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As mentioned in the first posting, wellness programs must be analyzed under a myriad of laws and regulations. This post will discuss generally the wellness program landscape in light of the Americans with Disabilities Act (ADA)/Americans with Disabilities Act Amendments Act (ADAAA), the Genetic Information Non-Discrimination Act (GINA), the Patient Protection and Affordable Care Act (PPACA), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Nondiscrimination Regulations. This is a 30,000-foot overview of laws and regulations that are in need of microscopic scrutiny when applying them to a wellness program.

ADA/ADAAA

The ADA/ADAAA generally prohibits discrimination in employment against a qualified individual on the basis of a disability in regard to employee compensation and other terms, conditions, and privileges of employment. Further is a prohibition from requiring a medical examination and making inquiries of an employee as to whether he or she has a disability, or as to the nature or severity of a disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.

However, there is a statutory safe harbor that exempts certain insurance plans from the ADA’s general prohibitions. The “benefit plan exception” states that the ADA shall not be construed as prohibiting an employer 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 inconsistent with, state law or where the plan is not subject to state law (a self-funded benefit plan) so long as the exemption is not used as a subterfuge for discrimination. As such, voluntary medical examinations and/or histories, which are part of a group wellness program, are permissible so long as strict confidential processes are followed.

What does it mean to be voluntary? There is no short answer, but the abbreviated answer is that a wellness program may be voluntary if the employer neither requires participation, nor penalizes employees who do not participate. The U.S. Equal Employment Opportunity Commission (EEOC) once posited that a health reimbursement arrangement (HRA) administered as part of a wellness program that meets the incentive limitations of HIPAA wellness regulations – no more than a (then) 20% reward – would be deemed voluntary and would not violate the ADA. Unfortunately, this portion of the opinion letter was withdrawn because it was outside the scope of the request. The position currently held by the EEOC is that an incentive is a veiled penalty, which, in essence, makes the program involuntary and, thus, violates the ADA. However, this is in conflict with the “benefit plan exception,” noted above.

GINA

Generally, GINA prohibits both the acquisition of genetic information as well as the use of genetic information by employers in employment decisions. As it applies to group health plans, Title I prohibits discrimination in health insurance premiums based on genetic information and places limitations on genetic testing and the collection of genetic information. Title II prohibits the use of genetic information in the employment context, restricts employers from requesting, requiring, or purchasing genetic information, and strictly limits employers from disclosing genetic information.

In general, Title II limits the conditions under which an employer might lawfully collect genetic information pursuant to an employer-sponsored wellness program and it requires those employers to follow strict privacy and confidentiality mandates. Under GINA, it is unlawful for an employer to request, require, or purchase genetic information with respect to an employee or an employee’s family member. There is an exception if the information is part of a wellness program, subject to strict adherence of the following three requirements:

1. The employee provides prior, knowing, voluntary, and written authorization;
2. Only the employee (or family member if the family member is receiving genetic services) and the licensed health care professional, or board certified genetic counselor involved in providing such services, receive individually identifiable information concerning the results of such services; and
3. Any individually identifiable genetic information provided in connection with the services is only available for purposes of such services and shall not be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees.

Again, what does it mean to be voluntary? In the preamble to the 2010 final regulations implementing Title II, the EEOC concluded that a wellness program is voluntary if the program neither requires participation, nor penalizes employees for non-participation. The EEOC concluded that it would not violate Title II for an employer to offer individuals an inducement for completing an HRA that includes questions about family medical history, or other genetic information, as long as the employer specifically identifies those questions and makes clear, in language reasonably likely to be understood by those completing the HRA, that the individual need not answer the questions that request genetic information in order to receive the inducement. The EEOC specifically declined to take the approach taken in HIPAA regulations – no more than a (then) 20% reward – and, instead, added that adherence to Title II of GINA does not guarantee adherence to Title I of GINA, ADA, or HIPAA.

HIPAA and PPACA

The general rule pursuant to HIPAA nondiscrimination provisions is that a plan or issuer is prohibited from charging similarly situated individuals different premiums or contributions on the basis of a “health factor.” However, there is an exception to the general rule if the reward, i.e., premium discount, is based on participation in a program reasonably designed to promote health or prevent disease, i.e., a “wellness program.” 

