1. Then I Saw Your Wellness Plan: Now I’m a Believer
(in changing it to comply with applicable law)
Keith Peters

2. Agenda Benefits of Wellness Programs ERISA COBRA ACA HIPAA ADA GINA
Wage Reporting

3. Benefits of Wellness programs
Unhealthy behaviors
Health risks
Chronic disease
Health care workers have dramatically higher health care costs
Health care workers work in stressful, unhealthy environments
Health Care Costs
*Aldana, Steven, MD,

4. Benefits of Wellness programs
Health care workers use the emergency room and hospital more often
Many hospitals are beginning to offer wellness programs to the community
Offer as part of marketing and branding
Public associates high quality of life and good health with those who use hospitals
Revenue generation
Allows for building partnerships with worksites and the community
No only treating disease, but making efforts to prevent disease from happening

5. Benefits of Wellness programs
Health care workers have more obesity than other occupations
Health care workers have more chronic disease than other workers

6. Benefits of Wellness programs
Hospitals are a convenient and easy place to focus on prevention and early detection
Employee wellness programs are a successful and proven business strategy
“Healthcare workers have higher-than-average health risks and carry a greater burden of chronic illness. Hospitals that tackle this issue can strengthen their business performance and community service.”
Raymond Fabius, M.D., Chief Medical Officer for the Healthcare business of Thompson Reuters

7. Benefits of Wellness programs
* Taylor, Michael, MD and Bithoney, William, MD, 10 Steps to Developing a Culture of Health for Hospital and Health System Employers (October 2012)

8. Benefits of Wellness programs
Existing hospital wellness programs show they are effective
* 2015 American Hospital Association Survey
In 2015, about 87% of hospitals reported that they were doing at least some health and wellness program or other initiatives for employees.
What some of the best hospital wellbeing programs are doing: 
Health risk assessment 82% Biometric screenings 72% Safety program 92% Flu shots or other immunizations 100% Stress management 74% Disease prevention/management programs 77% Healthy food options 93% Weight loss programs 77% Gym membership discounts 79% On-site exercise facilities 64% Smoking cessation program 85% Personal health coaching 62% Classes in nutrition or healthy living 72% Web-based resources for healthy living 78% Tobacco-free campus 92% 24-hour nursing “help line” 42% Employee Assistance Program (EAP) 93% Wellness newsletter 63% Other program or benefit 49%

9. Benefits of Wellness programs
Elsewhere, the same researchers found that medical costs were reduced by $3.27 for every $1 spent on wellness programs.
Costs associated with absenteeism fell by $2.73 for each dollar spent
Baicker K., Cutler D., Song Z., Workplace Wellness Programs Can Generate Savings Health Affairs (2010)
Amid soaring health spending, there is growing interest in workplace disease prevention and wellness programs to improve health and lower costs. In a critical meta-analysis of the literature on costs and savings associated with such programs, we found that medical costs fall by about $3.27 for every dollar spent on wellness programs and that absenteeism costs fall by about $2.73 for every dollar spent. Although further exploration of the mechanisms at work and broader applicability of the findings is needed, this return on investment suggests that the wider adoption of such programs could prove beneficial for budgets and productivity as well as health outcomes.

10. Benefits of Wellness programs
Researchers found that workplace wellness participants exercise more, actively manage their weight and have other healthier behaviors than their peers outside of the programs
However, they do not necessarily cause employees to have lower body mass index, blood pressure or cholesterol
No decrease in health care costs over an 18-month period
Song Z, Baicker K. Effect of a Workplace Wellness Program on Employee Health and Economic Outcomes: A Randomized Clinical Trial. JAMA. 2019; 321(15):1491–1501. doi: /jama
Among employees of a large US warehouse retail company, a workplace wellness program resulted in significantly greater rates of some positive self-reported health behaviors among those exposed compared with employees who were not exposed, but there were no significant differences in clinical measures of health, health care spending and utilization, and employment outcomes after 18 months. Although limited by incomplete data on some outcomes, these findings may temper expectations about the financial return on investment that wellness programs can deliver in the short term.

