Did you know that the Affordable Care Act allows employers to include Employee Wellness Plans as a means to cut health care costs? According to a Gallup poll, more than 85% of employers with 1000 or more employees offer Employee Wellness Programs, but only 60% of these companies’ employees are aware of such plans and only 24% take advantage of them. Wellness programs are intended to reward employees for participating in programs that enable employees to adopt healthier lifestyles. Sounds good, right? The Affordable Care Act sets certain standards for these programs. Now, if you could cut your costs and know that you are also complying with the ACA, you might jump at the opportunity. Here is a classic example of where “Look before you leap” might be safe advice, though. While your wellness plan might pass ACA muster, you it may not satisfy the ADA requirements–according to the EEOC. This week the EmpLAWyerologist will examine requirements under both laws and attempt to make some sense of them, after the jump…
First, what does the ACA has to say about wellness plans? (I know, what’s up with the alphabet soup?!) Back in June 2014, the Departments of Labor, Health and Human Services and Treasury released final regulations. In essence the ACA requirements re-classify those under the Health Insurance Portability and Accountability Act (HIPAA), and include some changes. The intent of these regulations is to ensure that regardless of the type of wellness program, everyone who participates should receive the maximum reward or incentive, regardless of any particular health factor.
Let’s look briefly at the types of wellness programs:
- Participatory Wellness Programs: are available to employees without regard to their health status and include programs that reimburse for health club membership, provide rewards for attending monthly no-cost health education seminars or reward employees for completing a health risk assessment, without requiring them to take any further action. Rewards are not based on a particular outcome, do not require invasive medical tests and do not impose penalties for failure to participate or to achieve certain results. This type of program gets participants thinking about their health.
- Health-Contingent Wellness Programs provide a reward based on health status or achievement of a certain goal. General requirements for this type of program under the ACA are: a) eligible employees must have the opportunity to qualify for the reward yearly; b) the reward can’t exceed 30% of the total cost of employee-only coverage (i.e. employer plus employee contribution to premiums). If dependents can participate, then the reward can be up to 30% of the total cost of employee plus dependent coverage. The reward limit increases to 50% of the total cost of coverage if the program is for tobacco cessation. (Reward limits are cumulative for all health-contingent wellness programs); c) the program must be designed to improve health or prevent disease; d) program materials must disclose the availability of an alternative standard that employees can meet to get the full reward.
- Activity-Based Health-Contingent Wellness Programs require employees to perform or complete an activity related to one or more health factors to obtain a reward (e.g. walking, diet, fitness program, etc.). The program must offer similar individuals an alternative standard for attaining the award if the original standard would go against medical advice, and a doctor’s verification may be necessary for setting that alternative standard.
- Outcome-Based Health-Contingent Wellness Programs require employees to attain or maintain certain health to get the reward in question (e.g. smoking cessation, meeting exercise targets, attaining certain results in biometric screenings). The full reward must be available to those who failed to meet the standard in an initial screening. Employees must also be given additional time to reach a different level of the same standard, and the employee’s doctor can be involved in setting the alternative standard.
Participatory Wellness Programs meeting the above requirements will likely pass both ACA and ADA muster. Health-Contingent Wellness Programs can, according to the EEOC run afoul of the ADA if employers are not careful in how they structure them. Here are three examples from some very recent EEOC cases:
- EEOC v Orion Energy: the employer’s wellness program required employees to submit to medical exams and inquiries that, according to the EEOC, were not job-related and consistent with business necessity. One particular employee who objected and refused was first required to pay her entire health insurance premium and ultimately was fired. The EEOC says this practice violates the ADA, because it a) made disability-related inquiries (not job-related or consistent with business necessity); b) interfered with the employee’s right to refuse to be subjected to such inquiries and medical exams; and c) retaliated against the employee because of her good-faith objections to the program. The program was arguably compliant with the ACA, because it met the above requirements, and because the “reward” was continued payment of health insurance premiums (or at least the employer’s share of premiums. More on that in a bit.). NOTE: The program could also run afoul of the Genetic Information Nondiscrimination Act (GINA). Click here for information/review on GINA.
- EEOC v. Flambeau, Inc.: Similar to Orion Energy, Flambeau’s wellness program required employees to submit to biometric testing and a health risk assessment or face cancellation of their insurance coverage and unspecified “discipline” for failing to attend the screening, and requirements to pay the full insurance premium.
- EEOC v. Honeywell: Honeywell required biometric screening and blood draws, after which it would use the information to set goals for the employees. Those who refused were penalized up to $4000 in lost benefits and surcharges. The EEOC says this program is not voluntary and is not designed to ensure that employees can perform the essential functions of their jobs and therefore constitutes unlawful inquiries under Title I of the ADA (and under GINA).
The EEOC says wellness programs must be voluntary or they violate the ADA (and GINA). The EEOC has not provided a clear definition of what makes a wellness program “voluntary”, though it says it is working on releasing an Enforcement Guidance on this very issue in the near future.
In my humble opinion, however, these programs probably also violate the ACA. How? If employees who do not participate now have to pay the entire premium, the coverage meet the ACA’s definition of affordability. If those employees then go to an exchange and get a subsidy, the employer may now have to pay a $3000 penalty for each employee receiving a subsidy. If the employer simply cancels the coverage, isn’t the employer not offering any coverage to an eligible employee? If enough employees face cancellation, then the employer could face the more stringent penalty of not offering coverage to at least 95% of its eligible employees (unless there is some provision in the ACA that says that these types of situations do not subject employers to these penalties–in which case that has been a fairly well-kept secret as far as I’m concerned.)
Here are some things you can do to make sure your wellness programs comply with the ACA, the ADA and GINA:
- Offer rewards for participation, and steer clear of imposing penalties for non-participation;
- Don’t ask employees to submit to medical testing that is not job-related, without making it clear that the program is truly voluntary (i.e. no discipline or penalties for those who opt out).
- Do not retaliate in any way against those who object, refuse to participate, or even actively try to dissuade others from participating.
- Work with competent benefits experts and employment counsel to ensure that your program is compliant.
That’s all for now. If you contract with staffing agencies, consulting firms and the like and who want to know how the ACA impacts you, watch for next week’s post!
Disclaimer: This post’s contents are for informational purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent employment counsel on any issues discussed here.
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