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Presentation on theme: "For a copy of this presentation, please go to www.UBAbenefits.com. Go to the Wisdom tab and scroll down to HR Webinar Series and click. Under Employer."— Presentation transcript:

1 For a copy of this presentation, please go to www.UBAbenefits.com. Go to the Wisdom tab and scroll down to HR Webinar Series and click. Under Employer Series click the Registration and Presentation link. Click the red Presentation button to see the slides. This UBA Employer Webinar Series is brought to you by United Benefit Advisors in conjunction with Jackson Lewis

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3 Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation. 750 attorneys in 54 locations nationwide. Current caseload of over 6,500 litigations and approximately 415 class actions. Founding member of L&E Global. 3

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5 This presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances. Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.). The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors. IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.) 5

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7 2012 Survey by the National Business Group on Health (NBGH) indicates: o Nearly 90 percent of employers surveyed currently offer wellness-based incentives. This is up from 60 percent in 2009. o Employers indicated that they plan to spend an average of $521 per employee on wellness-based incentives in 2013 - an increase of 13 percent from the average of $460 reported in 2011, and double the per employee average of $260 reported in 2009. o The most popular wellness-based incentives are a decrease in premiums (61%), cash or gift cards (55%), or an employer- sponsored contribution to a health savings account (27%). 7

8 Wellness Programs ACA/HIPAAERISA/IRCADAGINA Title VII and Other EEO Risks NLRA State Law Compliance Issues 8

9 May 8, 2013: EEOC announces wellness programs must be reviewed to avoid discrimination: o “To date, the Commission has not spoken clearly and definitely on the myriad of legal issues that can arise under these laws for wellness programs.” EEOC Commissioner Chai Feldblum o “Many of the most pressing questions on wellness programs involve the interaction of the laws within our jurisdiction with other health- related statutes, most notably, the Health Insurance Portability and Accountability Act, or HIPAA.” Commissioner Victoria Lipnic May 29, 2013: Obama Administration issues Final Regulations governing wellness programs under Affordable Care Act. 9

10 ACA/HIPAA: To which wellness programs do these rules apply? Health Contingent: Activity-Only v. Outcome-Based Programs Rewards, Incentives, Penalties Reasonable Alternatives ERISA and Tax Issues Impacts of GINA and ADA on wellness programs Other issues: Title VII/EEO, NLRA, State laws 10

11 Does our wellness program meet clear minimum statutory or regulatory requirements? Does our wellness program design raise other statutory or regulatory concerns? Should we make design changes to ensure we are in compliance and/or to reduce potential exposure to systemic attacks? 11

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13 Historical perspective (2006-2012): HIPAA, ADA, GINA, PPACA. Basic Nondiscrimination Rule: Group health plans and issuers cannot discriminate with regard to eligibility or benefits on the basis of a health factor. Health factors include - health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability. o Exception – Rule of construction, PPACA codification. Basic Privacy and Security Rule: Group health plans, issuers and their business associates may not use and disclose protected health information except as permitted under the HIPAA privacy rules, and must safeguard electronic PHI as required under the HIPAA security rules. 13

14 Pre-PPACA Participatory programs Programs that require satisfaction of health-related standard Reasonable design – easy! Limitation on reward – 20% employee-only premium Reasonable alternative required to address medical condition/medical inadvisability Reasonable alternative notice Post-PPACA ( plan years beginning on and after Jan 1, 2014) Participatory programs Health contingent programs Activity-only (reasonable alternative under old rules) v. Outcome-based programs (reasonable alternative for all) Limitation on reward – 30% employee-only premium; 50% for tobacco prevention programs. Updated reasonable alternative notice 14

15 Definition: Programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based satisfying a standard related to a health factor. Participatory wellness programs must be made available to all similarly situated individuals, regardless of health status. Distinctions between individuals must be based on bona fide employment-based classifications consistent with employer’s usual practice (e.g., geographical). 15

16 Examples: o Reimburses cost for membership in a fitness center. o Reward for participation in diagnostic testing regardless of outcomes. o Waiver of co-payment or deductible to encourage preventive care (e.g., prenatal care or well-baby visits). o Reimburses costs of smoking cessation programs regardless of outcomes. o Reward for attending monthly health education seminar. o NEW: Reward for completing a health risk assessment regarding current health status, without any further action (educational or otherwise) required by the employee with regard to the health issues identified as part of the assessment. 16

17 Definition: Program that requires an individual to perform or complete an activity related to a health factor in order to obtain a reward, but does not require the individual to attain or maintain a specific health outcome. Examples: o Walking, diet, or exercise programs. o Some individuals may be unable to participate in or complete (or have difficulty participating in or completing) program due to a health factor, such as severe asthma, pregnancy, or a recent surgery. 17

