Embed Size (px)
Citation preview
What You Need to Know AboutEmployee Wellness Plans
October 27, 2015
Garrett Fenton
2
Background – Rationale for Wellness Programs
• Keep healthy employees healthy• Encourage employees with at-risk health factors to make
better lifestyle choices (smoking, obesity, high cholesterol)• Direct employees with chronic conditions to disease
management programs (hypertension, diabetes, asthma)• Some challenge effectiveness of wellness programs,
particularly those involving penalties or surcharges for non-compliance But over 90% of large employers (200+ employees) that
provide health benefits offer at least 1 wellness program• Recurring legal theme: No good deed goes unpunished!
3
Background – Categories of Wellness Programs
• Laws regulating wellness program will be affected by status of program as a group health plan
• Wellness programs as an employer’s group health plan Programs providing “medical care” Primary focus of this presentation
• Wellness programs offered outside a group health plan Examples: Subsidizing healthy food choices in employee
lounge/cafeteria; giving pedometers to all employees to encourage walking; charging a fine for smoking on the job
4
Background – Primary Legal Issues
• HIPAA Wellness Rules • Income and Employment Tax Issues• Americans with Disabilities Act (“ADA”)• Genetic Information and Nondiscrimination Act
(“GINA”)• Other
5
Background – Enforcement
• Employee lawsuit • Agency enforcement via excise tax or administrative action Variety of agencies may be involved
Treasury Department/IRS Department of Labor Department of Health and Human Services EEOC State agency
Agencies may not have same perspective: Rules may have conflicting goals (promoting wellness plans versus protecting against discrimination)
6
HIPAA Wellness Regulations
• Since 1996, HIPAA has prohibited a group health plan from discriminating in eligibility, benefits or premiums on the basis of a health factor (e.g., health status, medical condition or medical history) Consequence of violating: IRS-imposed excise tax; self
reported on Form 8928 Form 8928 has been around since 2009 (first filed to self-
report violations in 2010)• Tax personnel often not involved in wellness programs, but
violation can give rise to excise tax; HR/tax must coordinate
7
Group Health Plan Nondiscrimination Rules and Excise Taxes (cont.)
• ACA updated and codified HIPAA wellness program regulations IRS, HHS, and DOL issued updated regulations effective
January 1, 2014
• Different rules in place for different programs: Participatory programs Health-contingent programs
8
Types of Wellness Programs
WELLNESS PROGRAM
Participatory Health-Contingent
Activity-Only
Outcome-Based
9
Participatory Programs
• Passive in nature; either no incentive, or incentive conditioned solely on participation rather than achieving health target
• Not discriminatory if available to all similarly situated individuals, regardless of health status
• No limit on financial incentives• Examples: Reimbursing employees for gym membership Reimbursing cost of weight loss or smoking cessation program
(regardless of outcome) Rewarding employees for completing health risk assessment
without any further action needed
10
Health-Contingent Programs
• Must satisfy health standard to obtain reward/avoid penalty• Two sub-categories: Activity-only and Outcome-based Activity-only: Requires performance/completion of activity
related to health factor in order to obtain reward, without needing to attain or maintain specific outcome Examples: Rewarding employee/dependents for walking 5 miles
per week, or completing diet program regardless of outcome Outcome-based: Requires employee/dependent to attain or
maintain specific health outcome in order to obtain reward Examples: Reduced health plan premiums (or surcharges)
based on tobacco use, waist circumference, etc.; gift card for staying under specified maximum BMI, cholesterol, blood pressure
11
Health-Contingent Programs: 5 Safeguards
• Health-contingent programs often do discriminate based on health factor, which regulations permit if 5 safeguards met
• (1) Total rewards for all health-contingent programs do not exceed 30% of total cost of coverage (increased to 50% if program designed to prevent or reduce tobacco use)
• (2) Provide opportunity to qualify at least annually Caution: Potential cafeteria plan issue if mid-year change in pre-
tax premiums• (3) Reasonably designed to promote health or prevent disease Outcome-based program: Must offer reasonable alternative
standard to anyone who fails to meet initial standard (tobacco-free, waist circumference, BMI, etc.)
