Presentation on theme: "Legal Considerations When Developing an Employer-Sponsored Wellness Program Nimesh R. Patel Unum Unum Group 2012 - All Rights Reserved. The name and logo."— Presentation transcript:
Legal Considerations When Developing an Employer-Sponsored Wellness Program Nimesh R. Patel Unum Unum Group All Rights Reserved. The name and logo combination is a service mark of Unum Group. This presentation is being provided to you for informational purposes only and is not intended to be legal advice. #718820
2 Session Overview – Legal Issues to Consider Explore (briefly) the current landscape Primary Focus ERISA HIPAA –Nondiscrimination and wellness rules –Privacy restrictions ADA Tax Other Misc. Legal Considerations Title VII ADEA GINA
3 The Big Picture: What’s Happening to Healthcare Costs Basic Facts Healthcare spending in the U.S. accounts for 16% of GDP and costs have been rising at more than double the rate of inflation over the past decade. (CDC) Premiums for employer-sponsored health insurance have been rising four times faster on average than workers’ earnings since (Kaiser Family Foundation) Average employee contribution to company-provided health insurance has increased more than 143 percent since (Hewitt Associates) Companies spend up to 52% more in annual healthcare costs on overweight employees than they do on employees at a healthy weight (Journal of Occupational Environmental Medicine) 75% of all medical spending is for chronic disease – up from 60% in 2000 (source: CDC) 70% of all healthcare costs in the United States are attributable to preventable risks and unhealthy choices. (CDC) 66% of employers are moving toward more aggressive wellness and disease management programs. (Hewitt) 50% of employers offer or planned to offer incentives to increase participation in health initiatives, up from 38 percent a year earlier. (Hewitt)
4 Wellness Programs - Generally What exactly is a wellness program? What are some of the reasons an employer may decide to sponsor a wellness program? –Increase productivity –Reduce health care expenditures –Improve company image –Attract and retain talent –Increase company morale
5 Employee Perceptions & Communication Communication and Education leads to buy-in. “What’s in it for me?” “You’re discriminating against me” Penalty or Incentive? Premium differentials look like a penalty for those who don’t receive it. Educating employees about the use of HRA and claims data. Consistency of message. Identify and explain the intended outcome: Lower cost trend? Reduced risk factors? Cultural shift? Employee engagement? What would happen if no incentives were used or if discontinued? Would employees continue to use the programs and services?
6 Wellness Programs Keys to Success Have a plan: communicate characterize population identify risks and cost drivers invest in programs that match needs measure outcomes (what’s credible?) adjust based on outcomes Obtain Senior Management support Incentives that are meaningful Permit wellness activities in the workplace during work time
7 A Wellness Story Mr. Bottom-Line, the CEO of Big Profit Company, is very unhappy with the 2012 budget. How can health care cost so much! Mr. Bottom-Line orders his business team to come up with a solution. He wants to have the healthiest company around (and make Big Profit Company even Bigger). The business people get busy and develop a host of cutting-edge wellness programs. They proudly present them to Mr. Bottom-Line, who thinks they are fabulous. CEO
8 A Wellness Story First Step – Identify employees who need help! Require employees to take a health risk assessment (HRA) questionnaire that asks about family history, recent treatments, and habits. –To make sure everyone participates, make the HRA mandatory – if the employee doesn't fill in the HRA, he cannot enroll in the health plan. –As a further incentive, offer a $25 cash payment for completing the HRA on time. Then, ask the Plan's insurer/TPA to search its claims data and provide a list of employees with conditions that cost a lot to treat, such as diabetes or asthma.
9 A Wellness Story Armed with claims data and the HRA results, the business group comes up with 5 innovative programs.
10 Announcing: Big Profit Company's New Wellness Programs! Education Send educational materials based on "problem areas" in HRA (for example, tips on exercising and eating healthy). Stop Smoking Program Impose a 20% premium surcharge on anyone who smokes!
11 Rewards for Good Behavior To reward those with ideal weight, BMI, and cholesterol. If meet ideal, receive 30% off on premiums. One-time-only offer! Announcing: Big Profit Company's New Wellness Programs! Disease Management If identified as having certain conditions, such as asthma, diabetes, or coronary artery disease, encourage employees to join a Disease Management program ASAP. If they do, this group will receive an additional 10% discount on premiums as long as they keep participating.
