A Division of Thompson Media Group
Wellness Program Design:
Avoiding Legal Risks Under HIPAA,
GINA and the ADA
Presented by: Lynda M. Noggle
Austen K. Townsend
www.thompsoninteractive.com
Overview
 What is a Wellness Program?
 Recent Trends
 Review of Pre-PPACA Laws Applicable to
Wellness Programs
 Analysis of Common Wellness Program
Designs
 PPACA Provisions Applicable to Wellness
Programs
2
What is a Wellness Program?
 A program designed to promote health and
prevent disease
 Examples of common wellness programs include:
– blood pressure and cholesterol screenings
– health risk assessments
– smoking cessation programs
– weight-loss programs
3
What is a Wellness Program?
 A typical disease management program might
target individuals who have 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
4
Recent Trends
 A recent ADP survey found that 70% of midsized
companies and 60% of large companies
experienced a significant to moderate increase in
the cost of providing health care benefits to
employees over 2011, and the majority anticipate
continued increases in 2012.
 According to the survey, 91% of HR/benefits
decision makers in midsized companies and 90%
in large companies cite controlling health care
costs as either a medium of high priority.
5
Recent Trends
 As a result of dramatic increases in health care costs,
many employers have implemented wellness
programs in an attempt to contain these costs.
According to a recent Mercer survey, in 2011:
– 33% of large employers with wellness programs
provided incentives or penalties to encourage
participation in wellness programs.
– Employers are using more substantial incentives. The
most common incentive in 2011 was a lower employee
premium contribution (median annual contribution
reduction for employee only coverage was $240).
6
Recent Trends
 According to the ADP survey, the most commonly
cited reason for employers offering wellness programs
is improving employee health (81% of midsized
companies and 78% of large companies).
 The second most common reason is controlling health
care cost (64% of midsized companies and 71% of
large companies).
 Interestingly, only ¼ of midsized companies and
slightly more than 1/5 of large companies measure
the return on investment of their wellness programs.
7
Recent Trends
 The Patient Protection and Affordable Care Act
(PPACA) contains several provisions specifically
relating to wellness programs.
 Review of pre-PPACA laws applicable to wellness
programs:
– Health Insurance Portability and Accountability Act
(HIPAA)
– Americans with Disabilities Act (ADA)
– Genetic Information Nondiscrimination Act (GINA)
– Other Laws
8
HIPAA Nondiscrimination Rules
 HIPAA prohibits group health plans (GHPs) from
discriminating against persons based on their health
status (referred to in HIPAA as a “health factor”)
– Cannot deny individuals eligibility for benefits because of
a health factor
– Cannot charge individuals more for coverage because of
a health factor
9
Wellness Program Exception to HIPAA
Nondiscrimination Rules
 HIPAA nondiscrimination rules do not prevent
GHPs from establishing premium discounts or
rebates or modifying otherwise applicable
copayments or deductibles in return for
participation in wellness programs
 Two categories of wellness programs under
HIPAA:
– Participatory Wellness Programs
– Standard-Based Wellness Programs
10
HIPAA: Types of Wellness Programs
 Participatory Wellness
Programs:
– Do not condition eligibility
for reward on ability to
meet health standard
– Must be available to all
similarly situated
individuals
– Examples:
• Reimbursement for health
club membership
• Diagnostic testing
program that rewards
participation, not results
 Standard-Based Wellness
Programs
– Condition eligibility for
reward on ability to meet
health standard
– Must meet five
requirements
– Examples:
• Premium reduction for
participants who quit
smoking
• Diagnostic testing
program that provides
rewards for “healthy”
results
11
HIPAA: Standard-Based Wellness
Programs
 Under HIPAA:
– Reward must be no more than 20% of cost of coverage;
•If dependents may participate, reward limit is measured as
20% of the cost of family coverage
•Do rewards impact a plan’s grandfathered status under
PPACA?
– Must be designed to promote health or prevent disease;
– Must give individuals an opportunity to qualify for
reward at least once a year;
– Must be available to all similarly situated individuals;
and
– Must disclose that alternative standards or waivers are
available.
•Cost of any reasonable alternative standard must
presumably be paid for by the GHP
12
HIPAA: Standard-Based Wellness
Programs
 Each standard-based wellness program offered must
meet these five requirements independently of any
other program offered.
– Example: Employer has 2 separate wellness programs.
Program A requires an employee to lose weight to earn
the reward. Program B provides a reward to employees
who complete a weight-loss program, regardless of
outcome. Program A violates HIPAA even though the
employee could earn a reward by participating in
Program B.
