upon an individual’s request. This is the juncture in the regulations where the AB and OB wellness programs have significantly different requirements, which are important to understand.
- Activity-Based: An AB wellness program must allow a reasonable alternative method for obtaining the reward for any individual for whom it is medically inadvisable to attempt to satisfy the standard or unreasonably difficult due to a medical condition. Here, it is reasonable for the Plan to require physician verification. Ultimately the Plan must provide a reasonable alternative based on the facts and circumstances, which will take into account considerations including, but not limited to, cost shifting and time commitment. In the alternative, the Plan may also waive the standard as opposed to providing a reasonable alternative.
- Outcome-Based: An OB wellness program must allow a reasonable alternative method for obtaining the reward for a much broader group of participants. It must allow ANY individual who does not meet the initial standard to use a reasonable alternative standard regardless of any medical condition. Therefore, the employer and/or the Plan cannot require an individual to provide physician verification of a need for an alternative standard. That is not to say that an individual’s physician cannot assert such claims, it is only to say that the employer and/or the Plan cannot require such. The Plan must ultimately provide a reasonable alternative based on the facts and circumstances, much like the AB requirement, and likewise, the Plan may also waive the standard as opposed to providing a reasonable alternative.
The challenge here is to adhere to the requirements yet still preserve meaningful and cost-effective OB wellness programs, and with either the AB or the OB wellness programs, employers need to keep in mind that they are going to need to determine the classification of the reasonable alternative (is it an AB or an OB) and follow the appropriate rules thereof.
The Plan must disclose in all Plan material the terms of an AB or OB wellness program as well as in any disclosure to an individual that he or she did not satisfy the initial standards (OB), the availability of a reasonable alternative, contact information and a statement that the recommendations of a participant’s physician will be accommodated. If the Plan simply mentions that a program is available, without mention of its terms, this disclosure is not required.
Potential landmines to consider outside of the wellness regulations themselves include but are not necessarily limited to the ADA, HIPAA, ACA, GINA, COBRA, ERISA, tax implications and other state and federal laws. Everyone is in agreement that compliance with HIPAA doesn’t necessarily mean compliance with the ADA. In fact, the 2006 HIPAA regulations confirmed for us that compliance with HIPAA’s non-discrimination rules and wellness program requirements does not necessarily ensure compliance with the ADA or any other applicable federal or state law. As a side note, the EEOC recently gathered testimony on the issue that may of these regulations are not in alignment, and we are hopeful that they will be issuing guidance shortly to help reconcile some of the inconsistencies.
Setting forth regulations always begs the question “what is the penalty for non-compliance?” Aside from the potential participant lawsuit regarding discriminatory practices, which could result in damages and possibly attorney fees, under HIPAA, the IRS may impose a penalty in the form of an excise tax of $100 per day per person for non-compliance. As we all know, the DOL is actively auditing plans for compliance and could bring a civil action against an employer to enforce these requirements as well. Now is a good time to get your house in order and ensure that the administration of your employer wellness programs is compliant and that your Administrative Services Agreements accurately represents the corresponding duties and responsibilities.
Compliance aside, successful wellness programs that have mastered health engagement and health accountability among their employee population typically have implemented programs in a methodical and strategic manner over a multi-year timeframe and have acknowledged early on that it will take time and a corporate commitment to build a true culture of wellness.
This article is intended for general informational purposes only. It is not intended as professional counsel and should not be used as such. This article is a high-level overview of regulations applicable to certain health plans. Please seek appropriate legal and/or professional counsel to obtain specific advice with respect to the subject matter contained herein.