Wellness Programs Under Health Reform - Crowell & MoringCompliance issues under additional federal...

Wellness

Programs Under

Health Reform

California Society for Healthcare Attorneys’

2013 Annual Meeting & Spring Seminar

Andrew J. Hefty

Crowell & Moring LLP

275 Battery Street, 23rd Floor

San Francisco, CA 94111

Direct (415) 365-7261

[email protected]

Wellness Programs Under Health Reform

Overview

Background on wellness programs and their regulation

Requirements for wellness programs under the ACA

Compliance issues under additional federal and state rules impacting wellness programs Americans with Disabilities Act (ADA)

Genetic Information Nondiscrimination Act (GINA)

Title VII and Age Discrimination in Employment Act (ADEA)

Health Insurance Portability and Accountability Act (HIPAA)

State laws

2 © Crowell & Moring LLP 2013. All Rights Reserved.

Background on Wellness Programs

Wellness programs have become common 63% of employers who offered health benefits also

offered at least one wellness program

More common among large employers – health risk assessments are offered by 38% of large employers offering health benefits, but only 18% of employers with fewer than 200 workers

Despite availability, actual participation remains limited A 2010 non-representative survey suggested typically

less than 20% of eligible employers participate

Source: Preamble to 11/26/12 tri-agency (DOL, HHS, Treasury) proposed regs, 26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 146-47



Employers largely report that wellness programs are improving health and reducing costs 65% of 2011 survey respondents that offered wellness programs

stated that the programs improved health, and 53% believed that they reduced costs

Surveys suggest that a small percentage of employers use incentives for programs, although more prevalent among larger employers 2011 survey – 14% of all employers offered cash, gift cards,

merchandise, or travel, while 27% of large firms (over 200 workers) offered these kinds of incentives

Most common incentivized program appears to be completion of health risk assessment

Source: Preamble to 11/26/12 tri-agency (DOL, HHS, Treasury) proposed regs, 26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 146-47



HIPAA non-discrimination and wellness provisions (29

C.F.R. § 2590.702(f))

Prohibits group health plans and issuers from discriminating

against individuals and beneficiaries in eligibility, benefits, or premium discounts based on a “health factor”

HIPAA and 2006 Regulations set forth eight health status-related factors: (1) health status; (2) medical condition; (3) claims experience; (4) receipt of health care; (5) medical history; (6) genetic information; (7) evidence of insurability; and (8) disability

Exception allows premium discounts, rebates, or modifications to cost sharing (copayments, deductibles or coinsurance) in return for adherence to certain programs of health promotion and disease prevention



HIPAA non-discrimination and wellness provisions Tri-agency final regulations (DOL, HHS, Treasury) issued in

2006 implemented HIPAA exception

Allowed benefits (including cost sharing), premiums, or contributions to vary based on participation in a wellness program that adheres to certain conditions set forth in the regulations

Created two categories of wellness programs

Participatory wellness programs

Comply so long as participation in program made available to all similarly situated individuals

Health-contingent wellness programs

Must adhere to five consumer protection conditions, including total reward limit of 20% of the total cost of coverage


Wellness Programs under the ACA

Tri-agency proposed regulations (DOL, HHS, Treasury) promulgated on November 26, 2012 (26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 146-47)

Effective January 1, 2014

Largely reflect the 2006 regulations under HIPAA Reward limit increased from 20% to 30%, and 50% for programs to

prevent tobacco use

Proposed clarifications regarding the reasonable design of health-contingent wellness programs and reasonable alternatives to avoid prohibited discrimination

Requirements apply broadly Group health plans

Health insurance issuers offering group coverage


Wellness Programs under the ACA

Requirements apply broadly (cont’d.)