12
Health-Contingent Programs: 5 Safeguards
• (4) Available to all similarly-situated individuals Activity-only program: Must offer reasonable alternative
standard or waiver if (1) unreasonably difficult due to medical condition to satisfy standard, or (2) medically inadvisable to attempt to satisfy standard (may require doctor note/verification, if reasonable)
• (5) Disclose availability of alternative standard in all plan materials describing program’s terms, and certain other disclosures (regulations provide model language)
13
Wellness Programs: Examples
• Plan provides annual 55% premium discount to employees who attend a monthly health seminar Permissible; participatory program, so 5 standards (30% / 50% limit)
N/A
• Plan offers 2 wellness programs (1) 30% annual premium discount if cholesterol count < 200;
alternative standard available (2) Reimbursement of cost of a monthly gym membership
First program is health-contingent and subject to 5 standards; second program is participatory
Both programs may be offered simultaneously
14
HIPAA Wellness Regulations – Tax Penalties for Noncompliance
• Potential penalty for violating: Excise tax (Code § 4980D) $100 per day, per affected individual (subject to limits)
Employer self-reports and pays using IRS Form 8928 Filed by due date for employer’s income tax return for year (without
regard to extensions) Statute of limitations does not run until Form 8928 is filed!!!
• Participant cause of action under ERISA• Tax personnel need to be involved in design, implementation,
and operation of wellness programs to ensure compliance and mitigate employer’s risk and financial/excise tax exposure
• Note: Other (non-tax) consequences of violating nondiscrimination rules (ERISA cause of action)
15
Income and Employment Tax Issues
• Tax 101: Reward/incentive is taxable income and wages unless specifically excludable
• Potential tax-free incentives Contribution to Health FSA, HRA or HSA
Subject to nondiscrimination rules; comparable contribution requirements for HSAs not offered through cafeteria plan
Reduced health plan deductible/cost-sharing Reduced employee premium/contribution (not actually “tax free”
for most employees) Flex credits employee can use on “qualified” cafeteria plan
benefits
16
Income and Employment Tax Issues (cont.)
• Potential tax-free incentives (cont.) On-site athletic facilities, if operated by employer and
substantially used by employees and spouses/dependents Employee discounts on goods/services sold by employer
Subject to limits under Code §132(c) De minimis fringe benefits
Caution: Potential cafeteria plan issues• Incentives that are or may be subject to income tax Cash payments, regardless of amount Gift cards All expense paid trip to a resort (without business purpose) Payment of offsite gym membership
17
Income and Employment Tax Issues (cont.)
• Gift cards are generally taxable, regardless of amount May be tax free if use is limited to medical expenses (gift card
“HRA” subject to detailed rules) “Statutory employer” issues for insured group coverage
If insurer administers program that provides taxable benefit (e.g., gift cards), issues can arise as to which party is “employer” for information reporting and withholding obligations
Which party has “control of payment” under fact-specific analysis May need to coordinate with insurers
Ex: Group health insurer determines eligibility, provides funding, etc.; insurer, not common law employer, may be responsible for reporting incentive on Form W-2 (not 1099)
18
Disability Discrimination under the ADA
• ADA: Employer may not require medical exam or inquire as to employee’s disability (or nature or severity thereof) unless job-related and consistent with business necessity Health risk assessments and other wellness screenings generally
are not job-related and consistent with business necessity• ADA safe harbor: Employer can establish, sponsor, observe or
administer “bona fide benefit plan” based on underwriting, classifying, or administering risks, if consistent with state law, and not used as a subterfuge to evade ADA’s purposes
• EEOC guidance: “Voluntary wellness program” does not violate ADA if medical records kept confidential and separate from employee personnel records Voluntary = Neither requires participation nor penalizes those who
opt out
19
ADA Issues – Voluntary Wellness Programs
