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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.
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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, 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.)
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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 employersponsored contribution to a health savings account (27%).
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ACA/HIPAA
State Law
Compliance
Issues
NLRA
ERISA/IRC
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
o “Many of the most pressing questions on wellness programs involve
the interaction of the laws within our jurisdiction with other healthrelated 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.
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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
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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?
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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 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.
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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
• 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
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(plan
years
beginning on
and after Jan
1, 2014)
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).
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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, 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.
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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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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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Not applicable to participatory programs
Currently, no more than 20% (30%/50% in 2014) of cost of:
o
o
EE-only level of coverage; or
cost of coverage levels in which employee and any dependents are
enrolled if dependents can to participate in the program.
Examples:
o
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).
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).
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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.
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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
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.
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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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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.
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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
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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 “outcome-based” 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 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.
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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.
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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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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 Lynn Clements: ClementsL@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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