by Lisa Klinger, J.D. and Susan Grassli, J.D.
Two sets of guidance issued in April of this year could require changes to some employers’ wellness programs. It could be months before a final rule is issued. This article 1) summarizes the recent guidance and the changes they make (or propose) to existing final regulations, and 2) suggests areas where employers may wish to be cautious in their wellness program design, pending issuance of final regulations that are approved by all agencies with jurisdiction over wellness programs.
The Recent Guidance
- On April 16 the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury jointly issued the Affordable Care Act (ACA) FAQ XXV on wellness programs, stating that such programs must comply with all other applicable laws, not just with HIPAA and the Affordable Care Act (ACA).
- On April 18, 2015, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations on wellness incentives and the Americans with Disabilities Act (ADA), which contain some significant differences from the existing final HIPAA and ACA regulations on wellness incentives. Several of the differences are additional limitations.
- In the April 18th guidance, the EEOC also announced that a rule will soon be forthcoming concerning how the Genetic Information Nondiscrimination Act (GINA) affects wellness programs.
Why do the EEOC Regulations Differ from Prior Guidance?
The reason the EEOC can issue separate and different regulations from those previously issued by HHS, DOL and Treasury is that all four of these agencies have jurisdiction over wellness incentives under employer group health plans, but in different ways. The EEOC has jurisdiction over the ADA and GINA, and the DOL, HHS and the Treasury have jurisdiction over HIPAA (nondiscrimination rules) and the ACA. All of these Acts intersect in some way with employer-sponsored wellness programs.
In the past year the EEOC took enforcement action against several large employer wellness programs that were actually in compliance with the HIPAA and ACA final regulations but that EEOC alleged were not in compliance with the ADA and/or GINA. The EEOC proposed regulations are helpful because they provide written clarification of the EEOC’s position on wellness programs under the ADA and GINA. At the same time, however, they are not helpful because they are inconsistent with existing final regulations under HIPAA and the ACA. The result: the possibility a wellness program could be in compliance with the ACA and HIPAA but not in compliance with the ADA or GINA.
On May 29, 2013, DOL, HHS and Treasury issued final regulations implementing the ACA changes to the HIPAA nondiscrimination requirements for wellness programs. The final regulations clarified and reorganized the rules outlined in previous proposed regulations and were intended to ensure that every individual participating in a wellness program would be able to receive the full amount of any reward or incentive, regardless of any health factor. Specifically, the final regulations:
- continued the previously proposed maximum-30% reward/penalty amount plus an additional 20% for tobacco cessation/reduction programs,
- distinguished between “activity-only” and “outcome-based” health-contingent wellness programs and imposed additional limitations on “outcome-based” wellness programs,
- revised the standard language for a Notice of Reasonable Alternative Standard.
EEOC Proposed Regulations
The EEOC proposed regulations (in April) limit the maximum incentive/ penalty to 30% for tobacco cessation programs that include medical testing (e.g., testing for nicotine), and also limit the maximum to 30% of the total cost of employee-only coverage even if the wellness program is offered to other family members. Additionally, the regulations define “voluntary” wellness programs and prohibit employers from penalizing employees who choose not to participate in voluntary programs. The following matrix summarizes some of the differences in the EEOC proposed regulations under the ADA, versus the previously-issued HIPAA and ACA regulations.
