Wellness and Disease Management Programs: What is legal under HIPAA, GINA and the ADA? May 2011 Stacy H. Barrow May 2011 © Proskauer1

2 Agenda “State of the Union” on health reform Review of HIPAA’s nondiscrimination rules Review of DOL’s wellness plan requirements EEOC’s effect on wellness and disease management programs ­ Genetic Information Nondiscrimination Act (GINA) ­ Americans with Disabilities Act (ADA) ­ Seff v. Broward County – rejected by Florida Federal District Court! Small business wellness grants under PPACA Materials are up-to-date as of April 14, 2011 May 2011 © Proskauer

3 Is health care reform going away?  Repeal and Replace  HR 2: “An Act to repeal the job-killing health care law”  HR 9: “Instructing certain committees to report legislation replacing the job-killing health care law”  Termination of Funding  Wholesale Changes to Mandates  None of the Above  However, free choice vouchers and 1099 reporting have been repealed March 2011 © Proskauer

4 Is health care reform constitutional?  About 20 different cases pending  3 Federal Courts: Constitutional  2 Federal Courts: Unconstitutional  Cases primarily focus on individual mandates  Supreme Court will ultimately decide March 2011 © Proskauer

5 Background 1996: HIPAA added Part 7 of ERISA to counter certain discriminatory practices by group health plans and health insurance issuers 2001: DOL, IRS and HHS jointly issue interim final nondiscrimination rules and proposed regulations for wellness programs 2006: DOL, IRS and HHS jointly issued final regulations on group health plan nondiscrimination provisions and wellness programs. 2009: EEOC issues two informal discussion letters on “voluntary” incentives 2010: PPACA codifies the wellness regulations ­ PPACA also increases the 20% cap on rewards to 30% for plan years beginning on or after January 1, 2014 (with the possibility that DOL, IRS and HHS may increase the cap to 50% in the future) May 2011 © Proskauer

6 General Nondiscrimination Rules under HIPAA Individuals cannot be denied eligibility for benefits or charged more for coverage because of any “health factor,” including: ­ Health status ­ Medical condition (both physical and mental) ­ Claims experience ­ Receipt of health care ­ Medical history ­ Genetic information ­ Evidence of insurability ­ Disability May 2011 © Proskauer

7 General Nondiscrimination Rules (cont.) “Evidence of Insurability” includes conditions arising from acts of domestic violence, as well as participation in high risk activities (e.g., motorcycling, snowmobiling, horseback riding, skiing, etc.) Health Risk Assessments are permitted under HIPAA, as long as not used to deny, restrict or delay eligibility or determine individual premiums March 2011 © Proskauer

8 Uniform Application Plans can exclude/limit benefits as long as applied on a uniform basis for all “similarly situated individuals” and not directed at individual participants based on a health factor Distinctions among groups must be based on bona fide employment-based classifications consistent with employer’s usual practice – NOT health factors: ­ Part-time and full-time ­ Geographical location ­ Dates of hire and length of service Different groups can have different eligibility, benefits and cost provisions Employees and covered dependents may be in different groups May 2011 © Proskauer

9 Source of Injury Rules If injury results from medical condition or act of domestic violence, a plan may not deny benefits for the injury (if plan otherwise covers such injury) ­ For example, coverage cannot be denied for injuries from suicide attempt resulting from depression Plan may exclude/limit coverage for high-risk activities (e.g., bungee jumping), but cannot exclude an individual from enrollment for coverage due to participation in such high-risk activities May 2011 © Proskauer

10 Actively-At-Work Provisions Plans may not refuse to provide benefits because individual is not actively at work on the day that individual would otherwise become eligible for benefits – UNLESS individuals absent due to health factors are treated as “actively-at-work” ­ Exception: First day of work limitation Review stop loss contracts – some carriers include actively-at- work provisions May 2011 © Proskauer

11 Permitted Reverse Discrimination Nothing prevents a plan from establishing more favorable rules for eligibility for benefits for individuals with adverse health factors A plan may charge higher premiums for individuals with adverse health factors only if such individuals would not otherwise be eligible for coverage were it not for the adverse health factor May 2011 © Proskauer

12 Wellness Programs Wellness programs are designed to promote health and prevent disease, and are an exception to HIPAA’s nondiscrimination rules Examples of common wellness programs include: ­ blood pressure and cholesterol screenings ­ smoking cessation programs ­ weight-loss programs A typical disease management program might target individuals who have or are at risk for developing diabetes and make case managers available to them to monitor compliance with medication protocols Both wellness and disease management programs are often structured to provide a financial reward for participating May 2011 © Proskauer

13 Wellness Programs “Rewards” 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 deductibles, copayments, or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan May 2011 © Proskauer

14 Wellness Programs Qualified programs that are NOT subject to any additional requirements: ­ Program that reimburses costs of fitness center membership ­ Diagnostic testing program that provides reward for participation, not outcome ­ Program that encourages preventative care through waiver of co- payment/deductible for certain activities ­ Program that reimburses employees for the costs of smoking cessation programs without regard to whether employees quit ­ Program that provides reward for attending a monthly health education seminar May 2011 © Proskauer