13
ADA Considerations
 Wellness programs often involve disability-related
inquiries and medical examinations (note broad
definition of disability under ADA Amendments
Act).
 General Rule: Disability-related inquiries and
medical examinations must be job-related and
consistent with business necessity.
– Employer must have a reasonable belief based on
objective evidence that either
• an employee’s ability to perform an essential job function will be
impaired by a medical condition; or
• an employee will pose a direct threat due to a medical condition.
14
ADA Considerations
 Wellness programs tend to be implemented
“across the board” without regard to an
employer’s belief based on objective evidence.
– Thus, wellness programs do not typically meet the “jobrelated and consistent with business necessity
standard.”
 EEOC guidance indicates that ADA also permits
disability-related inquiries or medical
examinations that are not job-related and
consistent with business necessity provided they
are voluntary.
15
ADA: Voluntary Wellness Program
 Voluntary Wellness Program:
– Employer may not require participation nor penalize
employees who do not participate.
– Information gathered:
• must be maintained according to confidentiality requirements set
forth in the ADA and
• may not be used to discriminate against an employee.
16
ADA: Financial Incentives for Wellness
Programs
 Permissible Financial Incentives
– No specific guidance about level of financial incentive
that can be provided before wellness program is
rendered involuntary.1
– EEOC guidance:
• ADA violation to require an employee to complete an HRA
as a condition of participation in an employer’s group
health plan.2
• ADA violation to require an employee to complete an HRA
as a condition of receiving medical expense
reimbursements from employer’s health reimbursement
account.3
1
2
3
EEOC Informal Discussion Letter (June 24, 2011).
EEOC Informal Discussion Letter (March 6, 2009).
EEOC Informal Discussion Letter (Aug. 10, 2009).
17
ADA: Financial Incentives for Wellness
Programs
 Satisfaction of HIPAA 20% standard does not
necessarily make the wellness program voluntary
 Structure of Financial Incentive
– “Reward” (e.g., premium discount) more likely to be
permissible than “penalty” (e.g., premium surcharge)
 Informal and possible forthcoming EEOC
guidance
 General sense that, despite strong support for
wellness programs, EEOC is unwilling to shift
from its current position
18
ADA Safe Harbor for Bona Fide
Wellness Programs
 Prohibition on disability discrimination should not
be construed to prohibit or restrict “a person or
organization covered by this chapter from
establishing, sponsoring, observing, or
administering the terms of a bona fide benefit
plan that are based on underwriting risks,
classifying risks, or administering such risks that
are based on or not consistent with state law.” 42
U.S.C. § 12201(c).
 Exception “shall not be used as subterfuge to
evade the purposes of the [ADA].” Id.
19
ADA Safe Harbor for Bona Fide
Wellness Programs
 ADA interpretive regulations indicate that this rule “is
a limited exception that is only applicable to those
who establish, sponsor, observe, or administer benefit
plans, such as health and life insurance plans….The
purpose of this provision is to permit the development
and administration of benefit plans in accordance with
accepted principles of risk assessment.” 29 CFR
1630.16(f) & Appendix.
 Regulations further provide that the “activities
permitted by this provisions do not violate [the ADA]
even if they result in limitations on individuals with
disabilities, provided that these activities are not used
as subterfuge to evade the purposes of this part.”
Appendix to Part 1630.