When analyzing a wellness program under PPACA and HIPAA, the first step is to determine whether the wellness program – or, as it may be the case, which part of the wellness program – is “participatory” or “health-contingent.” Participatory wellness programs are not required to follow HIPAA nondiscrimination provisions, discussed below. However, and to the point of this blog series, participatory (and health-contingent) wellness programs should be reviewed and scrutinized against the provisions of GINA, ADA, the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC), and other federal and state laws.

Participatory wellness programs are defined under HIPAA nondiscrimination final regulations as programs that either do not provide a reward, or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. Examples include a program that reimburses employees for all or part of the cost of membership in a fitness center, a diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes, and a program that provides a reward to employees for attending a monthly, no-cost health education seminar.

If the wellness program, or a piece of the wellness program, is participatory, it does not have to follow HIPAA nondiscrimination regulations. However, if the wellness program, or a portion thereof, is health-contingent, then the program must be analyzed pursuant to HIPAA nondiscrimination regulations.

HIPAA Nondiscrimination Provisions and the Wellness Program Exception

Health-contingent wellness programs, in contrast to participatory programs, require an individual to satisfy a standard related to a health factor to obtain a reward or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward. The standard may be performing or completing an activity relating to a health factor, or it may be attaining or maintaining a specific health outcome. The final regulations further subdivided health-contingent programs into (1) activity-only wellness programs, and (2) outcome-based wellness programs. While there are some differences, both types are permissible only if the program adheres to the five prongs:

1. Be reasonably designed to promote health or prevent disease (the same rules apply to activity-only and outcome-based programs);
2. Give employees a chance to qualify for the incentive at least once a year (the same rules apply to activity-only and outcome-based programs);
3. Cap the reward or penalty at 50% of the total cost of coverage for avoiding tobacco and at 30% for all other types of wellness incentives (the same rules apply to activity-only and outcome-based programs);
4. Provide an alternative way to qualify for the incentive for those who have medical conditions (different rules apply to activity-only and outcome-based programs); and
5. Describe the availability of the alternative method of qualifying for the incentive in written program materials (the same rules apply to activity-only and outcome-based programs).

These rules set forth criteria for an affirmative defense that can be used by plans and issuers in response to a claim that the plan or issuer discriminated under HIPAA nondiscrimination provisions.

This is not the end…

The above is merely a general overview of the innate tension created by conflicting regulations, compounded by the lack of guidance from the commission, which is confronting concerned employers who have chosen to be proactive in combating the costs of health care and improving consumers’ lives. The next part of the series will discuss the movements in the courts, the backlash felt by the EEOC, and steps employers should take.

For more data on wellness programs and other plan design trends, download the 2014 Health Plan Executive Summary. This survey – which has been conducted every year since 2005 – is the nation’s largest health plan survey and provides more accurate benchmarking data than any other source in the industry. You can contact a UBA Partner Firm for a customized benchmark report based on industry, region and business size.

The Department of Health and Human Services (HHS) has issued its proposed Benefit and Payment Parameters for 2016. While these amounts and dates are not yet final, they may be of help for planning purposes. At this time, HHS expects:

• Open enrollment for coverage through the Marketplace in 2016 will be from October 1 through December 15, 2015 (with coverage effective as of January 1, 2016).
• The transitional reinsurance fee for 2016 is likely to be $27 per covered life. Filing for 2016 would be due November 15, 2016, with $21.60 per covered life due January 15, 2017, and $5.40 per covered life due November 15, 2017.
• The out-of-pocket limits for health plans that are not high deductible plans related to HSAs would be $6,850 for single coverage and $13,700 for family coverage (with a maximum out-of-pocket for any family member of $6,850).
• The federally facilitated exchange fee would remain at 3.5% of premium.
• A special enrollment period would be available at renewal for individuals enrolled in non-calendar year plans.
• Retirees and COBRA participants could be covered through a Small Business Health Options Program (SHOP) plan.
• The current benchmark plans for essential health benefits would remain in effect for 2016, with new benchmark plans based on 2014 benefits and enrollment in effect for 2017.

A draft of an updated AV calculator and methodology for 2016 also are available. While this will help you stay forward-thinking, don’t forget about taking steps to ensure you are prepared to meet the Patient Protection and Affordable Care Act (PPACA) requirements that begin in 2015 and those which must be completed in 2014. For a complete checklist, download UBA’s PPACA Advisor, “Preparing for 2015 – Key PPACA Requirements”.

