This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Ben

This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Benefit Advisors This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLPin conjunction with United Benefit Advisors

Presenters Gregory L. Ash, Esq. gash@spencerfane.com 913.327.5116 Larry Jenab, Esq. ljenab@spencerfane.com 913.327.5125

Agenda • Overview • HIPAA Requirements • Other Laws • Practical Lessons

What Are Wellness Programs? • No uniform definition • Primary goals for employers: • Cost reduction • Improved productivity (and profits) • Broad range of creativity in design and components • Sometimes includes an incentive/reward for participation (or disincentive/implied punishment)

What Are Wellness Programs? • The Big Idea: Reduce health-care costs proactively by encouraging healthy behavior and targeting preventable disease • Encouraged by IRS, DOL, and DHHS through a narrow exception to most of HIPAA’s nondiscrimination rules • Final regulations became effective for plan years beginning on or after July 1, 2007

Applicable Laws • Subject to Regulation Under: • HIPAA • Tax Code • ERISA • Federal and State Non-Discrimination Laws • State Privacy and Specialty Laws

HIPAA Requirements • The General Rule • HIPAA’s nondiscrimination rules don’t mandate any particular benefits, but • Under those rules, a plan or issuer can’t require “similarly situated individuals” to satisfy different deductible, co-payment, or other cost-sharing requirements based on a “health factor”

HIPAA Requirements • The Wellness Program Exception • A Plan can offer premium discounts (or other modifications of its cost-sharing rules) if the reward is based on participation in a program of health promotion or disease prevention (a “wellness program”), but • This will trigger additional requirements

“Similarly Situated” Individuals • The employer (or issuer) can create categories of individuals, and therefore different benefit and cost-sharing structures, based on: • participant status (vs. beneficiaries) • categories of beneficiaries (based on employment classification through which they receive coverage, relationship to the participant, marital status, and age or student status of children) • bona fide employment-based classifications

“Similarly Situated” Individuals • Examples of bona fide employment based classifications include: • hourly vs. salaried, • full-time vs. part-time, • location, • date of hire, • collectively bargained, • length of service, • current vs. former employee

What Is a “Health Factor”? • A “health factor” is any of the following, with respect to an individual: • Health status • Medical condition (including both physical and mental illness) • Claims experience • Receipt of health care • (continued)

What Is a “Health Factor”? • Medical history • Genetic information • Evidence of Insurability • Includes conditions arising from: • Acts of domestic violence, and • “Hazardous activities,” such as motorcycling, snowmobiling, ATV and horseback riding, skiing, etc. • Disability

What Is a “Health Factor”? • Relationship of “insurability” to hazardous activities • A plan can’t deny an individual coverage because he or she participates in hazardous activities, but • It can exclude coverage for injuries resulting from such activities • Example • A plan provides coverage for head injuries, but includes an exclusion for injuries in connection with bungee jumping. Bob receives a head injury while bungee jumping. Can the Plan deny coverage to Bob? No. Can it deny coverage for the injury? Yes.

Types of Wellness Programs • “Non-HIPAA” Programs: programs that don’t trigger HIPAA’s nondiscrimination rules because they are not part of a group health plan • “Participatory” Programs: programs that implicate only one of those rules • “Achievement-Based” Programs: programs that trigger the full range of HIPAA’s nondiscrimination rules

“Non-HIPAA” Programs • Offer either: • no reward, or • a reward that is unrelated to a group health plan (i.e., not limited to plan participants or funded with plan assets) • Examples: • Reimbursement of all or part of a fitness club membership fee • A diagnostic testing program that rewards participation without regard to outcomes • Prizes, such as cash, an extra vacation day, or a gift certificate

“Participatory” Programs • Offer a reward that is related to a group health plan, but without basing any of the conditions for obtaining the reward on a health factor • Must be available to all “similarly situated” individuals • Examples: • Waiver of co-pays or deductibles for specific costs, such as pre-natal screening or well-baby visits • The Examples listed on the previous slide, but limited to plan participants or paid for through the plan

“Achievement-Based” Programs • An Achievement-Based program can condition its reward on an individual satisfying a standard related to a health factor • Permits a direct connection between rewards and desirable preventative steps • Standards could include, for example: • smoking cessation • weight loss • reduction in cholesterol levels

“Achievement-Based” Programs • Examples of rewards an Achievement-Based program can offer in return for claims-reducing behavior: • discounts or rebates on premiums or contributions • waivers of all or part of co-pays, coinsurance, or deductibles • forgiveness of a surcharge (e.g., a surcharge on smokers), or • the cost of a benefit not otherwise available under the plan