Apply to both grandfathered and non-grandfathered plans

Preamble explains that ACA requirements do not apply to grandfathered health plans, which would mean 2006 HIPAA non-discrimination rules would govern

However, proposed rules apply to grandfathered plans because the “Departments believe that the provisions of these proposed regulations would be authorized under either HIPAA or the Affordable Care Act”

Proposed regulations do not apply to individual market, although ACA extends non-discrimination protections to that market


Wellness Programs under the ACA: November

26, 2012 Tri-agency Proposed Regulations

Creates two types of permissible nondiscriminatory wellness programs: Participatory wellness programs

Health-contingent wellness programs

Participatory wellness programs None of the conditions for obtaining a reward are

based on satisfying a standard relating to a health factor; or

Wellness program does not provide a reward

Only requirement is that “participation in the program is made available to all similarly situated individuals”




Examples of Participatory Wellness Programs Reimbursement of fitness center membership costs

Reward for diagnostic test regardless of outcome

Reimbursement of cost of, or reward for, participating in smoking cessation program regardless of whether employee quits smoking

Reward for attending a monthly no-cost health education seminar

Reward for HRA without further action (education or otherwise) required as to health issues identified




Health-contingent wellness programs Reward is based on satisfying a standard related to a health

factor

Examples:

Program that imposes a premium surcharge based on tobacco use

Program that uses a biometric screening or HRA

Rewards those within normal or healthy range

Requires those outside the range or at risk to take additional steps (such as meeting with a health coach, taking a fitness course, adhering to health improvement plan, or complying with health care provider’s plan of care) to obtain the same reward

Health-contingent programs must satisfy five requirements




Five requirements for health-contingent wellness programs (1) Frequency of opportunity to qualify: must give individuals

opportunity to qualify for the reward at least once per year

(2) Size of reward: reward for health-contingent program, together with reward for other health-contingent programs, must not exceed 30% of the total cost of coverage, except the percentage is increased 20 percentage points to 50% to the extent that additional percentage is in connection with program to reduce tobacco use

Example: $6,000 total cost of coverage; $600 premium rebate for compliance with program focused on exercise, blood pressure, and cholesterol; $2,000 tobacco premium surcharge. $2,600 is less than 50%, and $600 is less than 30%




Five requirements for health-contingent wellness programs

(3) Reward must be available to all similarly situated individuals. Must meet two requirements:

(1) Program allows a reasonable alternative standard (or waiver of standard) for obtaining the reward for any individual for whom it is unreasonably difficult due to a medical condition to satisfy the standard





(3) Reward must be available to all similarly situated individuals. Must meet two requirements:

(2) Program allows a reasonable alternative standard (or waiver of standard) for obtaining reward for any individual for whom it is medically inadvisable to attempt to satisfy the standard If alternative is educational program, plan must make program available

and must pay for it

If alternative is diet program, plan must pay membership fee but not cost of food

If alternative is compliance with medical professional who is agent of plan, alternative standard of personal physician applies

Plan may seek verification if “reasonable under the circumstances”





(4) Program must be reasonably designed to promote health or prevent disease

Have a reasonable chance of improving health or preventing disease, and

Is not overly burdensome

Is not a subterfuge for discrimination based on a health factor

Is not highly suspect in the method chosen to promote health or prevent disease

To the extent reward is based on results of measurement, test, or screening such as HRA, plan must make available to anyone who does not meet the standard a different, reasonable means of qualifying for the reward




Five requirements for health-contingent wellness programs (5) Notice of availability of other means of qualifying for the

reward

Plan must disclose in plan materials describing the program the availability of other means of qualifying for the reward or possibility of waiver

If plan materials merely mention that a program is available, without describing its terms, this disclosure is not required

Proposed regulations contain sample language that satisfies this requirement


ADA and Wellness Programs

Under the ADA, a “covered entity” is prohibited from “requir[ing] a medical examination” and “mak[ing] inquires of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.”