The IRS has released final regulations that address how wellness incentives or penalties, contributions to a health reimbursement arrangement, and employer contributions to a Section 125 plan are applied to determine affordability. While these regulations were issued in connection with the individual shared responsibility requirement (also called the individual mandate), the agencies said that they expect to use the same approach when determining affordability for purposes of eligibility for the premium tax credit and the employer-shared responsibility/play or pay requirements.

The regulations provide that when deciding if the employee’s share of the premium is affordable:

• Wellness incentives or surcharges, except for a non-smoking incentive, may not be considered. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded, even if the employee has earned one.
• If an employer makes contributions to a health reimbursement arrangement (HRA) that the employee may use to pay premiums, the employee’s cost of coverage may be reduced by the employer’s current year contribution to the HRA, provided that the planned employer contribution is publicized before the enrollment deadline.
• If an employer makes flex contributions through a Section 125 cafeteria plan, the employee’s required contribution may be reduced by flex contributions that (1) may not be taken as a taxable benefit, (2) may be used to pay for minimum essential coverage, and (3) may only be used to pay for medical care.

Because an employer’s contribution to a health savings account (HSA) generally may not be used to pay premiums, employer contributions to an HSA may not be used when determining affordability. For a complete checklist, download UBA’s PPACA Advisor, “Preparing for 2015 – Key PPACA Requirements”.

While wellness programs have increased in popularity, according to the 2014 UBA Health Plan Survey, actual wellness program adoption has been in a holding pattern. As one might expect, the highest percentage (58.8%) of plans offering wellness benefits came from employers with 1,000 or more employees and the lowest percentage (8%) of plans offering wellness benefits came from employers with fewer than 25 employees. On average, wellness programs are down slightly by 1.3%. It’s no wonder given all the pending litigation and regulation surrounding these programs, including the fact that the health of an employee population is no longer a rating factor for smaller employers.

On the other hand, corporate wellness programs do have many positives. From a global perspective, wellness programs combat the rising costs of health care. Employers also benefit from wellness programs by creating healthier workforces. Healthier employees are more productive and have less absenteeism. Moreover, employees who participate in wellness programs enjoy the extrinsic reward provided by their employer (or the spouse’s employer), and they also realize the intrinsic value of changing their lives through healthier living. Regardless of the motive and intent of employers who establish corporate wellness programs, they just may find themselves in hot water – I mean, court – with the EEOC or on the other side of the aisle from a grieved employee.

What makes wellness programs particularly complicated is the numerous rules and regulations, many of which are discordant with other regulatory provisions. Employers should take due diligence to ensure that they are not sponsoring a wellness program that is ripe for litigation. The programs should be analyzed under the Americans with Disabilities Act (ADA)/Americans With Disabilities Act Amendments Act (ADAAA), the Genetic Information Nondiscrimination Act (GINA), the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC), the Patient Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act (HIPAA), Title VII and other EEOC regulations, and state law, being mindful that adherence to one regulation, e.g., PPACA, does not guarantee compliance with another, e.g., ADA or GINA.

The last three months have seen as many complaints filed by the EEOC against wellness programs. On August 20, 2014, the EEOC brought its first direct challenge of a wellness program under Title I of the ADA against Orion Energy Systems, Inc. (Orion suit). On September 30, 2014, the EEOC initiated its second ADA action against Flambeau, Inc.’s wellness program (Flambeau suit). The latest suit was filed on October 27, 2014, against Honeywell International, Inc.’s wellness program (Honeywell suit), and it included counts under both the ADA and GINA. 

In the following days, I will briefly review the various statutory and regulatory language governing wellness programs, outline the employers’ wellness programs that are the center of current litigation, address the EEOC’s concerns, and discuss what employers should do to guard against running afoul. 

For more data on wellness programs and other plan design trends, download the 2014 Health Plan Executive Summary. This survey – which has been conducted every year since 2005 – is the nation’s largest health plan survey and provides more accurate benchmarking data than any other source in the industry.  You can contact a UBA Partner Firm for a customized benchmark report based on industry, region and business size.