“Achievement-Based” Programs • Achievement-Based programs must satisfy five additional requirements: • Limited reward • Reasonable design • Once-per-year availability • Enhanced version of the “similarly situated individuals” rule (this is the tough one) • Disclosure requirements regarding alternative means of meeting program targets

Limited Reward • The reward offered by an Achievement-Based program cannot exceed 20% of the cost of coverage for the employee • “Cost” here means the total amount of employer and employee contributions for the benefit package under which the employee is covered • If the employee is enrolled in family coverage, and his or her dependents are eligible for the wellness program, the limit is 20% of the cost of family coverage

Limited Reward: Example • The total premium for coverage under Company X’s plan is $800 per month per employee. Employees contribute $200, and Company X pays the remaining $600. • The maximum reward (or surcharge) for a wellness program under Company X’s plan is $160 per month (not $40).

Reasonable Design • The program must be reasonably designed to promote good health or prevent disease • Intended to be an easy standard to satisfy: • Satisfied by any program with a “reasonable chance” of improving health (excludes only “bizarre, extreme, or illegal” requirements) • Intended to allow experimentation (the regulations cite “aromatherapy” as an example of a permissible program)

Once-Per-Year Availability • As long as the program continues, eligible individuals must be given a chance to participate at least once each year • No requirement that an employer continue to offer the program in subsequent years

Reasonable Alternative Standard • A reward is not available to all similarly situated individuals unless the program offers a reasonable alternative standard for obtaining the reward (or simply waives the standard) for: • individuals for whom it is unreasonably difficult to meet the standard, due to a medical condition, and • individuals for whom it is medically inadvisable to attempt to satisfy the condition

Reasonable Alternative Standard • The employer can require verification (such as a letter form the individual’s doctor) that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy (or attempt to satisfy) the requirement • The employer need not develop such alternative standards in advance

Reasonable Alternative Standard • Example • Plan X gives a 25% discount off the monthly employee contribution to employees who meet a cholesterol target of 200 • To satisfy the “alternative means” requirement, Plan X must provide that, if it is unreasonably difficult due to a medical condition for a participant to meet the target (or if it is medically inadvisable for the participant to try), Plan X will either make available a reasonable alternative standard that takes the medical condition into account or waive the standard.

Reasonable Alternative Standard • Does this mean that a smoking cessation program could be required to provide the reward to a participant who never quits smoking? • Yes. If the employee makes an effort but cannot quit because he or she is addicted to nicotine (a medical condition), or if it is inadvisable for the employee to try, then the program must provide an alternative standard (or waive the standard).

Disclosure Requirements • All plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard (or the availability of a waiver) • However, such materials need not describe specific alternative standards (these need not even be formulated until individual participants need them) • The regulations include model disclosures

Example • Example • During open enrollment, Employer’s health plan provides all employees with a form on which they can certify that they haven’t smoked in the last 12 months. If they don’t, they must pay a 20% premium surcharge. All the plan’s materials describing the terms of this wellness program include the following statement: • “If it is unreasonably difficult due to a health factor for you to meet the requirements under this program (or if it is medically inadvisable for you to attempt to meet the requirements of this program), we will make available a reasonable alternative standard for you to avoid this surcharge.”

Example • Jim, a smoker, is addicted to nicotine. Because he smokes, he does not sign the form. The Plan allows Jim to avoid the surcharge as long as he participates in a smoking cessation program, regardless of whether he quits smoking. • Does the wellness program pass muster under the HIPAA nondiscrimination rules? Yes.

Example • The program satisfies the five additional requirements for Achievement-Based programs: • Limited reward • Reasonable design • Once-per-year availability • Enhanced version of the “similarly situated individuals” rule • Disclosure requirements

Other Laws

ERISA • If the program provides a medical benefit, it is probably either an ERISA plan or part of one • For most employers, ERISA coverage implies significant reporting, disclosure, and fiduciary obligations • Practice Tip: Evaluate program design before implementation

Two Common Programs • Health Risk Assessment – employer requires each new employee to complete a HRA as prerequisite to enrollment in health plan • Smoke-Free Workforce – employer adopts comprehensive wellness program, including on-site fitness facility, and refuses to hire smokers

ADA General Rules • Pre-Offer: May not make any pre-offer inquiries that are likely to elicit information about disabilities • Post-Offer: May not use any post-offer inquiries about disabilities unless they are job-related and consistent with business necessity • During Employment: May not make inquiries of employees about disabilities unless they are job-related and consistent with business necessity (e.g., to determine fitness for duty, to determine “direct threat,” or in connection with request for accommodation)

