1. 25878784 Legal Do’s and Don’ts of offering a Wellness Program – Concerns under HIPAA, ADA and GINA © 2012 Proskauer. All Rights Reserved. 1 June 20, 2012 Benefit Advisors Network Stacy H. Barrow sbarrow@proskauer.com

2. 2 Today’s agenda Health Care Reform Update Review of HIPAA’s nondiscrimination rules Review of DOL wellness plan requirements Use of Health Risk Assessments and Biometric Screening Seff v. Broward County Learning from Seff Impact of Genetic Information Nondiscrimination Act (GINA) Small business wellness grants under PPACA © 2012 Proskauer. All Rights Reserved.

3. Legislative/Judicial Update Some Corrections Repeal of Vouchers 1099 Correction Other Being Considered Elimination of OTC Prescription Drug Requirement Elimination of CLASS Act Medical Loss Ratio Changes © 2012 Proskauer. All Rights Reserved.

4. Legislative/Judicial Update © 2012 Proskauer. All Rights Reserved. Supreme Court Oral Arguments ­ March 26, 27 & 28 What We Heard ­ Three Main Questions: ­ Is the Issue Ripe for Review? ­ Are the 2014 Individual Mandates Constitutional? ­ If the Individual Mandates are not Constitutional, is the Entire Law Unconstitutional?

5. 5 Background 1996: HIPAA added Part 7 of ERISA to counter certain discriminatory practices by group health plans and health insurance issuers 2001: DOL, IRS and HHS jointly issue interim final nondiscrimination rules and proposed regulations for wellness programs 2006: DOL, IRS and HHS jointly issued final regulations on group health plan nondiscrimination provisions and wellness programs. 2009: EEOC issues two informal discussion letters on “voluntary” incentives 2010: PPACA codifies the wellness regulations ­ PPACA also increases the 20% cap on rewards to 30% for plan years beginning on or after January 1, 2014 (with the possibility that DOL, IRS and HHS may increase the cap to 50% in the future) © 2012 Proskauer. All Rights Reserved.

6. 6 General Nondiscrimination Rules Individuals cannot be denied eligibility for benefits or charged more for coverage because of any “health factor,” including: ­ Health status ­ Medical condition (both physical and mental) ­ Claims experience ­ Receipt of health care ­ Medical history ­ Genetic information ­ Evidence of insurability ­ Disability © 2012 Proskauer. All Rights Reserved.

7. 7 General Nondiscrimination Rules (cont.) “Evidence of Insurability” includes conditions arising from acts of domestic violence, as well as participation in high risk activities (e.g., motorcycling, snowmobiling, horseback riding, skiing, etc.) Health questionnaires OK, as long as not used to deny, restrict or delay eligibility or determine individual premiums © 2012 Proskauer. All Rights Reserved.

8. 8 Uniform Application Plans can exclude/limit benefits as long as applied on a uniform basis for all “similarly situated individuals” and not directed at individual participants based on a health factor Plan amendments that apply to all individuals in a group of similarly situated individuals and that are effective no earlier than the first day of the next plan year after the amendment is adopted is not considered to be directed at individual participants © 2012 Proskauer. All Rights Reserved.

9. 9 Similarly Situated Individual Determinations Distinctions among groups must be based on bona fide employment- based classifications consistent with employer’s usual practice – NOT health factors: ­ Part-time and full-time ­ Geographical location ­ Dates of hire and length of service Different groups can have different eligibility, benefits and cost provisions Participants and their beneficiaries may be in different groups © 2012 Proskauer. All Rights Reserved.

10. 10 Source of Injury Rules If injury results from medical condition or act of domestic violence, a plan may not deny benefits for the injury (if plan otherwise covers such injury) ­ Example: Coverage cannot be denied for injuries from suicide attempt resulting from depression Plan may exclude/limit coverage for high-risk activities (e.g., bungee jumping) – BUT not exclude an individual from enrollment for coverage due to individual’s participation in such high-risk activities © 2012 Proskauer. All Rights Reserved.

