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Represents management exclusively in every aspect of
employment, benefits, labor, and immigration law and
related litigation.
750 attorneys in 55 locations nationwide.
Current caseload of over 6,500 litigations and
approximately 415 class actions.
Founding member of L&E Global.
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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, ADA, GINA, 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.
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When the HIPAA nondiscrimination rules apply
Analyze different approaches to health-contingent programs
Limits on allowable wellness incentives, how to calculate
them, and penalties
Satisfying “reasonable alternative requirements”
Whether you can have smoker and non-smoker rates without
a formal wellness program
Impact of GINA, ADA and other laws on wellness programs
Taxation of wellness incentives
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2013 Survey by the National Business Group on Health
(NBGH) indicates:
o Employers planned to spend 15% more on wellness programs
per employee in 2014 compared to 2013.
o 95 percent of companies plan to offer some kind of health
improvement program, with 74% offering incentives to
participate, an increase from 57 percent in 2009.
o 93 percent of companies plan to expand or maintain funding for
their program over the next three to five years
o 4 out of 10 employers plan to extend programs to spouses and
domestic partners
http://www.fidelity.com/inside-fidelity/employer-services/health-care-survey-finds-spending
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ACA/
HIPAA
ERISA/
IRC
State
Laws
NLRA
Wellness
Programs
Title VII
and
Other
EEO
Risks
ADA
GINA
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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
May 29, 2013: Obama Administration issues Final Regulations
governing wellness programs under Affordable Care Act.
May 23, 2014: EEOC announces plans to issue regulations
concerning wellness program
August 20, 2014: EEOC files first lawsuit against employer
concerning wellness program
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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 status,
medical condition, claims experience, receipt of health
care, medical history, genetic information, evidence of
insurability, disability).
Practice Tip – A program not connected to the
company’s group health plan (or itself a group health
plan) not subject to HIPAA.
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Wellness programs subject to HIPAA:
o Health plan premium discount for non-smokers
o Deductible under health plan eliminated for persons who satisfy
certain biometric measurements
Wellness programs NOT subject to HIPAA:
o Biggest loser competition with cash reward for winner.
o Points-based program where participants earn points for
participating in certain activities and redeem for products, services,
gift certificates
Practice Tip – When HIPAA does not apply, program is not
subject to 30/50% limitation on rewards, but ADA and state
law concerns remain.
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Effective plan years beginning on or after 1-1-14
Two program types: participatory and health contingent
Two types of health contingent programs:
o Activity-only (reasonable alternative under old rules)
o Outcome-based (reasonable alternative for all)
Incentive limit: 30% employee-only premium; 50% for tobacco
prevention programs.
Updated reasonable alternative notice
Practice Tip – Participatory programs not subject to incentive
limits.
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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 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).
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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.
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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.
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Definition: Program that requires an individual to attain or
maintain a specific health outcome in order to obtain a
reward.
Examples:
o Stop smoking, satisfy “healthy” ranges for certain biometric
screenings, being identified to work with a health coach.
o Typically two-tiers:
• Tier one. Measurement, test, or screening is applied and, 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.
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Participatory Programs:
Health Contingent:
“Activity-Only” Programs
Joining a fitness center
Participating in an exercise
program, regardless of
outcomes
Receiving preventive care
Keep up with all
recommended preventive
care
Attending monthly
nutrition education
seminar
Participating in a diet
program, regardless of
outcomes
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Program
Feature
Flu shot
Analysis
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 Activity only requires calling health coach, so participatory, right. What if
calls are longer for persons with certain health factors? Is this now
5 calls with
health contingent? What if program requires 3 calls for all participants
health coach
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?
Participatory only? Maybe. But what if individual’s health condition
Keep up with
preventive care qualifies her to receive more preventive services?
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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.
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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.
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“Activity-Only” Program
“This determination is
“Outcome-Based” Program
“This determination is based on all the
based on all the relevant
facts and circumstances.”
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.”
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Not applicable to participatory programs
No more than 30%/50% of cost of applicable premium
Practice Tip – Consider effect of incentive on ACA minimum value
and affordability requirements.
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
• tobacco prevention program - $2,000 annual reward
o Total annual reward - $3,100
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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.
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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
per person per metric for meeting a healthy cholesterol level and a
healthy BMI level, total reward $1,200
• tobacco prevention program - $4,000 annual reward if neither
smokes. If one smokes, no reward.
o Total annual reward - $6,200
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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.
