You don’t have to be a health insurance expert to know that healthcare coverage makes up a significant portion of businesses’ operating costs. Looking ahead to next year, Willis Tower Watson predicts the average annual per-employee cost for health insurance will increase 5.3% to $12,850 (up from $12,200 in 2017). Understandably, employers are always looking for ways to get a firmer handle on rising healthcare costs and often turn to wellness programs as a possible solution.
Three Important Federal Laws That Affect Wellness Plans
Before you launch a wellness program, it’s important to do your homework. Mistakes can be costly for both your employees and your bottom line. One area you should pay particularly close attention to is the intersection of wellness plans and federal law. There are several comprehensive federal statutes that impact workplace wellness plans, so before you put your plan in place, make sure you consult with a legal expert who can help you stay on the right side of the law.
1. The Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act (HIPAA) includes nondiscrimination rules that apply to wellness plans being offered in connection with group health plans. Under HIPAA, workplace wellness programs are divided into two categories: participatory wellness programs and health-contingent wellness programs.
Participatory Wellness Programs
The main difference between the two programs is that participatory wellness programs are not required to meet the same nondiscrimination standards as health-contingent wellness programs. Examples of a participatory program might include gym membership reimbursement, a diagnostic testing program (with rewards not based on outcomes), a program that reimburses employees for the cost of smoking cessation programs (not based on whether the employee actually quits smoking) or a program that provides rewards for attending free health education seminars.
As long as participation in a participatory wellness program is made available to all individuals (regardless of health status), the program automatically complies with HIPAA’s nondiscrimination requirements without having to satisfy any additional standards. The government does not set a limit on financial incentives for this type of wellness program.
Health-Contingent Wellness Programs
By contrast, health-contingent wellness programs require individuals to meet certain health-related standards to qualify for a reward. There are two types of health-contingent wellness programs: activity based and outcome based.
- Activity based health contingent wellness programs require an individual to perform or complete an activity related to a specific health factor to obtain a reward (for example: walking, diet, or exercise programs), but do not require enrollees to reach a specific health outcome.
- Outcome based wellness programs require an individual to reach or maintain a certain health outcome to earn a reward (for example: quit smoking, lower cholesterol, or meet exercise goals). Generally, these programs have two tiers: (1) a measurement, test, or screening as part of an initial standard; and (2) a larger program that then targets individuals who do not meet the initial standard with wellness activities. Outcome based programs allow plans and issuers to target specific individuals (such as those with high cholesterol for participation in cholesterol reduction programs, or those who use tobacco for participation in tobacco cessation programs), rather than the entire enrolled population. The reward is then based on health outcomes or participation in reasonable alternatives.
Under HIPAA, group health insurance issuers are prohibited from discriminating against individuals in terms of eligibility, premiums, or benefits based on a health factor. An exception to this rule allows benefits, premiums (including cost sharing), or contributions to vary based on participation in a wellness program. However, the program must comply with the following nondiscrimination standards:
- Frequency of opportunity to qualify: Health-contingent wellness programs must allow participants an annual opportunity to qualify for the award.
- Size of the reward: Beginning in 2014, the maximum permissible reward is 30 percent of the total cost of health coverage (50 percent for wellness programs designed to prevent or reduce tobacco use). The total cost refers to the entire cost of the entire premium, including portions paid by both employer and employee. The same reward limitations apply to any dependents of participants.
- Reasonable design: Health-contingent wellness programs must be reasonably designed to promote health or prevent disease. A wellness program is deemed “reasonably designed” if it has a reasonable chance of improving the health of (or preventing disease in) participating individuals and is not overly burdensome, a subterfuge for discrimination based on a health factor, or highly suspect in the method chosen to promote health or prevent disease.
- Uniform availability and reasonable alternative standards: The full reward under a health-contingent wellness program must be offered to all eligible participants. Because not all people will be able to meet ideal outcomes, health-contingent wellness programs must provide a reasonable alternative standard (or waiver) when necessary.
- Notice of other means for qualifying for the reward: Issuers are required to provide written documentation of the availability of said alternatives that allow for qualification of the reward for wellness programs.
2. The Americans with Disabilities Act
The Americans with Disabilities Act (ADA) prohibits employers with 15 or more employees from discriminating against individuals with disabilities. To comply with the ADA, employers need to structure their wellness plans to ensure that qualified individuals with disabilities have equal access to the program’s benefits and are not required to complete additional requirements in order to obtain equal benefits under the wellness program.