11. 11 Nonconfinement Provisions Plans may not delay or deny eligibility, benefits or effective date of coverage, or set individual premium rates based on a person’s confinement to a hospital or other health care facility Final rules clarify the interaction with states' extension of benefits laws to deal with insurance laws that require the prior carrier to continue coverage throughout the hospital stay State law cannot change the legal obligation of the succeeding carrier under HIPAA, but any state law designed to prevent more than 100% reimbursement, such as state coordination of benefits laws, continue to apply © 2012 Proskauer. All Rights Reserved.

12. 12 Actively-At-Work Provisions Plans may not refuse to provide benefits because individual is not actively at work on the day that individual would otherwise become eligible for benefits – UNLESS individuals absent due to health factors are treated as “actively-at-work” ­ Exception: First day of work limitation Some stop-loss carriers include actively-at-work provisions in the umbrella policy—DOL believes this practice is illegal © 2012 Proskauer. All Rights Reserved.

13. 13 Permitted Reverse Discrimination Nothing prevents a plan from establishing more favorable rules for eligibility for benefits for individuals with adverse health factors A plan may charge higher premiums for individuals with adverse health factors only if such individuals would not otherwise be eligible for coverage were it not for the adverse health factor © 2012 Proskauer. All Rights Reserved.

14. 14 Wellness Programs Wellness programs are designed to promote health and prevent disease, and are an exception to HIPAA’s nondiscrimination rules Examples of common wellness programs include: ­ blood pressure and cholesterol screenings ­ smoking cessation programs ­ weight-loss programs A typical disease management program might target individuals who have or are at risk for developing diabetes and make case managers available to them to monitor compliance with medication protocols Both wellness and disease management programs are often structured to provide a financial reward for participating © 2012 Proskauer. All Rights Reserved.

15. 15 Wellness Programs “Rewards” can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, copayments, or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan © 2012 Proskauer. All Rights Reserved.

16. 16 Wellness Programs Qualified programs that are NOT subject to any additional requirements: ­ Program that reimburses costs of fitness center membership ­ Diagnostic testing program that provides reward for participation, not outcome ­ Program that encourages preventive care through waiver of co- payment/deductible for certain activities ­ Program that reimburses employees for the costs of smoking cessation programs without regard to whether employees quit ­ Program that provides reward for attending a monthly health education seminar © 2012 Proskauer. All Rights Reserved.

17. 17 Wellness Programs Other wellness programs must satisfy the following: ­ Reward must not exceed 20% of cost of coverage – if dependents may participate, reward limit is measured as 20% of the cost of the family coverage ­ Reasonably designed to promote health or prevent disease ­ Opportunity to qualify at least once per year ­ Reward must be available to all similarly situated individuals ­ Consider whether rewards under a wellness program impact a plan’s grandfathered status under PPACA © 2012 Proskauer. All Rights Reserved.

18. 18 Wellness Programs When is a wellness program available to all similarly situated individuals? ­ Program must provide for a “reasonable alternative standard” (or waiver of otherwise applicable standard) to qualify for the reward ­ if it is unreasonably difficult for an individual to satisfy the otherwise applicable standard because of a medical condition, or ­ if it is medically inadvisable for an individual to attempt to satisfy the standard © 2012 Proskauer. All Rights Reserved.

19. 19 Wellness Programs Plan may seek verification, such as a statement from individual’s physician, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard In all plan materials describing the wellness program, the availability of the reasonable alternative standard must be disclosed While not explicitly addressed in the regulations, the cost of any “reasonable alternative standard” made available to participants (e.g., participation in a smoking cessation program in lieu of a participant’s certification of non-smoker status) must presumably be paid for by the health plan © 2012 Proskauer. All Rights Reserved.