18 Definition: Program that requires an individual to attain or maintain a specific health outcome in order to obtain a reward. Examples: o Stop smoking, or attaining certain results on biometric screenings, such as cholesterol, BMI, blood pressure. o Typically two-tiers: Tier one. Measurement, test, or screening is applied. If satisfied, individual earns reward. If not, individual moves to tier two… Tier two. Individual takes additional steps to earn the same reward, such as meeting health coach, taking health/fitness course, complying with a walking or exercise program, or complying with a health care provider’s plan of care. 18

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20 20 Requirements: o Annual qualification: Provide opportunity to qualify at least 1x/year. o Reward limit: 30% taking into account all health contingent programs; 50% for tobacco prevention programs. o Reasonably designed: (i) reasonable chance of improving health or preventing disease, (ii) not overly burdensome, (iii) is not a subterfuge for health factor discrimination, and (iv) is not highly suspect in method chosen. Facts and circumstances determination. o Uniform availability to similarly situated individuals: Provide a reasonable alternative standard or waiver for individuals who have difficulty meeting the standard due to a medical condition. o Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver. Sample language included in regulations.

21 21 Requirements: o Annual qualification: Same as activity-only. o Reward limit: Same as activity-only. o Reasonably designed: Same as activity-only, except a reasonable alternative also must be provided to any individual who does not meet the initial standard (tier one) based on a measurement, test, or screening that is related to a health factor. o Uniform availability to similarly situated individuals: Same as activity-only, except provide a reasonable alternative standard (or waiver) as described above. o Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver.

22 “Activity-Only” Program “ This determination is based on all the relevant facts and circumstances.” “Outcome-Based” Program “ This determination is based on all the relevant facts and circumstances. To ensure that an outcome-based wellness program is reasonably designed to improve health and does not act as a subterfuge for underwriting or reducing benefits based on a health factor, a reasonable alternative standard to qualify for the reward must be provided to any individual who does not meet the initial standard based on a measurement, test, or screening that is related to a health factor, as explained in paragraph (f)(4)(iv) of this section.” 22

23 Participatory Programs: Joining a fitness center Receiving preventive care Attending monthly nutrition education seminar Health Contingent: “Activity-Only” Programs Participating in an exercise program, regardless of outcomes Keep up with all recommended preventive care Participating in a diet program, regardless of outcomes 23

24 Program Feature Analysis Flu shot Preventive in nature, no particular outcome required so participatory, right? But a medical condition/health factor could prevent an individual from getting a flu shot, so health contingent? Complete up to 5 calls with health coach Activity only requires calling health coach, so participatory, right. What if calls are longer for persons with certain health factors? Is this now health contingent? What if program requires 3 calls for all participants and 5 calls for other participants identified as higher risk based on results of health risk assessment? This is health contingent. Complete health risk assessment Seems participatory – go on-line, answer 20 questions, and get reward regardless of answers to questions. What if the participant is blind, or has a learning disability, or a language barrier exists? Keep up with preventive care Participatory only? Maybe. But what if individual’s health condition qualifies her to receive more preventive services? 24

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26 Not applicable to participatory programs Currently, no more than 20% (30%/50% in 2014) of cost of: o EE-only level of coverage; or o cost of coverage levels in which employee and any dependents are enrolled if dependents can to participate in the program. Examples: o Annual premium (ER+EE portion) for EE-only coverage is $3,600 and the annual premium (ER+EE portion) for family coverage is $9,000, the annual reward for participating in the wellness program could not exceed $720 (20% of $3,600). o If any class of dependents is allowed to participate and the employee is enrolled in family coverage, the plan could offer the employee a reward of up to $1,800 (20% of $9,000). 26

27 Example for employee-only program: o Annual premium (ER and EE portion) for employee-only tier of coverage = $6,000. o Employer’s wellness program has 3 components: participatory on-line assessment - $500 annual reward; outcome-based biometric screening program - $600 annual reward; and tobacco prevention program - $2,000 annual reward. 27

28 Result: Reward limit – 50% of annual premium = $3,000 per year. Does total reward ($3,100) exceed 50% limit? o NO – rewards for participatory programs (here, $500) not included in calculation. Total reward for purposes of the reward limit is $2,600. Because o total reward for biometric screening and tobacco prevention program ($2,600) is less than 50% reward limit ($3,000), and o total reward for biometric screening program ($600) is less than 30% reward limit ($1,800) o reward limit requirement is satisfied. 28

29 Example for employee and spouse program: o Annual premium (ER and EE portion) for family tier of coverage = $12,000. o Employer’s wellness program has 3 components: participatory on-line assessment - $500 annual reward each; outcome-based biometric screening program - $300 annual reward person per metric for meeting a healthy cholesterol level and a healthy BMI level, total reward $1,200; and tobacco prevention program - $4,000 annual reward if neither smokes. If one smokes, no reward. 29