20
ADA Safe Harbor for Bona Fide
Wellness Programs
 Unclear that this safe harbor was intended to apply in
wellness program context
– Has not historically been relied on as a general
exception to the prohibition on disability-related
inquiries and medical examinations otherwise applicable
to wellness programs
– EEOC has never raised this safe harbor exception in any
of its guidance regarding wellness programs
 On April 11, 2011, a Florida federal district court (in
Seff v. Broward County) granted summary judgment
in favor of an employer in a wellness program case
based on this exception
21
ADA Safe Harbor for Bona Fide
Wellness Programs
 Seff v. Broward County, No. 10-61437-CIVMOORE/SIMONTON (S.D. Fla. Apr. 11, 2011)
– Claim: 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”
– Ruling: Wellness program was permissible based on the
ADA’s safe harbor exception for bona fide benefit plans
because it was designed to develop and administer past
and future benefit plans using accepted principles of risk
assessment
22
ADA Safe Harbor for Bona Fide
Wellness Programs
 Seff v. Broward County
– Significant Factors:
• Employer’s health plan insurer administered the wellness program
• Only those enrolled in the GHP were eligible to participate in the
wellness program
• Program was described in communications materials related to the
health plan
• Plan was not designed to evade the purposes of the ADA
23
ADA Safe Harbor for Bona Fide
Wellness Programs
 Seff v. Broward County
– Decision cannot necessarily be seen as a green light for
employers to disregard potential ADA issues
• EEOC was NOT party to this suit and decision is NOT binding on
the EEOC (or even jurisdictions outside the Southern District of
Florida)
• General sense that EEOC is unwilling to shift from its position that,
in order to be permissible under the ADA, a wellness program
must be voluntary, regardless of whether it is part of a GHP or
stand-alone
24
GINA Title I Considerations
 Prohibits GHPs from discriminating against
individuals on the basis of their genetic
information
 Scope extends to wellness programs
 Prohibits collection of genetic information prior to
or in connection with enrollment or at any time
for underwriting purposes
25
GINA: Definition of Genetic
Information
 Genetic Information includes information about:
– An individual’s genetic tests;
– The genetic tests of an individual’s family members;
– The manifestation of a disease or disorder in an
individual’s family member (i.e., family medical history);
and
– An individual’s request for, or receipt of, genetic
services.
26
GINA: Definition of Underwriting
Purposes

Underwriting Purposes include:
– Rules for and determination of eligibility (including
enrollment and continued eligibility);
– Computation of premium and contribution amounts; and
– Application of broader preexisting condition exclusions.

Broad definition, includes:
– Changing deductibles or other cost-sharing mechanisms;
– Providing discounts, rebates, or payments in kind; and
– Other differential mechanisms in return for completing an
HRA or participating in a wellness program
27
GINA Title I: Interaction with HIPAA
Wellness Program Rules
 Wellness programs that provide rewards for
completing HRAs that request genetic
information, including family medical history,
violate the prohibition against requesting genetic
information for underwriting purposes even if the
rewards comply with the applicable HIPAA
requirements.
28
GINA Title II Considerations
 Applicable to wellness programs provided outside
GHP
 Includes a wellness program exception that
allows employers to request genetic information
if:
– Employee provides prior, knowing, voluntary, and
written authorization;
– Only employee and licensed health care professional or
board-certified genetic counselor receives individually
identifiable information concerning the results; and
– Individually identifiable information is only available for
purposes of the program and is not disclosed to
employer except in aggregate terms.
29
GINA Title II Considerations
 Wellness programs seeking medical information
must be “voluntary”
– Same as ADA wellness program requirement
– Voluntary only if employer neither requires participation
nor penalizes employees who do not participate
– Title II regulations indicate that offering a $150 financial
inducement for wellness program participation is
permissible
30
GINA Title II Considerations
 Does Title II prohibit employers from offering
financial incentives in return for an employee’s
spouse completing his/her own separate HRA?
– Rumor that an EEOC regional office views the provision
of the spouse’s medical history as the employee’s family
medical history so no financial incentive is permitted
– The EEOC has not issued any official, written guidance
prohibiting incentive-based spousal HRAs
31
Other Considerations
 Employee Retirement Income Security Act
(ERISA)
– If wellness program constitutes an “employee welfare
benefit plan” under ERISA §3(1) (e.g., EAP or certain
on-site medical facilities providing more than first-aid
type benefits), then it will be subject to requirements of
Title I of ERISA.
– Where wellness programs are provided through the
employer’s larger GHP this should not be an issue.
32
Other Considerations
 Consolidated Omnibus Budget Reconciliation Act
(COBRA)
– If wellness program constitutes a “group health plan”
separate from the regular GHP, then it will be subject to
COBRA.
– Example: A wellness program that provides cholesterol
screenings might be subject to COBRA because this
service is considered medical care under Code §213(d).
33
Other Considerations
 Age Discrimination in Employment Act (ADEA)
– If an employer terminated or decreased wellness
incentives, imposed a surcharge, or otherwise
discriminated against any employee or group of
employees over the age of 40 with respect to its
wellness program, an ADEA violation could occur.
 Title VII
– If wellness program makes race, color, sex, religion, or
natural origin distinctions, it will likely violate Title VII.
– Title VII discrimination could also be asserted under
disparate impact theory.
34
Other Considerations
 Fair Labor Standards Act (FLSA)
– Employers requiring participation in wellness programs
should carefully review under FLSA and any similar state
laws whether the wellness program is mandatory, which
may result in time spent completing the program being
compensable time.