• Can monetary incentives make a program not “voluntary”? January 2009 EEOC discussion letter: “Voluntary” if
incentive not > 20% of cost of coverage, consistent with then-applicable (pre-ACA) wellness rule; rescinded two months later because EEOC “continuing to examine”
April 16, 2015: EEOC proposed regulations Attempt to be consistent with ACA/HIPAA rules; several
inconsistencies and open issues remain
20
ADA Issues – Insurance Safe Harbor
• Employer may establish, sponsor, observe, or administer terms of “bona fide benefit plan” based on underwriting, classifying, or administering risks, if consistent with state law and not a subterfuge to evade purposes of ADA
• Seff v. Broward County: Biometric screening and health risk assessment; state governmental employer added $20 per pay period to premiums for employees who opted out 11th Circuit: Wellness program did not violate ADA; was
within ADA insurance safe harbor, thus bypassing EEOC “voluntary” analysis entirely
EEOC strongly disagrees with decision, which renders “voluntary” ADA exception moot
21
ADA – Open Issues
• Outstanding EEOC litigation (“voluntary” wellness programs)
• Legislative Response to EEOC Cases Congressional hearings: Lawmakers expressed concern with
EEOC’s litigation efforts and position House and Senate bills introduced this year would clarify
interaction of ACA wellness rules and ADA (and GINA), retroactive to 3/23/10 No violation of ADA (or GINA) if wellness program meets ACA
requirements No GINA violation if wellness programs collect info about
manifested diseases or disorders of employees’ family members who participate in wellness program
• Final EEOC regulations on “voluntary” wellness incentives
22
GINA
• GINA prohibits group health plans from: Restricting enrollment or adjusting premiums for similarly
situated individuals, based on their genetic info Requesting or requiring individual (or family member) to
undergo a genetic test Requesting, requiring, or “buying” genetic info (1) prior to or in
connection with enrollment, or (2) any time for underwriting Issues often arise in the context of health risk assessments
• Genetic info defined broadly; includes genetic tests or services for employee and family, and family medical history Does not include person’s own manifestation of disease Family member: Four degrees of kinship (e.g., first cousins),
including spouses and adopted children
23
GINA (cont,)
• Examples: A plan may not solicit or collect genetic/family medical history
info (e.g., as part of a health risk assessment) before the employee’s enrollment date, nor in connection with the employee’s enrollment or eligibility
A plan may not offer financial rewards at any time in return for providing genetic/family medical history info (e.g., as part of a health risk assessment)
Exception for incidental collection in certain cases Beware of open-ended questions (“Is there anything else
relevant to your health that you would like us to know or discuss with you?”)
24
GINA (cont.)
• HRA options in light of GINA: Include family medical history questions on a voluntary HRA
distributed after and unrelated to enrollment, and provide no reward for completing
Offer a reward for completing an HRA that does not solicit any genetic/family medical history info, and states explicitly that such info should not be provided
Bifurcated approach with two HRAs Current DOL guidance does not appear to permit en employer
to bifurcate a single HRA
• EEOC may deem financial incentives to induce spouses or dependents to complete an HRA to violate GINA, even if the HRA asks for no family medical history info from them
25
GINA (cont.)
• Other (non-HRA) options in light of GINA Reward participation in an annual physical, even if doctor
asks for family medical history information Provide more favorable cost-sharing for genetic screenings Reward participation in a voluntary disease management or
prevention program But employer may not offer rewards for providing genetic info
26
Miscellaneous
• ERISA• COBRA• ACA “Market reforms” (e.g., extending to children up to age 26) Impact on employer shared responsibility (“pay-or-play”) rules
Affordability and actuarial value determinations “Cadillac tax” calculation
• HIPAA Privacy and Security• Fair Labor Standards Act (“FLSA”)• Title VII Discrimination• Age Discrimination in Employment Act (“ADEA”)• State laws (and possible ERISA preemption)