20. 20 HRAs The cornerstone of an effective wellness program is often a Health Risk Assessment (HRA) and/or biometric testing “Voluntary” HRAs are generally regarded as ineffectual ­ Only those who are health conscious will be conscientious about completing them and returning them “Involuntary” HRAs are those that are coupled with rewards or penalties and are generally more effective ­ Reward (bonus payment, gift cards, premium reduction, enhanced benefits) ­ Penalty (premium increase, condition to eligibility, limits on benefits) US Department of Labor condones use of “involuntary” HRAs, as long as results are not basis for reward or penalty © 2012 Proskauer. All Rights Reserved.

21. 21 HRAs U.S. Equal Employment Opportunity Commission ­ Jurisdiction over individual rights claims, including under the Americans with Disabilities Act (ADA) ­ ADA generally establishes a per se violation for any employer inquiring about an employee’s health condition ­ EEOC has said that voluntary HRAs are “OK” ­ Involuntary HRAs violate the ADA While ERISA preempts most state laws (with limited exceptions), it does not preempt other federal laws ­ DOL has no greater authority in this area than the EEOC © 2012 Proskauer. All Rights Reserved.

22. 22 HRAs & PPACA PPACA includes provisions designed to promote the use of wellness programs ­ Despite what “internet lawyers” will tell you, PPACA did not address this issue, despite it being well known to the Obama Administration and the House and Senate leadership that two federal agencies held inconsistent positions ­ So, current state of the law is that the EEOC believes involuntary HRAs violate federal law & the DOL believes they don't © 2012 Proskauer. All Rights Reserved.

23. 23 Seff v. Broward County Predictably, a class action suit was filed in a federal district court—Seff v. Broward County Plaintiffs alleged that Broward County violated the ADA by imposing a $20 bi-weekly premium surcharge on anyone who failed or refused to complete a HRA and biometric screening as part of a “wellness program” EEOC was not a party to this suit Many worried that this could lead to a decision adverse to the use of HRAs © 2012 Proskauer. All Rights Reserved.

24. 24 Seff v. Broward County The Court reviewed the reasons for implementing a wellness program (rising costs) and noted key factors of the program Then held that the wellness program (including the HRA and screening) were terms of the employer's group health plan, which is a “bona fide benefit plan” within the meaning of the insurance safe-harbor provisions of the ADA The insurance safe-harbor provision is designed to protect insurers from violating the ADA because of plan design The Seff Court held that the HRA and screening and wellness programs used by the County were part of the County's health plan and protected by the safe harbor Plaintiffs’ suit was dismissed (but watch for an appeal) © 2012 Proskauer. All Rights Reserved.

25. 25 Seff v. Broward County The Court noted that the County paid for the entire cost of the wellness program; Only those enrolled in the underlying group health plans could participate in the wellness program; Plan documentation clearly established that completion of the HRA and biometric screening was required and set out the penalty for non-compliance; and Information obtained was not available to the employer in identifiable form but was used as part of the underwriting process for the insurance product © 2012 Proskauer. All Rights Reserved.

26. 26 Learning from Seff Case Study One: Simple HRA/Biometric Screening as a condition to eligibility or condition to reduced rates ­ Document clearly as part of enrollment process ­ Forms, internet, general material should clearly state that this is a condition of enrollment in the group health plan ­ Summary Plan Descriptions—don't forget to update, consider an SMM ­ Update should clarify that Screening is part of enrollment process ­ Need to focus on COBRA, too ­ Use of information for underwriting purposes—retaining documentation ­ What are COBRA implications? © 2012 Proskauer. All Rights Reserved.

27. 27 Learning from Seff Case Study Two: Comprehensive wellness program that includes HRA/Biometric Screening as a condition to eligibility or condition to reduced rates, but also includes on-site gym, vouchers for wellness programs, etc. ­ Document clearly as part of enrollment process ­ Forms, internet, general material should clearly state that this is a condition of enrollment in the group health plan ­ Summary Plan Descriptions—don't forget to update, consider an SMM ­ Use of information for underwriting purposes—retaining documentation ­ What are the COBRA implications ­ Can you—should you—split out any part of the program from the rest ­ Consider tax implications © 2012 Proskauer. All Rights Reserved.