Wellness programs may ask employees to answer questions on a health risk assessment (HRA) or undergo biometric screenings measuring blood pressure, cholesterol levels, or for the presence of nicotine or tobacco. However, programs that include questions about employees’ health or require a medical examination are subject to the ADA’s final rule requirements.
Employers must provide reasonable accommodations that help employees with disabilities to fully participate in wellness programs, including having the ability to avoid any penalties or earn any associated rewards. For example, if an employer requires employees to attend a nutrition class, they must provide a sign language interpreter for a deaf employee who requests one in order to participate in the class.
The ADA mandates that medical information obtained as part of a wellness program must be kept confidential. Employers may only receive medical information in aggregate form specifically so the information collected does not disclose the identity of specific employees. Employers cannot require employees to agree to the sale, exchange, transfer or other disclosure of their health information to participate in a wellness program or to receive an incentive.
Employees cannot be required to participate in a wellness program, nor can they be denied health insurance or be subject to reduced health benefits, be disciplined for, nor retaliated against, for not participating. In addition, employers are not permitted to interfere with the ADA rights of employees who choose not to participate in wellness programs and may not coerce, intimidate, or threaten employees in order to force their participation.
Employers must also disclose what medical information will be collected, who will be receiving said data, the intended use for the information, and the measures in place to keep it confidential.
3. The Genetic Information Nondiscrimination Act
The Genetic Information Nondiscrimination Act (GINA) is concerned primarily with protecting individuals who may be discriminated against because an employer thinks they are at increased risk of acquiring a condition in the future. These rules prohibit employers from discriminating against employees or applicants based on their genetic information. In addition, GINA restricts employers from requesting, requiring or purchasing genetic information.
Genetic information is defined as information about an individual’s genetic tests, the genetic tests of family members of the individual, the manifestation of a disease or disorder in family members of the individual, any request for, or receipt of, genetic services provided, or participation in clinical research that includes genetic services provided to the individual or a family member of the individual.
GINA mandates that group health insurance issuers cannot adjust premiums or contribution amounts for a plan, or any group of similarly situated individuals under the plan, based on genetic information of one or more individuals in the group. However, premiums may be increased for the entire group based upon the manifestation of a disease or disorder of an individual enrolled in the plan.
Under GINA, plans and issuers must ensure that any HRA (health risk assessment) conducted prior to, or in connection with, benefit enrollment does not collect genetic information, including family medical history. A plan may use an HRA that requests family medical history, but only if it is requested to be completed after enrollment. There cannot be any premium reduction or other reward tied to completing the HRA.
Plans may use two separate HRAs: one that collects genetic information, such as family medical history, that is not tied to a reward, or an HRA that does not request genetic information, but can be tied to a reward. Examples of genetic testing would be a test that looks for the genetic variants associated with a predisposition to certain types of diseases or cancers, such as BRCA1/BRCA2 for breast cancer. Non-genetic testing could include an HIV test, drug or alcohol testing, blood sugar levels, and cholesterol screening. Genetic testing by the employer is not allowed.
In addition to asking an employee directly about genetic information, a request for genetic information could include conducting an internet search on an individual in a way that is likely to result in obtaining genetic information, listening to third-party conversations, searching an individual’s personal effects for the purpose of obtaining genetic information, or making requests for information about an individual’s current health status in a way that is likely to result in obtaining genetic information.
Instances that genetic information may be acquired and not be in violation of GINA could include information that is acquired inadvertently, if genetic information is provided on a voluntary basis in the form of family medical history in conjunction with certification requirements of the Family and Medical Leave Act (FMLA), if the information comes from sources that are commercially and publicly available (newspapers, books, magazines and electronic sources), or if employers conduct DNA testing for law enforcement purposes in a forensic lab for human remains identification.
The Right Employee Benefits Broker Can Keep Your Wellness Program Compliant
If these federal laws make your eyes glaze over, we totally understand. For some companies, the burden of compliance keeps them from launching wellness initiatives, which is a real shame. Many other companies are operating wellness initiatives in direct violation of many of these laws, unbeknownst to them. If your company is in either of these camps, give us a call. Our on-staff Medical Director and compliance oversight team can get your wellness initiatives back on track. Our main goal is helping companies cultivate meaningful benefits packages for their workforces — and wellness programs are no exception.
How are you keeping your wellness program compliant? Leave us a comment below or contact us. We’d love to hear from you!
The JP Griffin Group consults for discerning companies coast-to-coast, ranging in size from 10 to more than 30,000 employees. In addition to our Scottsdale, Arizona headquarters, we have bi coastal offices in Seattle, WA and Washington, DC.