1. HEALTH WEALTH CAREER BEST PRACTICE WELLNESS PROGRAMS ASSOCIATED WITH SUPERIOR BUSINESS FINANCIAL RESULTS Steven P. Noeldner, Ph.D., M.S. Mercer May 25, 2016

2. © MERCER 2016 1 1 THE STOCK PERFORMANCE OF HERO SCORECARD HIGH-SCORING EMPLOYERS COMPARED WITH THE STANDARD & POOR’S 500 INDEX

3. © MERCER 2016 2 WELL-BEING CONTRIBUTES TO CORPORATE FINANCIAL SUCCESS HERO HIGH SCORER STOCK MARKET STUDY HERO Scorecard “High Scorer” portfolio appreciated 235% versus S&P Index of 159% from 2009–2014 Grossmeier J, Fabius R, Flynn J, Noeldner S, Fabius D, Goetzel R, Anderson D. “Linking Workplace Health Promotion Best Practices and Organizational Financial Performance: Tracking Market Performance of Companies With Highest Scores on the HERO Scorecard,” JOEM, Volume 58, Issue 1 (2016), pp. 16–23.

4. © MERCER 2016 3 WELL-BEING CONTRIBUTES TO CORPORATE FINANCIAL SUCCESS HERO HIGH-SCORER STOCK MARKET STUDY

5. © MERCER 2016 4 WELL-BEING CONTRIBUTES TO CORPORATE FINANCIAL SUCCESS Grossmeier J, Fabius R, Flynn J, Noeldner S, Fabius D, Goetzel R, Anderson D. “Linking Workplace Health Promotion Best Practices and Organizational Financial Performance: Tracking Market Performance of Companies With Highest Scores on the HERO Scorecard,” JOEM, Volume 58, Issue 1 (2016), pp. 16–23. Goetzel R, Fabius R, Fabius D, Roemer E, Thornton N, Kelly R, Pelletier K. “The Stock Performance of C. Everett Koop Award Winners Compared With the Standard & Poor’s 500 Index,” JOEM, Volume 58, Issue 1 (2016), pp. 9–15. Fabius R, Loeppke R, Hohn T, Fabius D, Eisenberg B, Konicki D, Larson P. “Tracking the Market Performance of Companies that Integrate a Culture of Health and Safety,” JOEM, Volume 58, Issue 1 (2016), pp. 3–8. HERO Scorecard “High-Scorer,” Koop Award Winners, and CHAA “High- Scorer” Stock Performance Compared to S&P 500

6. © MERCER 2016 5 STUDY IMPLICATIONS Contributes to growing evidence that healthy workforce correlates with company financial performance Well-being programs may not independently increase company stock value, but may contribute to the overall health and financial performance of an organization. Additional research is needed to determine if there is a causal relationship. A robust health and well-being program may be one of multiple superior business practices leading to exceptional financial performance Provides broader definition of the value of investing (VOI) in health and well-being programs, in addition to cost avoidance, job performance, and employee engagement Further validation of HERO Scorecard; demonstrates utility of best practices

7. © MERCER 2016 6 WHAT WE MEAN WHEN WE SAY WELL-BEING CORE COMPONENTS AND GUIDING PRINCIPLES FINANCIAL Security Life planning Retirement EMOTIONAL Resilience Mindfulness Problem solving PHYSICAL Activity Nutrition Sleep COMMIT TO A CULTURE OF WELL-BEING CREATE AN EXCEPTIONAL MEMBER EXPERIENCE FOCUS ON WHAT INFLUENCES LONG-TERM BEHAVIOR CHANGE ESTABLISH CLEAR MEASURES 123 4

8. © MERCER 2016 7 7 HERO HEALTH & WELL-BEING BEST PRACTICES SCORECARD IN COLLABORATION WITH MERCER ©

9. © MERCER 2016 8 HERO SCORECARD IN COLLABORATION WITH MERCER Designed to be educational tool and best practice assessment, with benchmarks Over 2000 users since launch online in 2009 2013 validation study published in JOEM –High Scorers had -1.6% claims trend over three years Scores Maximum of 200 points are distributed as follows: Section 1: Strategic Planning (20 points) Section 2: Organizational & Cultural Support (50 points) Section 3: Programs (40 points) Section 4: Program Integration (16 points) Section 5: Participation Strategies (50 points) Section 6: Measurement and Evaluation (24 points) Optional Outcomes (not scored) Participation Rates Employee Assessments Health Measures Lifestyle Behaviors Financial Impact Benchmarking National average is provided with the participant’s score in the feedback email Benchmarks by size, industry and geography are also available

10. © MERCER 2016 9 Inventory of best practices Review the current best thinking on what makes health and well-being programs successful Indicator of program success Compare your organization’s scores with national averages and/or your organization’s past scores Collaboration aid During Scorecard completion and scoring discussions, build consensus and a common framework for addressing improvement opportunities Comparative/Benchmarking tool Benchmark against industry and peers (norms are in development) Planning tool Use during program evaluation/design, gap analysis, strategic planning and vendor selection BENEFIT FOR EMPLOYERS