28. 28 Learning from Seff If biometric screening vendor is providing services on behalf of the group health plan: ­ What does vendor agreement say? ­ Business Associate Agreement in place? Remember State Privacy Laws Remember GINA © 2012 Proskauer. All Rights Reserved.

29. 29 Genetic Information Nondiscrimination Act GINA prohibits discrimination by group health plans, health insurance issuers and employers against an individual based on the individual’s genetic information “Genetic information” includes information about an individual’s genetic tests, the genetic tests of family members, and the manifestation of a disease or disorder in a family member © 2012 Proskauer. All Rights Reserved.

30. 30 Genetic Information Nondiscrimination Act Generally unlawful for a plan to acquire an employee’s genetic information (e.g., family medical history) ­ Limited exception for voluntary programs ­ For example, an HRA may contain questions on family history as long as it is clear that the participant does not have to answer them to receive any incentive or avoid any penalty Plan may offer financial inducements to voluntarily provide genetic information as part of disease management programs ­ For example, programs that provide coaching to employees attempting to meet particular health goals (e.g., achieving a certain weight, cholesterol level, or blood pressure) © 2012 Proskauer. All Rights Reserved.

31. 31 Genetic Information Nondiscrimination Act Underwriting. Group health plans and insurance carriers generally may not request, require, or purchase genetic information for underwriting purposes, and may not collect genetic information about an individual before the individual is enrolled ­ “Underwriting purposes” means: ­ rules for, or determination of, eligibility (including enrollment and continued eligibility) for benefits under the plan or coverage ­ the computation of premium or contribution amounts ­ the application of any preexisting condition exclusion; and ­ other activities related to the creation, renewal, or replacement of a health insurance contract or health benefits ­ May have impact on Health Risk Assessments © 2012 Proskauer. All Rights Reserved.

32. 32 Genetic Information Nondiscrimination Act Group Health Plan Premiums. Group health plans and insurers are prohibited from setting premium and contribution rates for the employer group on the basis of genetic information of an individual enrolled in the plan ­ Does not prohibit plans and insurers from increasing premiums for the group based on manifestation of a disease or disorder in any individual enrolled in a health plan ­ Manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members to further increase the premium for the group © 2012 Proskauer. All Rights Reserved.

33. 33 Genetic Information Nondiscrimination Act Genetic Testing. Group health plans may not request or require an individual or a family member of such individual to undergo genetic testing Relationship to HIPAA Regulations. Requires the HIPAA Privacy regulations to be amended to treat genetic information as protected health information, prohibits use of genetic information for underwriting purposes and makes the definitions of genetic information and underwriting consistent with GINA © 2012 Proskauer. All Rights Reserved.

34. 34 Small Business Wellness Grants Under PPACA PPACA establishes $200 million in wellness grant funding to be distributed to eligible small employers for fiscal years 2011 to 2015 Eligible employers are defined as those that employ less than 100 employees who work 25 hours or more per week, and also who do not have a wellness program in place as of March 23, 2010 (the date of PPACA’s enactment) An application for a grant must include a proposal for a “comprehensive workplace wellness program” There is no guidance on the application process at this time © 2012 Proskauer. All Rights Reserved.

35. 35 Small Business Wellness Grants Under PPACA A “comprehensive workplace wellness program” must be available to all employees and include the following: ­ Health awareness initiatives (including health education, preventive screenings, and health risk assessments) ­ Efforts to maximize employee engagement (including mechanisms to encourage employee participation) ­ Initiatives to change unhealthy behaviors and lifestyle choices (including counseling, seminars, online programs, and self-help materials) ­ Supportive environment efforts (including workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity, and improved mental health) © 2012 Proskauer. All Rights Reserved.

36. 36 Questions? June 20, 2012 Stacy H. Barrow sbarrow@proskauer.com 617.526.9648 © 2012 Proskauer. All Rights Reserved.