12 Case Management For those with very serious conditions – transplant patients, premature infants... Sign them up for Case Management. If they don't enroll, no more benefits for the rest of the plan year. Announcing: Big Profit Company's New Wellness Programs!
13 A Wellness Story Mr. Bottom-Line is interested in "results, results, results." So, the Plan will send out quarterly reports on each division's progress (with no names, of course). Year-end bonuses to division heads with the healthiest teams or most participation!
14 A Wellness Story As Mr. Bottom-Line and his crew are about to go to print with a glitzy brochure with all these new programs, they decide to run it by someone in Benefits. Fortunately, the Benefits Team (who is very smart) knows about ERISA, the HIPAA nondiscrimination and privacy rules, the ADA, and the tax laws.
15 So, what did the Benefits people know that the Business people didn't?
16 Questions to Ask Is the program an ERISA plan? Does the program discriminate based on health status? If so, does it comply with HIPAA’s nondiscrimination and wellness rules? Are there HIPAA privacy restrictions? Does the program involve a disability or require mandatory medical exams? If so, does it meet the ADA? Are the rewards taxable?
17 Is the program an ERISA Plan? Does your wellness program provide medical care benefits? –If employer is involved and program provides “medical care,” program likely an ERISA plan? “Medical care” if individualized and provided by trained professionals (e.g., coaching by nurse, counseling by therapist, biometric screening). Not “medical care” if general education and without individual assessment (e.g., articles about health condition, weight loss class, etc.). Example: Biggest Loser Program offered by Employer. If coupled with individualized coaching, may be an ERISA plan.
18 If an ERISA Plan... Implications of being subject to ERISA –Plan Document –Summary Plan Description –Form 5500 Filing –COBRA –HIPAA Privacy Compliance –Certificate of creditable coverage –Plan Asset Issues – can only use plan assets to provide medical benefit reward (not cash)
19 HIPAA Nondiscrimination & Wellness Final Regulations Final Regulations issued December 13, Applies to plan years beginning on or after July 1, 2007 (January 1, 2008 for calendar year plans). Final rules define a wellness program as “any program designed to promote health or prevent disease.”
20 HIPAA Nondiscrimination Rules Summary GENERAL RULE - Cannot discriminate against individual in eligibility, contributions or benefits based on health factors (e.g., charge different premiums based on individual health status). Health factors include medical conditions, claims experience, receipt of health care, genetic information, disability, or evidence of insurability. May distinguish among similarly situated individuals, as long as “bona-fide employment-based classification” (e.g., full-time vs. part- time, retired vs. employed, length of service, geographic location, occupation). TWO POTENTIAL EXCEPTIONS TO ABOVE GENERAL RULE: –May discriminate in favor of those with adverse health status. –May discriminate as part of a HIPAA-compliant wellness program.
21 HIPAA Wellness Rules: When do rules apply? Only applies if program required individual to meet health standard to obtain reward (i.e., so-called “outcome based”). If “participant-only” standard, outside of HIPAA rules. Examples: Subject to HIPAA Wellness Plan has lower co-pay for employees with low cholesterol. Plan charges surcharge on employees who smoke. Plan rewards premium holiday if employee meets weight loss goal.
22 HIPAA Wellness Rules: When do rules apply? Outside of HIPAA Wellness Plan reimburses (all or part) cost of fitness center membership. Plan waives co-pay for cost of well-baby visit in order to encourage preventive care. Plan reimburses smoking cessation class, regardless of whether employee stops smoking. Plan rewards employee for attending monthly health education seminar. Diagnostic testing program that provides a reward for participation only and is not based on outcomes.
23 HIPAA Wellness Rules: When do rules apply? If program provides reward based on satisfying health standard, then must meet five requirements: –Amount of reward –Reasonable standard –Annual qualification –Reasonable alternative –Disclosure
24 HIPAA Wellness Rules Requirement #1 – Amount of Reward Reward for all health standard-based wellness programs cannot exceed 20%* of cost of single employee coverage. Cost of coverage includes employer + employee contributions. For example, if employer contribution is $60 and employee contribution is $40, total cost is $100. Reward limit = $20. Applies to the whole family (not 20% per person). Reward can be in many different forms. *Amount will increase to 30% in 2014
25 HIPAA Wellness Rules Requirement #2 – Reasonable Standard Must be reasonably designed to promote good health (not well defined – “squishy standard”). Will be “reasonable” if – –Reasonable chance to improve health or prevent disease; –Not overly burdensome (i.e., only a few people likely to accomplish); –Not a subterfuge for discrimination based on health; and –Not ”highly suspect” (e.g., extreme or illegal).