42 U.S.C. § 12112(d)(4)(A)



EEOC issues enforcement guidelines in 2000 State that employees may be asked disability related questions

and given medical examination pursuant to voluntary wellness programs

Program is voluntary so long as it neither requires participation nor penalizes employees who do not participate

EEOC Office of Legal Counsel issues memo in 2009 stating that a HIPAA compliant wellness program, including total reward limit of 20%, is an ADA-compliant wellness program

EEOC withdraws letter shortly after it is issued

Regional enforcement begins and still continues

Plans and issuers win first legal challenge with Seff v. Broward County, Fla.



ADA, however, contains safe harbor stating ADA shall not be construed as prohibiting a covered entity “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. 42 U.S.C. § 12201(c)(2)

This exemption, however, may not be used as a “subterfuge” to evade the purposes of the ADA

EEOC guidance from 1993 says to satisfy this requirement any disability based disparate treatment must be justified by risks and costs associated with the disability, as demonstrated through actuarial data or actual or reasonably anticipated experience



Seff v. Broward County, Fla., 691 F.3d 1221 (11th Cir. 2012)

County asserted that it had workforce with higher costs than average workforce. County implemented wellness program composed of biometric screening exam and an online HRA

Wellness program was administered by the group health insurer. Employees who suffered from one of five “disease states” could participate in coaching program and, if they did, were eligible for waiver from co-pay of disease management medication

Participation in wellness program was not condition for enrollment in the group health plan



Seff v. Broward County, Fla., 691 F.3d 1221 (11th Cir. 2012) County imposed a $20 surcharge on each bi-weekly paycheck

on those enrolled in health plan but refused to participate in the wellness program. District court certified class

The wellness program was HIPAA-compliant

Plaintiffs alleged that wellness program violated the ADA because it was involuntary because the dollar surcharge penalized employees who did not participate in the program

County argued that program was saved by the ADA’s statutory safe harbor provision, or, in the alternative, that it was voluntary



Seff v. Broward County, Fla., 691 F.3d 1221 (11th Cir. 2012) District Court granted summary judgment for the County based

on conclusion that program fell within ADA’s safe harbor provision. Court found that program qualified as a “term of a bona fide benefit plan” because program constituted a “term” of Broward’s group health plan

Court did not address whether program was “voluntary” because it held that program fell under safe harbor

Plaintiff argued District Court erred in finding no dispute of material fact of whether program was “term” of benefit plan

Acting benefits manager’s testimony could be understood to mean that plan documents for group health plan did not contain a written term providing for the wellness program



Seff v. Broward County, Fla., 691 F.3d 1221 (11th Cir. 2012) 11th Circuit affirmed, finding that wellness program need not be

identified in benefit plan’s written documents to qualify as a “term” of benefit plan within safe harbor

11th Circuit held that District Court did not err in finding that program was “term” of benefit plan given that

Coventry Healthcare sponsored the wellness program as part of contract to provide Broward with group health plan

Program was only available to plan enrollees; and

Broward presented program as part of group plan in at least two employee handouts

Court did not focus on whether program was “subterfuge”



EEOC regional enforcement activity continues

Amount/corrective actions being proposed as part of conciliation include:

Repayment of the rebate/surcharge in question to affected individuals

Payment of make-whole amounts to individuals who incurred out-of-pocket expenses if they opted out of the wellness program

Amounts for pain and suffering

Greater amounts for those that incurred a “penalty”

In the range of $1,000 to $5,000 per plan participant



Employers that choose to use rebates or surcharges remain at risk for EEOC enforcement actions and resulting liability

Considerations Eliminate surcharges and only provide “rewards” (not

failsafe)

Eliminate surcharges and rewards

Creates the problem of how to get people to participate

Divorce the reward or surcharge from the premium (not failsafe)


GINA and Wellness Programs: Title I

Title I: Applies to Group Health Plans and Issuers Prohibits setting premiums based on genetic information

Generally prohibits requesting or requiring an individual to undergo genetic tests

Prohibits collecting genetic information, including family medical history, prior to or in connection with enrollment, or for “underwriting purposes”