30 Reward limit – 50% of annual premium = $6,000 per year. Does total reward ($6,200) exceed 50% limit? o NO – rewards for participatory programs (here, $1,000) not included in calculation. Total reward for purposes of the reward limit is $5,200. Because o total reward for biometric screening and tobacco prevention program ($5,200) is less than 50% reward limit ($6,000), and o total reward for biometric screening program ($1,200) is less than 30% reward limit ($3,600) o reward limit requirement is satisfied. Consider allocation of reward for tobacco prevention program, reasonable methods permitted. 30

31 Compliance date for new ACA provisions – plan years beginning on and after January 1, 2014. Non-compliant programs could be subject to penalties under the Internal Revenue Code or the Public Health Services Act of up to $100 per day. Department of Labor has updated its group health plan audit inquiries to include wellness programs. 31

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33 33 Follows the old HIPAA rules - Must give individuals opportunity to meet a reasonable alternative standard (or waive standard) if, o due to a medical condition, it is unreasonably difficult for individual to meet the wellness program standard, or o it is medically inadvisable to attempt to meet the standard Multiple attempts/alternatives contemplated Plan sponsor may seek verification from individual’s physician

34 34 When is “reasonable alternative” reasonable? o “Facts and circumstances” determination, including the following: Education program alternatives – program must pay for and provide or assist individual in finding program. Diet program alternatives – program must pay for program or membership fee, but not food. Time commitment – must be reasonable. Personal physician’s recommendations – must be taken into account if physician determines standard is medically inappropriate. o If alternative also is an “outcome-based” program, it too must meet these requirements.

35 35 Must provide an alternative for any individual who does not meet the initial standard based on a measurement, test or screening that is related to a health factor, regardless of health condition. Plan sponsor may NOT seek verification from individual’s physician For reasonableness of alternative, follow same rules as activity-only

36 Alternative must meet basic requirements for outcome- based programs, PLUS: o If it is a different level of same standard, program must provide additional time to comply, taking into account the individual’s circumstances. o Give individual opportunity to comply with his Dr.’s recommendations as a second alternative to meeting the plan’s reasonable alternative, but only if the Dr. “joins in the request.” Individuals can inject Dr.’s recommendations at any time, and Dr. can adjust recommendations any time, as medically appropriate. May not seek physician verification, unless the reasonable alternative is activity-only. 36

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38 General rule: ERISA applies to plans established or maintained by employers to provide, among other things, medical, surgical, or hospital care or benefits. A wellness program can be: o Itself or part of an ERISA group health plan (and subject to the HIPAA nondiscrimination requirements described above); or o Not itself or part of an ERISA plan. If subject to or part of an ERISA plan, basic ERISA rules apply, as well as PPACA implications. 38

39 ERISA preemption can blunt state laws relating to the group health plan/wellness program, but watch fully insured plans. ERISA Section 510 prohibits employers from disciplining, discharging or discriminating against a plan participant for the purpose of interfering with the participant’s right to attain a benefit under the plan. 39

40 Wellness program rewards outside of group health plan context are taxable under IRS “fringe benefit” rule unless… De minimis: o Occasional or unusual in frequency; o Of little value; o Cannot be disguised compensation. 40

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42 Disparate treatment: o Under “actual disability” “record of” or “regarded as” theories. Consider potential coverage of hypertension, diabetes, obesity, heart disease, cancer, and nicotine addiction under the ADAAA. Disparate impact. Failing to provide reasonable accommodations. Unlawful medical inquiries or medical examinations. Breach of medical confidentiality. Could be broad, class action claims. 42

43 January 6, 2009 Informal Opinion Letter: o Voluntary = HIPAA’s 20%. March 6, 2009 Informal Opinion Letter: o 20% rule rescinded; o Confirms can’t condition receipt of coverage on completion of HRA. May 8, 2013 EEOC Public Meeting: o Confirmed there are viable claims under the ADA; o EEOC may issue guidance but may also wait for courts to resolve. 43

44 ADA Section 501(c). Title V – “Miscellaneous Provisions.” Safe Harbor for Insurance: o Equal access is key goal; o If insurance plan contains “disability-based distinctions”, employers must show that distinctions are justified by generally accepted principles of risk classifications and are not a “subterfuge” to evade purposes of the ADA. 44

45 Seff v. Broward County*: o ADA class action challenging surcharge for health risk appraisal; o Summary judgment granted to employer; o Affirmed on appeal to 11th Circuit. *Steff v. Broward County, 778 F. Supp. 2d 1370 (S.D. Fla. 2011), aff’d, 691 F.3D 1221 (11 th Cir. 2012) 45

46 Title II of GINA, enforced by EEOC, prohibits discrimination on basis of genetic information. Genetic information includes family medical history, including medical history of spouse and adopted children. Generally bars acquisition of genetic information about applicants and employees. Imposes strict confidentiality requirements regarding genetic information. 46

