Simplify Compliance Benefits Brief
Employers offer wellness plans for a number of reasons, but the main reasons are often to contain health care costs and to encourage employees to improve their health and prevent disease. There are many different laws and legal considerations that govern wellness plans. The design of an employer’s wellness plan will often determine which federal law will apply. This brief will touch on some of these laws but employers will also have to consider additional laws upon implementation of a wellness plan. It is important to consult a trusted advisor when designing a wellness plan.
The Health Insurance and Portability and Accountability Act (HIPAA) Nondiscrimination Rules
An employer should begin with HIPAA when reviewing their wellness plan compliance. In order to determine if your wellness plan has to comply with HIPAA’s nondiscrimination rules, an employer will need to determine if their wellness plan is a “group health plan” or part of a group health plan that falls within HIPAA’s wellness exception.A “group health plan” is broadly defined by ERISA as an employee welfare benefit plan that provides medical care. Determining if the wellness plan provides medical care may not be an easy determination. Examples of wellness plans that are not group health plans include a fitness center or simply providing a health newsletter.
Caution: Even if a wellness plan is not a group health plan, it may still be affected by various laws if it provides rewards or incentives that relate to a major medical coverage (for example, using incentives that reduce premiums).
HIPAA Nondiscrimination Wellness Exception: In general, HIPAA prohibits group health plans from using “health status-related factors” to discriminate among similarly situated individuals in terms of plan eligibility, employee contribution and premium amount. Based on the nondiscrimination rules, it would seem that all wellness plans would violate HIPAA. However, HIPAA created an exception from the nondiscrimination rules for certain types wellness plans which fall into two categories: (1) participation-only plans, and (2) health-contingent plans. A health-contingent wellness plan may be an activity-only wellness plan or an outcome-based wellness plan. Determining whether the wellness plan falls into one of these three categories requires deeper examination than the scope of this brief.
Compliance Tip: For a health contingent wellness plan, the employee should provide an employee notice that discloses the availability of a reasonable alternative standard.
The Americans with Disabilities Act (ADA)
Employers should also consider the interaction of the ADA with their wellness plan to determine compliance. Under the ADA, employers are not allowed to discriminate against individuals with disabilities. Also, an employer can only make disability-related inquiries or require medical exams if they are job-related.
Wellness plans that include disability-related inquires or medical examinations must comply with the ADA wellness rules. For example, health risk assessment questionnaires and biometric screenings in connection with a wellness plan are covered by the ADA. If an employer has this type of wellness plan, the employer must structure the plan so it fits within the ADA regulations. The wellness plan must (1) be voluntary, (2) have a 30% incentive limit (this requirement has currently been vacated by a court order), (3) be reasonably designed, (4) the information must be kept confidential, and (5) the employer must provide a notice to employee. EEOC has provided a model notice.
While the 30% incentive limit requirement was vacated by court order, the rest of the listed requirements are still valid. Employers should continue to structure their wellness plans covered by the ADA to comply with the above requirements.
The Genetic Information Nondiscrimination Act (GINA)
Another law to consider when reviewing your wellness plan is GINA. GINA has two main parts, Title I and Title II (Title I applies to group health plans and Title II applies to employers).
Title I of GINA prohibits group health plans from (1) adjusting group premium or contribution rates on the basis of genetic information, (2) requesting or requiring an individual or an individual’s family member to undergo genetic testing, and (3) requesting, or purchasing genetic information for underwriting purposes or prior to or in connection with enrollment. Genetic information includes, but is not limited to the genetic test of an individual or their family members and family medical history. GINA has a broad definition of family members, which includes the individual’s spouse.
If the employer’s wellness plan uses a health risk assessment (HRA) for an employee or an employee’s spouse or requires a spouse to complete a biometric screening, it would be subject to GINA. Under GINA, a group health plan may not provide a reward or incentive to an individual for completing a HRA that requests genetic information, such as family medical history. Also, an employer cannot collect “genetic information” prior to, or in connection with enrollment, or anytime for “underwriting purposes” (for example, wellness plans may offer incentives such as a discount on premiums that would affect plan cost). In order to stay compliant with GINA, employers could structure their HRAs to include no incentive or rewards. If an employer is going to have an incentive in their wellness plan, the plan should be structured so each individual earns their own reward.