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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.
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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
Plan sponsor may seek verification from individual’s
physician
Practice Tip – Be prepared to allow multiple attempts to
meet standard, have different alternatives ready to go.
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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 “activity-only” program, it too must meet
these requirements.
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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
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Alternative must meet basic requirements for outcomebased 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.
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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 part of an ERISA group health plan; or
o an ERISA plan itself.
If subject to or part of an ERISA plan, basic ERISA rules
apply, as well as HIPAA and ACA implications.
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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.
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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.
IRS de minimis standard difficult to meet
(http://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/DeMinimis-Fringe-Benefits)
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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.
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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.
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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.
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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 (11th Cir. 2012)
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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.
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“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.
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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.
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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
What’s clear: Employee representatives have set their sights
on wellness programs.
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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!
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This year the EEOC filed two lawsuits challenging whether participation in
wellness programs was truly voluntary.
Both lawsuits initiated by the EEOC’s Chicago district office.
ADA prohibits medical examination and medical inquiries in connection with
a wellness program, only if participation in the program is voluntary.
If the medical examination or medical inquiries are not part of a voluntary
wellness program, then they must be job-related and consistent with
business necessity to be lawful under the ADA.
EEOC’s position is that a wellness program is “voluntary” if it neither
requires participation nor penalizes an employee for not participating.
Standard is elusive, but seems to focus on the size of the reward for
participating as the cases illustrate.
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EEOC v. Flambeau, Inc., Civil Action No. 3:13-cv-00638) was filed in U.S. District
Court for the Western District of Wisconsin. Filed October 31, 2014
EEOC’s complaint alleges that when employee Dale Arnold did not complete the
biometric testing and health risk assessment required by the wellness program,
Flambeau cancelled his medical insurance and shifted responsibility for payment of
the entire premium cost to him.
According to the Complaint, employees who had taken the biometric testing and
health risk assessment, by comparison, did not have their coverage cancelled
involuntarily, and were only required to pay 25% of their premium cost.
The EEOC contends that the biometric testing and health risk assessment constituted
"disability-related inquiries and medical examinations" that were not job-related and
consistent with business necessity as defined by the ADA. The EEOC claims that the
alleged actions and severe consequences for not providing prohibited information as
part of the employer’s wellness program violate Title I of the ADA, which prohibits
disability discrimination in employment, including making disability-related inquiries.
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EEOC v. Orion Energy Systems, Civil Action 1:14-cv-01019). Filed on August 20,
2014 in U.S. District Court for the Eastern District of Wisconsin, Green Bay Division.
Program required completing an Health Risk Assessment, some blood work and
some medical inquiries to determine whether the employee could use certain
exercise equipment.
Complaint alleges that when employee Wendy Schobert declined to participate in the
program, Orion shifted responsibility for payment of the entire premium for her
employee health benefits from Orion to Schobert. Shortly thereafter, Orion fired
Schobert.
Like, Flambeau, Inc., the EEOC claims that Orion Energy Systems violated Title I of
the ADA by making disability-related inquiries that were not job-related and
consistent with business necessity as defined by the ADA.
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"Employers certainly may have voluntary wellness programs -there's no dispute about that -- and many see such programs as a
positive development," said John Hendrickson, regional attorney for
the EEOC Chicago district. "But they have to actually be voluntary.
They can't compel participation by imposing enormous penalties
such as shifting 100 percent of the premium cost for health benefits
onto the back of the employee or by just firing the employee who
chooses not to participate. Having to choose between responding to
medical exams and inquiries -- which are not job-related -- in a
wellness program, on the one hand, or being fired, on the other
hand, is no choice at all." (emphasis added)
Unclear where the EEOC is going next in challenging wellness
programs that the agency believes are not voluntary.
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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.
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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.
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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).
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Invasion of privacy
Violation of public policy
Negligent or intentional infliction of emotional distress
Wrongful discharge
Constitutional claims (some states)
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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.
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Jackson Lewis Workplace Wellness Taskforce:
o Frank Alvarez: AlvarezF@jacksonlewis.com
o Joe Lazzarotti: LazzarottiJ@jacksonlewis.com
o Mike Soltis: SoltisM@jacksonlewis.com
o Joe Lynett: LynettJ@jacksonlewis.com
o Patricia Pryor: PryorP@jacksonlewis.com
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Visit our Workplace Wellness Resource Center at
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/
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