35
Other Considerations
 Internal Revenue Code
– Benefits provided outside the GHP by an employer to its
employees through a wellness program (e.g., $100 gift
certificate for completing an HRA) are includable in
employee’s gross income.
– Premium discounts and other similar rewards are
generally not taxable to the employee.
– Employer’s cost in creating or administering wellness
program may generally be deducted as a business
expense.
36
Other Considerations
 Potential Employer Liability
– Could face liability for certain types of problems or
injuries that arise during the course of an employersponsored wellness program
– “Dual capacity” exception to workers compensation laws
that limit employers’ liability for workplace injuries
• Possibility in the wellness program context that an employer could
be seen as acting in a dual capacity vis-à-vis an employee seeking
medical care, particularly when the wellness program includes onsite facilities
– Huffman v. Smithkline Beecham Clinical Lab., Inc., 111
F.Supp.2d 921 (N.D. Ohio 2000)
37
Common Wellness Programs—Potential
Pitfalls
Smoker Surcharge
Design 1
•Persons who have smoked within
the last 6 months are charged a
higher GHP premium than persons
who have not smoked in last 6
months. Only way to qualify for
lower premium is to quit smoking.
Smoker Surcharge
Design 2
•Same as Design 1 except can also
qualify for the lower premium by
completing a smoking cessation
program.
38
Common Wellness Programs—Potential
Pitfalls
Diabetes Management Program
Design 1
Diabetes Management Program
Design 2
•Offered to individuals who have or are •Same as Design 1 except provides
at risk for developing diabetes.
enhanced benefits related to diabetes
Genetic information may be used to
only.
demonstrate that individual is at risk.
Provides enhanced benefits related to
diabetes and enhanced benefit in the
form of a lower annual deductible that
applies to all medical expenses
incurred.
39
Common Wellness Programs—Potential
Pitfalls
HRA Completion
+ Healthy Results
Option 1
HRA Completion
+ Healthy Results
Option 2
•GHP enrollment conditioned on HRA
“healthy” results.
•GHP financial incentives conditioned
on HRA “healthy” results.
40
PPACA Provisions Applicable to
Wellness Programs
 PPACA contains several provisions specifically
relating to wellness programs:
– PPACA §1001, which creates new PHSA §2717
concerning reporting requirements for group health
plans;
– PPACA §1201, which creates new PHSA §2705
prohibiting discrimination on the basis of health status;
– PPACA §4303 (as amended), which creates sections in
the PHSA, including §399MM, that provide for CDC
grants for employer-based wellness programs; and
– PPACA §10408, concerning workplace wellness grants.
41
PPACA Provisions Applicable to
Wellness Programs
 Are wellness programs subject to the coverage
mandates?
– Likely yes, if they provide medical benefits that would
cause the program to be consider a GHP under ERISA
– Shouldn’t be a concern for wellness programs integrated
with employer’s GHP because the underlying GHP will
also be subject to the coverage mandates
– Stand-alone program may have to comply with
applicable coverage mandates
• Example: Biometric screening and associated health counseling
42
PPACA: Codification of HIPAA Wellness
Program Rules
 Codifies verbatim (except for two changes), the
employer-based wellness program rules
established by HIPAA.
 Changes to HIPAA wellness program rules:
– Increase the 20% limit on wellness program rewards to
30% of the cost of coverage. In addition, the reward
limit may be increased to 50% in future years.
– Wellness program reward may not be reduced or
withheld based on a participant’s lawful ownership,
possession, storage, or use of a firearm or ammunition.
43
Application of PPACA Wellness Program
Rules
 Application to Grandfathered Plans
– Technically effective in plan years beginning on or after
January 1, 2014 and appear not to apply to
grandfathered plans.
– However, it was likely intended that all wellness
programs, whether offered under a grandfathered or
non-grandfathered health plan, would be governed by
the reform law beginning in 2014.
44
Application of PPACA Wellness Program
Rules
 Effect of Penalties on Grandfathered Status
– DOL, HHS, and Treasury have cautioned that, while
GHPs may continue to provide incentives for wellness by
providing premium discounts or additional benefits to
reward healthy behaviors, penalties (such as costsharing charges) may implicate a GHP’s grandfathered
status
45
PPACA-Recognized Wellness Program
Activities
 Include personalized wellness and prevention
services coordinated, maintained, or delivered by
a health care provider, a wellness and prevention
plan manager, or a health, wellness, or
prevention services organization that conducts
HRAs or offers on-going face-to-face, telephonic
or web-based intervention efforts.
 May not require disclosure or collection of any
information related to presence or storage of a
lawfully possessed firearm or ammunition.
