How to Administer Wellness Programs in Today’s Regulatory Environment Larry Grudzien Attorney at Law
AGENDA • Review requirements under: • HIPAA • Internal Revenue Code • ERISA • GINA • ADA • ACA • Take your questions •
Wellness Program Requirements Under HIPAA
FUNDAMENTAL PRINCIPLES Group health plans and insurers cannot discriminate against participants on the basis of any health factors. Discrimination encompasses: • Eligibility: Enrollment, effective date, waiting periods, benefits. - • Premiums or contributions: Including discounts, rebates or differential mechanisms. - But wellness plans are an exception.
FUNDAMENTAL PRINCIPLES Violations of HIPAA nondiscrimination rules can result in: • Code-based excise taxes of $100 per day per person per failure. • DOL audit and civil action to enforce rules. • Private right of action under ERISA §502 to enforce rules.
WELLNESS PROGRAMS IN GENERAL • Guidance is provided in the final regulations for evaluating the permissibility of wellness programs under HIPAA’s nondiscrimination requirements. • Separate requirements apply under HIPAA depending upon whether the wellness program is: - a health-contingent program (it provides a reward that is contingent on satisfaction of a health-contingent standard related to a health factor); or - a participation-only program (it simply rewards participation in the program regardless of whether the individual satisfies a health- contingent standard related to a health factor).
WELLNESS PROGRAMS IN GENERAL • In a nutshell, if the program is health- contingent-based, the final regulations require the program to meet five specific conditions. • If the program is participation-only, the final regulations require only that the program be available to all similarly situated individuals.
WHAT IS A WELLNESS PROGRAM? • A wellness program can take many forms (and might not even be called a wellness program), but its defining feature is usually a reward to encourage healthier lifestyles — reduced premiums or co-pays in exchange for quitting smoking or reducing bad cholesterol levels, for example. • Employers and insurers hope that by encouraging healthier lifestyles, health care costs can be contained or reduced. • HHS has recommended that employers “consider providing health promotion or wellness programs and disease management programs for employees as part of their health benefits.”
WHAT IS A WELLNESS PROGRAM? • Some wellness programs simply make their services available to those who wish to use them, but others target individuals who have specific medical conditions, such as asthma or diabetes, and make special help available to them. • For example, the program may provide case managers who will help monitor compliance with medication protocols and schedule appointments with physicians or therapists; special educational opportunities; newsletters; and discounts on co-pays for required medications.
WHAT IS A WELLNESS PROGRAM? • The rewards offered by wellness programs can vary greatly, from T-shirts or water bottles to significant reductions in premiums, co-pays, or deductibles. • In addition, the health-contingents necessary to qualify for the reward can vary greatly, from actually quitting smoking or lowering cholesterol to merely attending a smoking-cessation class or signing a certification that weekly exercise sessions have been completed.
HEALTH RISK ASSESSMENTS HRAs HRAs are often used by wellness programs to identify the individuals who can benefit the most from the wellness programs and who represent the greatest opportunities for cost containment. In addition, health risk assessments can be used by plan participants and beneficiaries to identify areas of possible concern and to set health-related goals.
HEALTH RISK ASSESSMENTS (HRAS) • HRAs can also be much more hands-on and can range from basic screenings at the employee’s worksite (e.g., blood pressure, cholesterol, body mass index, blood sugar, and bone density) to complete physical examinations at a doctor’s office or a hospital. • Often the initial HRA is used as a baseline against which subsequent assessments are measured to track progress toward health-related goals. • An employer cannot make taking HRAs mandatory to receive coverage.
PARTICIPATION-ONLY PROGRAMS Wellness programs that do not condition eligibility for a reward upon a participant’s ability to meet a health Health -Contingent are permissible if participation in the programs is available to all similarly situated individuals. • Examples of participation-only programs include: - incentives to participate in a health fair or testing (regardless of outcome); - waiver of co-payment/deductible for well-baby visits; - reimbursement of health club membership; - reimbursements for smoking cessation programs (regardless of outcome); and - a program that rewards employees who complete a health risk assessment, without further action related to health issues identified as part of the health risk assessment.
HEALTH-CONTINGENT-BASED PROGRAMS • Health-contingent wellness programs require individuals to satisfy a health-contingent standard related to a health factor as a condition for obtaining a reward. • A “reward” includes both an incentive in the form of a reward (e.g., premium discount, waiver of cost sharing amount, an additional benefit or any financial or other incentive) and an incentive in the form of avoiding a penalty (e.g., the absence of a premium surcharge or other financial or nonfinancial disincentive).
HEALTH-CONTINGENT-BASED PROGRAMS Health-contingent programs are further divided into activity-only programs and outcome-based programs: • Activity-only programs require individuals to complete an activity related to a health factor to obtain the reward, but the activity need not result in a specific health outcome. For example, the employer may provide a reward for a walking, diet, or - exercise program. • Outcome-based programs require individuals to attain or maintain a specific health outcome in order to obtain the reward. For example, an employer could provide a reward for not smoking, for - obtaining a certain result on a biometric screening, or for maintaining a certain body mass index (BMI).
HEALTH-CONTINGENT-BASED PROGRAMS Each health-contingent program must meet five requirements to be exempt from HIPAA nondiscrimination provisions. • The Reward Must Be No More Than 30% of the Cost of Coverage; • The Program Must Be Reasonably Designed to Promote Health or Prevent Disease; • The Program Must Give Individuals an Opportunity to Qualify for the Reward at Least Once a Year; • The Reward Must Be Available to All Similarly Situated Individuals; and • The Plan Must Disclose That Alternative Health-Contingents (Or Waivers) Are Available.
HEALTH-CONTINGENT-BASED PROGRAMS The Reward Must Be No More Than 30% of the Cost of Coverage. • The reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as a deductible, co-payments, or co-insurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan. • If only the employee may participate in the wellness program, then the reward must not exceed 30% of the cost of employee-only coverage .
HEALTH-CONTINGENT-BASED PROGRAMS The Reward Must Be No More Than 30% of the Cost of Coverage – An Exception. • The maximum reward increases from 30% to 50% for wellness programs that are designed to prevent or reduce tobacco use. • For a wellness program that is exclusively a tobacco-use prevention program, the incentive could be as high as 50%. • But if the wellness program has incentives for tobacco use and other health- contingent factors (e.g., cholesterol levels), the incentives not related to tobacco use would have to be capped at 30%, and the total of all incentives (including the tobacco-related incentives) would be capped at 50%.
HEALTH-CONTINGENT-BASED PROGRAMS The Program Must Be Reasonably Designed to Promote Health or Prevent Disease. A program meets this requirement if it: • has a reasonable chance of improving the health of, or preventing disease in, participating individuals; • is not overly burdensome; • is not a subterfuge for discriminating based on a health factor; and • is not highly suspect in the method chosen to promote health or prevent disease.
HEALTH-CONTINGENT-BASED PROGRAMS The Program Must Be Reasonably Designed to Promote Health or Prevent Disease. • There does not need to be a scientific record that the chosen method promotes wellness, and this requirement is intended to be easy to satisfy and prohibits bizarre, extreme, or illegal requirements in a wellness program. • There are examples in in the final regulations that serve as safe harbors, so that an employer can adopt a program identical to one described as satisfying the example and be assured of satisfying the requirements in the regulations. • Wellness programs similar to the examples also would satisfy the reasonably designed requirement. • Plans or issuers should not feel constrained by the relatively narrow range of programs described by the examples but want plans and issuers to feel free to consider innovative programs for motivating individuals to make efforts to improve their health. • This determination must be based on all relevant facts and circumstances.
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