47 “Genetic information” may be acquired as part of a “voluntary” wellness program. “Voluntary” means no incentives for genetic information (Title I of GINA has similar rule) and other safeguards must be observed. EEOC Public Meeting on May 8, 2013, confirmed potential challenges to financial incentives rewarding spousal participation in wellness programs. 47

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49 Multiple theories of claims: o Disparate treatment; o Disparate impact. Multiple protected-classes potentially embraced: o Title VII race and gender-based challenges; o ADEA age-based challenges; o Equal Pay Act claims. 49

50 Diverse panelists: o EEOC Office of Legal Counsel; o National Partnership for Women and Families; o Consortium for Citizens with Disabilities; o ERISA Industry Committee (ERIC); o Kaiser Family Foundation; o Leslie Silverman, Former EEOC Vice Chair (2002-2008); o American Benefits Council (ABC). Meeting transcript available at http://www.eeoc.gov/eeoc/meetings/5-8-13/index.cfm http://www.eeoc.gov/eeoc/meetings/5-8-13/index.cfm What’s clear: Employee representatives have set their sights on wellness programs. 50

51 Challenges to wellness programs also possible by OFCCP: o Executive Order 11246; o Section 503. Agency is uniquely situated to investigate because compliance reviews are not complaint driven. o Be careful about providing specific leave and wellness policies, handbook table of contents, or entire handbook to the OFCCP. o Remember that OFCCP has a work-sharing agreement with EEOC! 51

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53 Employer must bargain with the union concerning “terms and conditions of employment.” referred to as “mandatory subjects of bargaining.” Mandatory subjects include: o Implementing or modifying benefit programs or any aspect of a benefit program, including wellness plans; o The financial impact on employees of such program, such as the size of the reward in a wellness plan; o Criteria for employees to obtain the reward, including the reasonable alternative standards to be offered. Workplace smoking policies are a mandatory subject of bargaining. Exception: No obligation to bargain if the union has waived its right to bargain over an issue. Consider negotiating language giving the company the right to implement and modify wellness programs. 53

54 Most states have “lifestyle discrimination” laws to protect the right of employees to participate in legal activities outside the workplace. Absent ERISA preemption, these laws prohibit an employer from incentivizing healthy behavior because they protect an employee’s right to engage in unhealthy behavior. 54

55 Of the various state lifestyle discrimination laws: o Some prohibit discrimination based on any lawful off duty activity (CO, CA, ND) or any lawful recreational activity (NY); o Some prohibit discrimination based on the use of lawful consumable products (NY, IL, MN, MO, MT, NV, NC, TN, WI); o Some specifically prohibit discrimination based on the use of tobacco products (29 States and the District of Columbia). 55

56 Invasion of privacy Violation of public policy Negligent or intentional infliction of emotional distress Wrongful discharge Constitutional claims (some states) 56

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58 Identify programs that are part of group health plans, which means they are covered by HIPAA, ERISA and ACA. Identify if programs are “participatory” or “health contingent.” Identify if health contingent programs are “activity only” or “outcome-based.” Ensure “health contingent” programs satisfy ACA requirements. Evaluate impact of incentives on ADA and GINA protections. Evaluate potential disparate impact on women, racial minorities and older workers. Evaluate state law risks if program is not expected to be preempted by ERISA. 58

59 Jackson Lewis Workplace Wellness Taskforce: o Frank Alvarez: AlvarezF@jacksonlewis.comAlvarezF@jacksonlewis.com o Joe Lazzarotti: LazzarottiJ@jacksonlewis.comLazzarottiJ@jacksonlewis.com o Lynn Clements: ClementsL@jacksonlewis.comClementsL@jacksonlewis.com o Mike Soltis: SoltisM@jacksonlewis.comSoltisM@jacksonlewis.com o Joe Lynett: LynettJ@jacksonlewis.comLynettJ@jacksonlewis.com o Patricia Pryor: PryorP@jacksonlewis.comPryorP@jacksonlewis.com 59

60 Visit our Workplace Wellness Resource Center at http://www.jacksonlewis.com/wellness/ http://www.jacksonlewis.com/wellness/ Workplace Wellness Resource Center includes links to: o Wellness articles and blog posts written by Jackson Lewis attorneys; o Links to relevant statutes, regulations and guidance; o Links to significant cases. Visit our Disability, Leave & Health Management Blog at http://www.disabilityleavelaw.com/ http://www.disabilityleavelaw.com/ 60

61 To obtain a recording of this presentation, or to register for future presentations, contact your local UBA Partner Firm. Thank you for your participation in the UBA Employer Webinar Series If your question was not answered during the webinar or if you have a follow-up question, you can email the presenters today or tomorrow at: UBAwebinars@jacksonlewis.com www.UBAbenefits.com www.jacksonlewis.com


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