46
PPACA: New Reporting Requirements
for Wellness Programs
 GHPs must submit an annual report to HHS and
to plan participants regarding quality of care
requirements.
 Could apply to wellness programs that are GHPs.
 Unclear how broadly the reporting requirements
will apply to employer-based wellness programs.
47
PPACA: Effective Date of Wellness
Program Reporting Requirements
 Technically effective for plan years beginning on
or after September 23, 2010, even though HHS
had until March 23, 2012 to develop reporting
requirements
 Practically speaking, the reporting requirements
cannot be enforced until HHS issues guidance.
As of today, no guidance has been issued
 HHS guidance necessary to clarify whether
ERISA-governed plans are subject to the new
reporting requirements, among other things
48
PPACA: Monetary Grants in Support of
Wellness Programs
 Financial Support for Wellness Programs Provided
To Date
– In 2011, the CDC made $9 million available to support a
national initiative to establish and evaluate
comprehensive evidence-based workplace health
promotion programs.
– Initiative is aimed at improving the health of workers
and their families, thereby controlling health care
spending by reducing risk factors for chronic diseases.
49
PPACA: Non-Monetary Support of
Wellness Programs
 CDC is required to provide employers with
technical assistance, consultation, tools and other
resources to evaluate their wellness programs.
 CDC must help employers measure and increase
participation in wellness programs and evaluate
effectiveness of the programs.
 CDC must train employers on how to evaluate
their wellness programs.
 Unclear when CDC resources will be available to
employers.
50
Effect of PPACA on ADA and GINA
Considerations
 PPACA did not enact any changes to ADA or GINA
regarding wellness programs.
 PPACA clearly supports the continued use and
expansion of wellness programs.
 Will PPACA cause the EEOC to revisit their
approach to wellness programs under the ADA
and GINA?
51
Questions?
52
Lynda M. Noggle
Associate

202.416.5816
lnoggle@proskauer.com
Lynda M. Noggle is an Associate in the Employee Benefits,
Executive Compensation & ERISA Litigation Practice Center, resident
in the Washington, D.C. office. Ms. Noggle advises employers in all
aspects of employee benefits law. A substantial portion of her
practice is devoted to the design, administration and compliance of
tax-qualified retirement plans and welfare plans. In this regard, she
designs and prepares plan documents and participant
communications, negotiates service-provider contracts, prepares
required governmental filings, and advises on a broad range of
employment and benefit matters, including tax-qualification, HIPAA
privacy and security, COBRA, fiduciary liability and prudent plan
administration practices. Ms. Noggle also advises employers
regarding the design and implementation of non-qualified retirement
plans and executive compensation arrangements. In addition Ms.
Noggle handles employee benefits matters in connection with
business transactions by conducting due diligence, negotiating and
preparing contract provisions, and addressing transitional issues.
Ms. Noggle is a Contributing Editor of a nationally-circulated loose
leaf publication published by Thompson Publishing Group, Mandated
Health Benefits – The COBRA Guide. Lynda is also a contributing
author of The New Health Care Reform Law – What Employers Need
to Know (A Q&A Guide), published by Thompson Publishing Group.
53
Austen K. Townsend
Associate

202.416.5845
atownsend@proskauer.com
Austen K. Townsend is an Associate in the Employee Benefits,
Executive Compensation & ERISA Litigation Practice Center,
resident in the Washington, D.C. office. Ms. Townsend counsels
clients on all aspects of employee benefits and executive
compensation, including compliance with the Internal Revenue Code
and ERISA and the treatment of employee benefits in corporate
transactions. Her practice covers tax-qualified retirement plans,
health and welfare plans, equity compensation, and nonqualified
deferred compensation plans, among other areas. In addition, she
advises employee benefit plans and funds of funds on investments
in private equity funds, hedge funds, and complex financial
instruments. As a member of Proskauer’s Health Care Reform Task
Force, Ms. Townsend assists clients with all aspects of the new
health care reform laws. She is also a contributing editor of The
New Health Care Reform Law: What Employers Need to Know (A
Q&A Guide).
54
Contact Information
Lynda M. Noggle
Proskauer Rose LLP
1001 Pennsylvania Ave., NW
Suite 400, South
Washington, DC 20004
(202) 416-5816 (office)
lnoggle@proskauer.com
Austen K. Townsend
Proskauer Rose LLP
1001 Pennsylvania Ave., NW
Suite 400, South
Washington, DC 20004
(202) 416-5845
atownsend@proskauer.com
55
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