ADA • EEOC Enforcement Guidance on “Disability-Related Inquiries and Medical Examinations of Employees Under the ADA” (July 27, 2000) • Voluntary wellness programs and disability-related inquiries and medical exams under them (including medical histories, blood pressure screening, cholesterol testing, glaucoma testing, and cancer detection screening) are permitted as long as program is truly “voluntary” • “Voluntary” means an employer neither requires participation nor penalizes employees who do not participate

ADA • EEOC Informal Opinion Letter on “Health Risk Assessments” (March 6, 2009) • Requiring employees to take a health risk assessment as a prerequisite to obtain group health insurance violates the ADA • Because: • If not part of a wellness program, it is not job-related and consistent with business necessity; or • If part of a wellness program, it is not “voluntary” as there is a penalty for non-participation (loss of opportunity to obtain health insurance coverage)

ADA • EEOC has hedged a bit: • Its original informal opinion letter (dated January 6, 2009) also described the circumstances under which employers could offer employees inducements to participate in wellness programs without violating the ADA (i.e., as along as the inducement to participate did not exceed 20% of the cost of coverage under the plan, consistent with HIPAA regulations) • EEOC rescinded the above comments on March 6, 2009 (in an amended opinion letter) because the employer did not ask that particular question • EEOC is continuing to evaluate what level, if any, of financial inducement to participate in a wellness program would be permissible under the ADA

ADEA, Title VII, GINA, NLRA • ADEA – wellness programs may be unlawful if discriminatory based on age (as employees age, becomes more difficult to participate) • Title VII – wellness programs may be unlawful if discriminatory based on gender (e.g., one gross weight goal for all employees rather than body mass index goals based on gender) • GINA – wellness programs may be unlawful if genetic information obtained and used against an employee • NLRA – wellness programs may be mandatory subject of collective bargaining

State Privacy and Lifestyle Laws • State law constitutional right of privacy • In some states, it is unlawful to discriminate against an employee because of that employee’s off-duty, off-premises use of lawful agricultural products (such as tobacco and alcohol, and probably even food in general) • Mandatory components of wellness programs may violate the right of privacy or lifestyle laws (e.g., mandatory testing for cholesterol level, higher premiums for smokers etc.)

Smoke-Free Workforce Programs • Rodrigues v. EG Systems, Inc. d/b/a Scotts LawnService (D.Mass. 7/23/09) • Scotts implemented a comprehensive wellness plan • Many components, including a requirement that employees not smoke at any time, on or off duty • Scotts decided not to hire smokers

The Scotts Case • Required pre-hire nicotine testing; new hires had to submit to urinalysis testing • Rodrigues was offered a job contingent on being nicotine-free • He began working before test results were received; he tested positive and was fired • He filed a lawsuit under Massachusetts Civil Rights Act, Massachusetts wrongful termination law, Massachusetts Privacy Act, and ERISA (but not ADA or Mass. Fair Employment Practices Act)

The Scotts Case • He lost on the Civil Rights Act claim because the nicotine test did not constitute a “threat, intimidation or coercion” • He lost on the wrongful termination claim because the nicotine test did not rise to the level of being a “weighty public policy matter” (equivalent to protected rights under worker’s compensation, jury duty, voting, and whistle blowing laws)

The Scotts Case • He lost on the Privacy Act claim because the employer was a private employer and because he never attempted to keep private the fact he was a smoker • He lost on the ERISA claim (a § 510 retaliation claim) because he was not a “participant” in any ERISA benefit plan (he would not have been eligible for coverage until the first day of the month following 60 days of employment)

The Scotts Case • The case is currently on appeal to the First Circuit • A different result might have occurred if: (1) he had kept his smoking private; (2) he had already been an employee; (3) he had filed claims under ADA and Mass. FEPA; (4) employment had not been specifically contingent on passing a nicotine test; (5) the court had found he had already been “hired” (court still considered him an “applicant” even though he worked for 2 weeks before test results were received

Practical Lessons • Evaluate wellness programs carefully • Consider all potentially applicable legal constraints – both federal and state • Wait to announce to employees until after evaluation is completed • Make sure descriptions of HIPAA programs include “reasonable alternative standard” disclaimer

Thank you for your participation in the Employer Webinar Series. To view previous webinar presentations or to obtain a recorded version of any of the previous webinar presentations, contact your local UBA Member Firm.

This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Ben