Title II applies to employers with 15 or more employees. GINA prohibits employers from requesting genetic information of an employee or family member. However, there is an exception to Title II for “voluntary” wellness plans offered by the employer, as defined in the regulations. Employers may request family medical history under a wellness plan if the employee voluntarily provides the information. Also, the wellness plan must be reasonably designed to improve health or prevent disease and the employee must give written authorization to the employer prior to providing genetic information or providing family history.
GINA also provided that wellness plans could offer a maximum incentive limit of 30% for information provided by an employee’s spouses’ manifestation of a disease or disorder as part of a HRA. The incentive for providing the spouse’s health history could be in addition to the 30% available to employees under the ADA (60% total). As explained below, the maximum incentive limit has been vacated by court order.
AARP v. EEOC
AARP challenged the ADA and GINA rules’ that state that a wellness plan can offer a maximum incentive of 30% of the total cost of employee-only coverage and still be “voluntary”. The AARP argued that the incentive limit was arbitrary, coercive, and involuntary. The court ultimately agreed with AARP and vacated the incentive provisions, effective January 1, 2019. The EEOC formally removed the incentive sections of the ACA and GINA regulations, but has not proposed replacement language. This leaves uncertainty for employers who have wellness plans covered by the ADA and GINA. Until further guidance is issued, an employer who offers incentives with their wellness plan should carefully consider their plan design.
Affordable Care Act (ACA)
The ACA had a big impact on wellness plans and included many provisions that promoted and supported wellness plans.
The ACA implemented market reforms and mandates that apply to group health plans (for example, out-of-pocket maximums and prohibitions on annual and lifetime dollar limits on essential health benefits). When a wellness plan is tied to a major medical plan, they are complying with the ACA’s PHSA mandates by default if the group health plan is already complying the ACA. However, if a wellness plan is a stand-alone group health plan, and no exemption applies, they will have to comply ACA’s PHSA mandates on their own.
Employer Shared Responsibility Payment: For ALEs (applicable large employers) who need to determine if their plan meets minimum value or is affordable, employers only have to take into consideration incentives related to tobacco use in their wellness plan. If the wellness plan offers any other kind of incentive, employers do not have to take those into account when determining minimum value and affordability. Tobacco-related incentives that affect deductibles, copayments, or other cost-sharing will be treated as earned in determining a plan’s minimum value. Tobacco-related incentives that affect premiums will be treated as earned in determining a plan’s affordability.
W-2 Reporting: Large employers who are required to file at least 250 W-2’s must report the total cost of employer-sponsored group health coverage on employee’s W-2s. The IRS has indicated that coverage provided under a wellness plan is includible in the aggregate reportable cost only to the extent that the coverage is provided under a plan that is a group health plan. Significantly, an employer is not required to include the cost of coverage provided under a wellness plan if that employer does not charge a premium with respect to that type of coverage for purposes of COBRA or other federally required continuation coverage (or the employer is not subject to COBRA). If, however, the employer charges a premium with respect to that type of coverage, reporting is required.
The Employee Retirement Income Security Act (ERISA)
If your wellness plan provides medical care, as discussed above, it will be subject to ERISA. If the wellness plan is subject to ERISA, it must comply with ERISA’s applicable compliance and disclosure requirements, including having a written plan document, distribution of a summary plan description and filing a Form 5500 (if the plan has more than 100 participants at the beginning of the plan year). Other compliance obligations may also apply, like establishing claims procedures.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
As discussed above, if your wellness plan is a group health plan, it would be subject to COBRA (if the employer is subject to COBRA’s provisions). If the employer’s wellness plan is embedded into their major medical plan, the employer would not have to separately comply with COBRA’s requirements for their wellness plan. If the wellness plan is a stand-alone plan, however, the wellness plan would have to separately comply with COBRA’s notice and election process.
Compliance Tip: Only employees who are eligible for the group health plan should be eligible for the wellness plan.
• • • ACTION ITEMS • • •
- Determine which laws apply to your wellness plan to ensure compliance (keep in mind that compliance with one law does not guarantee compliance with another law)
- Comply with the notice requirements of each law (if applicable to your wellness plan)
- Determine COBRA obligations
- Monitor upcoming litigation (watch for EEOC’s new proposed regulations or other guidance)
This Benefits Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.