Many employee benefit limits are automatically adjusted each year for inflation (this is often referred to as an “indexed” limit). The Internal Revenue Service and the Social Security Administration have released a number of indexed figures for 2015.
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Data in the 2014 UBA Health Plan Survey is based on responses from 9,950 employers sponsoring 16,967 health plans nationwide. Results are applicable to the small to midsize market that makes up a majority of American businesses, as well as to larger employers, providing benchmarking data on a more detailed level than any other survey. To help employers benchmark their health plan costs by organization size, the chart below shows average costs in descending order.

Copyright © 2014 United Benefit Advisors, LLC. All Rights Reserved.

Looking at the smallest employer groups, the 2014 findings show an interesting flip in rate increase patterns. Contrast this with last year’s findings, which showed the following increases over 2012 among the same groups.

Copyright © 2014 United Benefit Advisors, LLC. All Rights Reserved.

Historically, employers with 1 to 49 employees felt the brunt of increases, which ranged from 4% to 5% or more. However, in this year’s survey results, these groups saw more modest increases of approximately 1%. Conversely, employers with 50 to 199 employees have historically had more modest increases of 1% to 2%, while this year they saw increases of approximately 3% to 4%.

The ability for small groups to “renew as is” (by grandmothering or by delaying renewals) is having a huge impact on keeping their rates level, at least at this point. Many small groups had the choice of moving to a PPACA-compliant plan or staying with the plans they had (thanks to grandmothering in some states and other delay tactics). Healthy groups tended to stay with the plans they had, which often was the most cost-effective approach. As these groups move to PPACA-compliant plans and become subject to community rating, they will likely see significant cost increases. But this year, they had a reprieve.

For more information to help you benchmark your health plan, download the 2014 UBA Health Plan Survey Executive Summary or contact a local UBA Partner for a customized benchmarking report.

Premium tax credits are only available to individuals who obtain health coverage through a Marketplace. A dispute has arisen as to whether the IRS has the ability to interpret PPACA to allow the subsidy to individuals who obtain coverage through any Marketplace, or whether the language of PPACA limits eligibility to those who have obtained coverage through a state Marketplace. The U.S. Supreme Court has agreed to rule on whether premium tax credits may only be available to individuals who receive tax subsidies as a result of being enrolled in a state exchange. In the meantime, the IRS has stated that it will continue to issue tax credits to individuals in both state and federally-run Marketplaces.

If the Supreme Court decides the IRS rule that tax credits are available regardless of what type of Marketplace is in place, the current system will remain in effect. However, if it rules that tax credits are only legally available to individuals enrolled in state Marketplaces, that decision will have significant consequences, since only about one-third of the states are running their own Marketplace, while the federal government runs the Marketplace for the remaining states. If premium tax credits are only allowed in states with their own Marketplace, most Americans will become ineligible to receive the tax credits. Well over half of the people currently enrolled in a Marketplace are receiving a tax credit. Additionally, an employer owes the play or pay penalty only if an employee receives a tax credit.

If the Supreme Court rules that premium tax credits are only available to individuals enrolled in state Marketplaces, employers should expect that states that have chosen to provide coverage through the federally-run Marketplaces will be under pressure to transition to state Marketplaces from those who have benefitted from the subsidized Marketplaces. Those that are benefitting from subsidized coverage include the individuals receiving premium tax credits, hospitals that are experiencing less unreimbursed care, and insurers that have invested in providing coverage through the Marketplaces. Similarly, states that have state Marketplaces may be pressured to move to a federally-run Marketplace by employers trying to avoid penalties. Debate is already occurring as to what, exactly, is needed to qualify as a state Marketplace should a state wish to move in that direction. Employers with employees located in multiple states could have to manage a situation in which some employees are eligible for tax credits and others are not.

The decision of the Supreme Court is expected in late June 2015.

To get the latest information on other federal developments including plan designs being disallowed—such as employer reimbursement of premiums for individual coverage, incentivizing employees in poor health to enroll in the marketplace, and more—download UBA’s PPACA Advisor, “Agencies Disallow Several Plan Designs; Other Federal Developments”.

The employer-shared responsibility (“play or pay”) requirements do not apply to small employers and have been delayed until 2016 for most mid-sized employers. This raises the question – what exactly is included in the play or pay requirement, which a small employer may be able to ignore and that mid-size employer may not need to meet until later?