11. © MERCER 2016 10 HOW IT WORKS Employers access the Scorecard, free of charge, through the HERO website or a Preferred Provider An editable PDF allows employers to easily share the Scorecard and gather input from different stakeholders within the organization Final responses are submitted online The organization’s best practice score is calculated automatically and sent by e-mail to the organization, along with national norms Access the Scorecard at: http://hero-health.org/http://hero-health.org/

12. Christopher S. Lockman, Esq. clockman@verrilldana.com (207) 253-4712 Follow Verrill Dana’s Benefits and Compensation blog: www.employeebenefitsupdate.com www.employeebenefitsupdate.com Wellness Program Design and Operation A Brief Guide to Legal Compliance This material is provided for general information purposes as a service to clients and friends of Verrill Dana, LLP and is not complete without the oral remarks that accompanied the presentation. This material may not be relied upon by any person as legal advice and does not create an attorney-client relationship. Treasury Regulations require us to notify you that any tax-related information contained in this material is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.

13. Wellness Program Regulations HIPAA generally prohibits group health plans and health insurance issuers from discriminating on the basis of “health factors” Wellness programs that meet certain criteria have an affirmative defense in response to claims that the employer discriminated under HIPAA DOL, HHS, and IRS published final regulations for wellness programs in 2006 – revised in 2013 to reflect changes under the Affordable Care Act

14. Two Types of Wellness Programs Participatory wellness programs –No need to satisfy health standard in order to receive reward (e.g., fitness center reimbursement) –Participation must be available to all “similarly situated” individuals

15. Two Types of Wellness Programs Health contingent wellness program –Requires individual to achieve a health outcome or meet a health- related standard to get reward –Two sub-types: Activity-only Outcome-based

16. Health Contingent Program Requirements Design: Must be reasonably designed to promote health or prevent disease Frequency: Employees must be able to qualify for reward at least once each year Size: Financial rewards may not exceed limits: –30% of total cost of coverage –Maximum of 50% of total cost (aggregate) for tobacco cessation Uniform Availability: Must be available to all “similarly situated” individuals

17. Uniform Availability – Activity Only Must allow a reasonable alternative standard, if: –“Unreasonably difficult” due to a medical condition –“Medically inadvisable” May seek physician verification All plan materials must disclose availability of reasonable alternative

18. Uniform Availability – Outcome Based Must allow a reasonable alternative standard to any individual who does not meet the initial standard –Alternative must be provided upon request –If alternative is activity-only program, may seek physician verification prior to providing second alternative –Must accommodate recommendations of physician as a second reasonable alternative or if the standard is not medically appropriate All plan materials must disclose availability of reasonable alternative

19. Potential Sources of Liability Compliance with the Final HIPAA Wellness Regulations does not ensure compliance with: –Title VII of the Civil Rights Acts of 1964 –Americans with Disabilities Act (ADA) –Genetic Information Nondiscrimination Act (GINA) –Other ERISA, Tax Code, and State Laws

20. The ADA generally prohibits medical exams unless “job related and consistent with business necessity.” Two exceptions: 1. Bona fide benefit plans 2. Voluntary wellness plans GINA Precludes information gathering that discloses genetic information, which could also be derived from inquiries involving family history. Exception for voluntary wellness exams ADA and GINA

21. 2014 EEOC Litigation EEOC v. Orion Energy Systems, Inc. EEOC v. Flambeau, Inc. EEOC v. Honeywell Int’l, Inc. Final ADA Rules (5/16/2016) Disability-related inquiries or medical exams “Voluntary” safe harbor Final GINA Rules (5/16/2016) Spouse incentive permitted for certain information No genetic information regarding children EEOC Litigation and Final Rules

22. Wellness Rules Comparison RequirementsHIPAA Final RuleEEOC Final ADA Rule Included ProgramsHealth contingent programProgram includes disability-related inquiries or medical examinations Maximum IncentiveNo maximum for participatory programs 30% cost of enrolled coverage for health contingent programs 30% total cost of self-only coverage Plus additional 30% for spouse incentive (Final GINA Rule) Maximum Incentive (Tobacco) 50% aggregate cost for programs designed to reduce or eliminate tobacco use 30% total cost of self-only coverage 50% if program does not include disability-related inquiries or biometric screening Notice RequirementNotice of availability of reasonable alternative standard required for health contingent programs Notice of Privacy Practices Notice for all programs: understandable, what medical information will be obtained, who will receive, how used, restrictions on disclosure AccommodationNo provisionReasonable accommodation

23. ADA and GINA Final Rule Highlights “Reasonably designed to promote health or prevent disease” “Gateway” programs prohibited “Manifestation of disease or disorder” New notice requirement Confidentiality protections –Cannot be waived as a condition of participating

24. Litigation Outcomes Bona fide benefit plan exception? –EEOC v. Flambeau, Inc. –Seff v. Broward County

25. Tips and Take Aways Make the program as voluntary as possible Incorporate the program into your health plan (?) Do not base cost differences on outcomes If outcome-based, provide reasonable alternatives, provide incentives within HIPAA and ADA limits, no “gateway” programs Provide clear employee (and spouse) communications Assure Privacy and Security