|Type of Program||HIPAA & ACA Regulations||EEOC Proposed Regulations|
|Tobacco cessation health-contingent Wellness program||Maximum incentive/penalty is 50% of total cost of coverage for the tier the EE selected. (e.g., self-only, family)||Maximum incentive/penalty is 30% of total cost of EE-only coverage if program includes a disability-related inquiry (e.g., health risk assessment) or medical testing (e.g., testing for nicotine). Otherwise, it appears that limit of 50% applies, but EEOC requests comments on this.|
|Non-tobacco health contingent wellness program||Maximum incentive/penalty is 30% of total cost of coverage for the tier the EE selected. (e.g., self-only, family)||Maximum incentive/penalty is 30% of total cost of EE-only coverage if program includes a disability-related inquiry (e.g., health risk assessment) or medical testing (e.g., biometric screening).|
|Participation-only wellness programs (do not require participant to attain any particular outcome)||No limit applies if incentive must be awarded regardless of results of HRA/health risk assessment or biometric screening.||Maximum incentive/penalty is 30% of total cost of EE-only coverage if program includes a disability-related inquiry (e.g., health risk assessment) or medical testing (e.g., biometric screening).|
|“Voluntary” participation. Penalizing EEs who do not participate in a participatory wellness program (e.g., HRA or biometric screening)||Permitted. Some employers limited benefit options for EEs who do not complete HRA or biometric screening. (E.g., cannot enroll in ‘high” value plan such as PPO.) HIPAA/ACA regulations did not define “voluntary.”||Employers are not permitted to penalize employees who choose not to participate. “Voluntary” means that a covered entity: (1) Does not require employees to participate, (2) Does not deny coverage under any GHP or particular benefits packages in a GHP for non-participation or limit the extent of such coverage; (3) Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees.|
|Notice requirements on “voluntary” plans that include disability-related inquiries and/or medical exams, and that are part of a group health plan||HIPAA/ACA regulations required notice of “reasonable alternative standards” for certain types of wellness programs, but did not include any specific notice requirements about use of medical information obtained.||Employer must provide a notice that includes five factors: (1) what medical information will be obtained, (2) how the medical information will be used, (3) who will receive the medical information, (4) the restrictions on disclosure of the information, and (5) the methods the employer uses to prevent improper disclosure of medical information.|
FAQ XXV on Wellness
FAQ XXV (April 2015) clarifies what is meant by the requirement that a wellness program must be “reasonably designed to promote health and prevent disease” and also warns that just because a wellness program complies with the HIPAA/ACA regulations does not necessarily mean it complies with all other applicable laws.
On the first issue—of promoting health and preventing disease– FAQ XXV warns that the following factors/designs will be scrutinized and may result in an enforcement action:
- “A program that collects a substantial level of sensitive personal health information without assisting individuals to make behavioral changes such as stopping smoking, managing diabetes, or losing weight, may fail to meet the requirement that the wellness program must have a reasonable chance of improving the health of, or preventing disease in, participating individuals.”
- Programs that require unreasonable time commitments or travel – these may be considered overly burdensome.
- Outcome-based wellness programs that do not provide a reasonable alternative standard to qualify for the reward, for all individuals who do not meet the initial standard that is related to a health factor.
On the second issue—of compliance with various laws– FAQ XXV specifically references the Public Health Service (PHS) Act, the Code, ERISA, (including the COBRA continuation provisions), and other State or Federal law, such as the Americans with Disabilities Act (which the EEOC proposed regulations address) and the privacy and security obligations under HIPAA , where applicable. The FAQ includes the following specific examples:
- Rewards provided by a qualifying wellness program may nonetheless be taxable under Internal Revenue Code rules. For example, if one reward under a wellness program is that the employer reimburses participants for fitness center fees, such payment will be taxable because it is generally considered an expense for general good health, not a deductible “medical expense” under Code section 2013. Thus, the payment should be added to the employee wages reported on the Form W-2.
- Although the Departments’ wellness program regulations generally do not impose new disclosure obligations on plans and issuers, compliance with the wellness program regulations is not determinative of compliance with any other disclosure laws, including those that require accurate disclosures and prohibit intentional misrepresentation.
Next Steps for Employers
Review your wellness program and determine if it will have to be amended due to the recent guidance.
- If your incentive or penalty is more than 30% of the cost of employee-only coverage, you might want to decrease it for your next plan year. On the other hand, you may choose not to change your plan design until the EEOC issues final regulations.
- If you penalize employees who choose not to participate in a voluntary wellness program (such as biometric screening), you may want to reconsider this.
- If you have a voluntary program that collects medical information (such as a health risk assessment or biometric screening), you might want to start providing a notice that includes the information noted above in the EEOC proposed regulations.
- If you have a health risk assessment and/or biometric screening that collects a substantial level of personal health information, you might want to also include a component that assists participants to make behavioral changes such as stopping smoking or managing diabetes.
If you need assistance, contact your Leavitt advisor to help you work through these details.