26 HIPAA Wellness Rules Requirement #3 – Annual Qualification Must give plan participant opportunity to qualify at least once per year. Precludes plan from “locking in” reward based on initial health status.
27 HIPAA Wellness Rules Requirement #4 – Reasonable Alternative Must allow “reasonable alternative” to those who can show it is unreasonably difficult due to medical condition, or medically inadvisable, to satisfy standard. May require doctor’s certification. Examples: –Reasonable alternative to stop smoking requirement – attend smoking cessation class. –Reasonable alternative to lower BMI requirement – exercise 20 minutes per day.
28 HIPAA Wellness Rules Requirement #5 – Disclosure Plan must disclose availability of reasonable alternative standard in plan material describing wellness program. Not required to determine alternative ahead of time (may determine if individual requests). Regulations provide safe harbor language: –If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at [insert telephone number] and we will work with you to develop another way to qualify for the reward.
29 Other Wellness Issues – HIPAA Privacy May need privacy procedures to safeguard information. May need to include HIPAA privacy notice. May need business associate agreement with wellness program vendors. May need authorization to disclose PHI (for example, to employer to pay incentive or to report results).
30 Other Wellness Issues – ADA What is the ADA? ADA prohibits “medical examinations and inquiries” unless voluntary. –What does the term “voluntary” exactly mean The EEOC has indicated that an employer may request information as part of a “voluntary” wellness program if the employer neither requires participation nor penalizes employees who do not participate. An HRA may be considered a “medical examination and inquiry.” Recent EEOC Guidance
31 Other Wellness Issues – Tax Cash reward is taxable (employer may have withholding obligation). Gift certificates/gift cards are taxable. Gifts are taxable (unless below de minimus). Premium holidays, lower deductibles, contribution to HRA/HSA not taxable.
32 A Wellness Story: Issues Identifying employees for programs HRA generally ok, but "mandatory" HRA may violate ADA. Better to offer reward (such as $25). But note that cash reward is taxable. Obtaining claims data from Plan’s insurer/TPA probably ok, too, but may raise HIPAA privacy issues. Make sure it is used for treatment, payment, or health care operations (not employment). Make sure any individually identifiable health information obtained is safeguarded under HIPAA privacy procedures.
33 A Wellness Story: Issues Education Probably ok. May not even be an ERISA plan. No reward or health goal, so no HIPAA problem. Smoker Surcharge OK - but offering reward for reaching health goal, so must meet bona fide wellness program regulations. Reward limit of 20% (when combined with other programs requiring health goal). Must offer at least once per year. Must offer reasonable alternative to those who cannot medically meet health goal (e.g., participation in smoking cessation class).
34 Reward for Good Behavior OK - but offering reward for reaching health goal, so must meet bona fide wellness program regulations. Reward limit of 20% (when combined with other programs requiring health goal). Must offer at least once per year. Must offer reasonable alternative to those who cannot medically meet health goal. Disease Management OK - HIPAA nondiscrimination rules allow plan to be more favorable to those with adverse health status. Reward is based on participation only (no health goal), so do not need to comply with bona fide wellness program regulations. Reward does not need to be combined with other wellness programs for purposes of 20% limit A Wellness Story: Issues
35 Case Management DOL Q&A: Only those with adverse health status eligible for penalty, so discriminatory. To be permissible, must meet bona fide wellness program regulations. "Penalty" cannot exceed 20% limit (when combined with other programs with health goal). If require further health goal, must offer reasonable alternative. Risk if penalty too severe. Reporting Results HIPAA Privacy Issue – even if names are removed, information must be "de- identified" for HIPAA purposes. Beware of employment law issues. A Wellness Story: Issues
36 Other Wellness Issues – Misc. Legal Considerations Title VII –Religious Discrimination –Race Discrimination ADEA
37 Other Wellness Issues – Misc. Legal Considerations GINA –What does GINA require? –Effective dates Bottom Line Wellness Programs are great but... be aware of the potential legal issues!