“Underwriting” includes changes in deductibles and cost sharing, and premium discounts or rebates in return for completing HRA or participation in wellness program

Thus, plans prohibited from offering reward for genetic information collected as part of HRA

Genetic information includes individual’s or family members’ genetic tests, manifestation of a disease or disorder in family members or any request for or receipt of genetic services



Interim Final Rules for Title I

Prohibit group plans and issuers from collecting

genetic information for the purpose of "providing discounts, rebates, payments in kind, or other premium differential mechanisms in return for activities such as completing a health risk assessment or participating in a wellness program”



Interim Final Rules provide proposed solutions:

Eliminate incentives for HRA that collects genetic information

Use HRA that does not collect genetic information

Create two HRAs First HRA that provides a reward and does not solicit genetic

information

Second HRA that is unrelated to enrollment and contains instructions stating that completion of that HRA is voluntary and will not affect the reward given for first HRA


GINA and Wellness Programs: Title II

Title II: Applies to Employers

Title II applies if wellness program is administered by an

employer (rather than by a health plan or issuer)

Prohibits use of applicant’s or employee’s genetic information to make employment decisions

Generally prohibits employers from requesting, requiring, or purchasing genetic information, with certain exceptions

Regulations create firewall between liability under Title I and Title II


GINA and Wellness Programs: Title II

Title II Provides exception that permits employer to collect genetic information, such as family medical history, as part of a voluntary wellness program if

Employee provides prior, knowing, voluntary, and written authorization

Only the employee and health care professional or counselor involved in providing such services receive the results; and

Information provided for wellness program cannot be disclosed to the employer except in aggregate terms that do not disclose the identity of the specific employees

Final regulations (11/9/10) state wellness program is voluntary as long as employer neither requires participation nor penalizes employees who do not participate (29 C.F.R. §1635)


GINA and Wellness Programs

Issue: Firewall between Titles I and II

Example: Employer sponsors group health plan that includes wellness

program consisting of HRA. Program is administered by health plan, and not employer. Plan participants can complete online HRA that includes area where individual can provide family medical history (genetic information). HRA includes compliant Title I disclaimer that provision of family medical history is completely voluntary and that no reward is provided for providing such family medical history.

Should comply with Title I standard for “voluntary” programs Only requires notification that the receipt of genetic information is voluntary

May not comply under Title II were Title II to apply Title II requires prior, voluntary, and written acknowledgment that the genetic

information is being provided

Issue: Does Title II apply in light of the firewall?


Title VII and ADEA and Wellness

Programs

Title VII – prohibits discrimination in employment based on race, color, religion, sex, or national origin (29 U.S.C. 151

et seq.)

Employers must be able to provide objective, reliable, expert data that a specific standard (such as BMI thresholds) do not discriminate against the protected class

Disparate impact is prohibited

ADEA – prohibits age discrimination in employment (29

U.S.C. § 621 et seq.)

The ADEA provides an affirmative defense for employer actions “based on reasonable factors other than age.”

Disparate impact is prohibited


HIPAA and Wellness Programs

Numerous issues remain under HIPAA regarding wellness programs

For example: Whether the reward must be provided on a

retroactive basis regarding health-contingent program

Validity of combining health-contingent program and participatory program

Application of privacy and security to wellness plans

Increased scrutiny by participants, regulators, and litigators


State Law and Wellness Program

Many types of state laws may impact wellness programs if no ERISA preemption

Examples:

Smoking nondiscrimination laws – many states prohibit employers from taking adverse employment action for smoking

Possible implications for smoking cessation programs

Lawful off-duty conduct laws – certain states protect lawful off-duty conduct that does not conflict with the employer’s business

Example: Employee who likes to eat fried food and as a result continues to have higher cholesterol and thus is penalized under the employer’s wellness program

State privacy laws

State laws protecting overweight individuals


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