15 Wellness Programs Other wellness programs must satisfy the following: ­ Reward must not exceed 20% of cost of coverage – if dependents may participate, reward limit is measured as 20% of the cost of the family coverage ­ Reasonably designed to promote health or prevent disease ­ Opportunity to qualify at least once per year ­ Reward must be available to all similarly situated individuals ­ Consider whether rewards under a wellness program impact a plan’s grandfathered status under PPACA May 2011 © Proskauer

16 Wellness Programs When is a wellness program available to all similarly situated individuals? ­ Program must provide for a “reasonable alternative standard” (or waiver of otherwise applicable standard) to qualify for the reward ­ if it is unreasonably difficult for an individual to satisfy the otherwise applicable standard because of a medical condition, or ­ if it is medically inadvisable for an individual to attempt to satisfy the standard May 2011 © Proskauer

17 Wellness Programs Plan may seek verification, such as a statement from individual’s physician, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard In all plan materials describing the wellness program, the availability of the reasonable alternative standard must be disclosed While not explicitly addressed in the regulations, the cost of any “reasonable alternative standard” made available to participants (e.g., participation in a smoking cessation program in lieu of a participant’s certification of non-smoker status) must presumably be paid for by the health plan May 2011 © Proskauer

18 GINA Generally unlawful for a plan to acquire an employee’s genetic information (e.g., family medical history) ­ Limited exception for voluntary programs ­ For example, a health risk assessment (HRA) may contain questions on family history as long as it is clear that the participant does not have to answer them to receive any incentive or avoid any penalty Plan may offer financial inducements to voluntarily provide genetic information as part of disease management programs ­ For example, programs that provide coaching to employees attempting to meet particular health goals (e.g., achieving a certain weight, cholesterol level, or blood pressure) Are HRA questions legal? May 2011 © Proskauer

19 ADA Under the ADA, disability-related inquiries and medical examinations must be job-related The legal issue raised by wellness plans is that they typically are implemented “across the board” and would not meet the “job-related” standard EEOC has issued guidance indicating that the ADA permits disability-related inquiries or medical examinations that are not job-related provided that they are voluntary According to the EEOC, to be voluntary, an employer may not require participation nor penalize employees who do not participate May 2011 © Proskauer

20 ADA EEOC has yet to provide specific guidance on what level of financial incentive can be provided as condition of participation in a wellness program before the program is rendered involuntary EEOC letters indicate that it violates the ADA to require an employee to complete an HRA to participate in the plan ­ It is less clear how EEOC would view other rewards that are conditioned upon completion of an HRA or other wellness program criteria Informally, it appears that the EEOC would be more willing to find that a wellness program is voluntary if the financial incentive for participation in the program is structured as reward (e.g., a premium discount) as opposed to a penalty (e.g., a premium surcharge) However, EEOC has no specific policy on reward levels May 2011 © Proskauer

21 Seff v. Broward County Suit is a class action certified in federal district court in Florida Plaintiffs allege that their employer violated the ADA by imposing a $20 bi-weekly premium surcharge for declining to complete a Health Risk Assessment and biometric screening as part of a "wellness program" The Court found that the wellness program was a term of the employer’s group health plan, which is a "bona fide benefit plan" within the meaning of the insurance safe-harbor provisions of the ADA ­ Therefore, because the Court found that the employer’s actions are protected by the safe harbor provision of the ADA, it did not decide the employer’s alternative argument that the program is permitted under the ADA as a "voluntary" wellness program. May 2011 © Proskauer

22 Seff v. Broward County The Court found that the employer, as plan administrator, may require a covered employee to undergo a medical examination or answer medical inquiries as part of a wellness program, as long as the program is not a subterfuge to evade the ADA In the Seff case, the Court did not find the wellness program to be a subterfuge; in fact, it found that the program was generally benign, as employees only faced a $20 bi-weekly surcharge for non-participation, as opposed to being ineligible for coverage May 2011 © Proskauer

23 Small Business Wellness Grants Under PPACA PPACA establishes $200 million in wellness grant funding to be distributed to eligible small employers for fiscal years 2011 to 2015 Eligible employers are defined as those that employ less than 100 employees who work 25 hours or more per week, and also who do not have a wellness program in place as of March 23, 2010 (the date of PPACA’s enactment) An application for a grant must include a proposal for a “comprehensive workplace wellness program” There is no guidance on the application process at this time May 2011 © Proskauer

24 Small Business Wellness Grants Under PPACA A “comprehensive workplace wellness program” must be available to all employees and include the following: ­ Health awareness initiatives (including health education, preventive screenings, and health risk assessments) ­ Efforts to maximize employee engagement (including mechanisms to encourage employee participation) ­ Initiatives to change unhealthy behaviors and lifestyle choices (including counseling, seminars, online programs, and self-help materials) ­ Supportive environment efforts (including workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity, and improved mental health) May 2011 © Proskauer

25 Questions? May 2011 Stacy H. Barrow May 2011 © Proskauer