Employer-shared responsibility includes five basic requirements that must be met by a large employer to avoid penalties:

1. The employer must offer minimum essential coverage to at least 95% of its full-time employees (under a transition rule, for 2015 the requirement is to offer minimum essential coverage to 70% of full-time employees).
2. The employer must offer affordable, minimum value coverage to its full-time employees.
3. The employer must consider an employee as full-time for health coverage purposes if the employee averages 30 or more hours work per week.
4. The employer must offer minimum essential coverage to natural and adopted dependent children until the end of the month in which the child reaches age 26 (under a transition rule, this requirement is generally delayed to 2016).
5. The employer must offer employees the opportunity at least once a year to elect or decline coverage under the group health plan (with an exception to the required opportunity to decline coverage for particularly generous coverage).

Employers that are small enough that the play or pay requirements do not apply, or have been delayed, still must meet many requirements under the Patient Protection and Affordable Care Act, such as the limit on waiting periods, but they need not meet the criteria of the play or pay package to avoid penalties.  Caution: fully insured plans must meet both state and federal requirements, so small and mid-size employers with insured plans should make sure that their plans meet state insurance law requirements. For example, some states have adopted the 30-hour threshold for eligibility, and some require that coverage be offered to spouses and children.

Note: for purposes of this blog piece, “small” means that the employer had fewer than 50 full-time or full-time equivalent employees in its controlled group during the prior calendar year. “Mid-size” means the employer had 50 to 99 full-time or full-time equivalent employees in its controlled group during the 2014 calendar year and has not materially reduced benefits, eligibility or contributions from the level in effect on February 9, 2014. Mid-size employers will need to provide reporting on available coverage for 2015, even though the actual employer shared responsibility requirements generally will not be effective for mid-size employers until 2016.

To help employers understand the pay or play provisions of the PPACA, download UBA’s white paper, “The Employer’s Guide to Play or Pay”. For help further help making pay or play decisions under PPACA, request UBA’s compliance and decision guides for small and large employers.

Since 2005, United Benefit Advisors® (UBA) has surveyed thousands of employers across the nation regarding their health plan offerings, their ongoing plan decisions in the face of significant legislative and marketplace changes, and the impact of these changes on their employees and businesses. The UBA survey represents the nation’s largest health plan benchmarking survey and the most comprehensive source of reliable benchmarking data.

As always, the survey revealed several noteworthy trends and developments that bear scrutiny and the ongoing attention of employers interested in making the most informed health care plan decisions possible. For example, among the most striking trends revealed by the survey, employers have overwhelmingly opted for early renewals of their plans—a delay tactic that helped them avoid costly Patient Protection and Affordable Care Act (PPACA)-compliant plans and manage costs. Another cost management tactic employers are using is to increase out-of-pocket costs for employees, with a “new normal” emerging for these higher cost thresholds.

Employers typically continue to offer one preferred provider organization (PPO) health plan option to employees, while also still widely offering family coverage. In addition, wellness program adoption seems to be in a holding pattern, as pending litigation and regulatory changes swirl on these offerings. Among employers providing wellness programs, health risk assessments and incentives are increasingly common offerings.

Plans in the Northeast U.S. continue to be the richest—and most expensive—and are at risk of being subject to the looming Cadillac tax. Government employees have the most generous plans with the highest costs—and they pay the least toward their overall coverage costs. Conversely, construction industry employees cost the least to cover but those employees pay the most toward costs.

Regarding cost increases, the smallest employers (0 to 49 employees) saw the lowest increases, a surprising break for them due to an unusual option they had over larger employers to remain with non-PPACA-compliant plans. In short, this was a reprieve for a group that usually faces the highest increases. Self-funding of plans, particularly among small employers, has not yet surged, but is still anticipated to do so as employers run out of other avoidance strategies.

The prevalence of consumer-driven health plans (CDHPs) continues to grow, as does employee enrollment in these plans, despite lower contributions to health savings accounts (HSAs)
(which are often tied to CDHPs to entice participation). And, finally, prescription drug plans are increasingly offering four or more tiers, along with ever-increasing copays—a trend that might fall off as they must all eventually tie to out-of-pocket maximums under PPACA.

For more information to help you benchmark your health plan, download the 2014 UBA Health Plan Survey Executive Summary or contact a local UBA Partner for a customized benchmarking report.