11. Enforcement IRS (Code) HHS (PHSA) DOL (ERISA)
State Law*
IRS
(Code)
HHS
(PHSA)
DOL
(ERISA)
ERISA Retirement and Welfare Benefit Plans
Church and Governmental Retirement Plans
ERISA Group Health Plans (includes many Wellness Programs)
* State laws also affect benefits provided through insurance policies.

12. Enforcement
ACA
GINA
HIPAA

13. ERISA Requirements Welfare Benefits Plans
ERISA Op. Ltr. No A – ERISA can apply even if Wellness Program only offers biometric screenings and nicotine cessation programming
Exceptions
First Aid Facility – limited to “minor injuries”
But see ERISA Op. Ltr A (on-site employee assistance program that dealt with health problems and health-related personal problems did not constitute an on-premises facility for purposes of the safe harbor)
ERISA 3(1) any plan, fund, or program established or maintained by an employer for the purpose of providing its participants or beneficiaries medical, surgical, or hospital care or benefits
ERISA will apply even if only a few of the benefits provided
under a plan are subject to ERISA. ERISA Op. Ltr. No A.
The safe harbor excludes from the definition of “employee welfare benefit plan” facilities on an employer’s premises utilized “for the treatment of minor injuries or illness or rendering first aid in case of accidents occurring during working hours” (a “First Aid Facility”). DOL Reg. § (c)(2). To qualify for this safe harbor, the Program’s biometric screenings and other activities would need to occur on employer’s premises.

14. ERISA Requirements Plan Document Summary Plan Description (SPD)
Accelerated distribution deadline
Claims Procedures
Form 5500 filing (Wrap Plan)
ERISA 3(1) any plan, fund, or program established or maintained by an employer for the purpose of providing its participants or beneficiaries medical, surgical, or hospital care or benefits
ERISA will apply even if only a few of the benefits provided
under a plan are subject to ERISA. ERISA Op. Ltr. No A.
The safe harbor excludes from the definition of “employee welfare benefit plan” facilities on an employer’s premises utilized “for the treatment of minor injuries or illness or rendering first aid in case of accidents occurring during working hours” (a “First Aid Facility”). DOL Reg. § (c)(2). To qualify for this safe harbor, the Program’s biometric screenings and other activities would need to occur on employer’s premises.

15. COBRA Requirements COBRA applies to “group health plans”
A plan (including a self-insured plan) of, or contributed to by, an employer (including a self- employed person) or employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families. Code § 5001(b)(1).
Common Wellness Plan Examples
Biometric Screenings
Nicotine cessation
Medical care under Code § 213(d) includes the diagnosis, cure, mitigation, treatment, or prevention of disease, and any other undertaking for the purposes of affecting any structure or function of the body. Conversely, health care does not include a program that furthers general good health, but does not relate to the relief or alleviation of health or medical problems (e.g., an exercise or fitness program).

16. COBRA Requirements Exceptions
On-premises facility that provides primarily first aid during the employer’s working hours for treatment of a health condition, illness, or injury that occurs during those working hours so long as the care is available only to current employees and employees are not charged for the use of the facility.
Combine with Employer’s group health plan?
Automatically provide coverage for 36-month period?

17. COBRA Requirements
COBRA Notice
COBRA Premium
COBRA Election Period

18. ACA Requirements
Medical care includes “the diagnosis, cure, mitigation, treatment or prevention of disease, or amounts paid for the purpose of affecting any structure of function of the body.” 42 U.S.C. § 300gg-91(a)(2)(A).
ACA requirements: no annual/lifetime limits, preventative care requirements, internal claims and appeals requirements, external review procedures, SBC

19. ACA Requirements
Incorporate wellness plan into employer’s group health plan
Split the wellness plan into two separate wellness plans
Meet exception to ACA –
On-site medical clinic
Grandfathered plan
Employee Assistance Plan

20. ACA Requirements
Solution 1 - Incorporate wellness plan into employer’s group health plan
Only provide wellness program to employees who participate in employer’s group health plan
Combine wellness program into group health plan documents
Would require excluding some employees (since not all participate)
Would simplify COBRA, SPD, and reporting requirements
Evaluate “affordability”
Whether coverage is “affordable” depends on the relationship the employee’s
premium for self-only coverage bears to household income. Treas. Reg.
§ 1.36B-2(c)(3)(v)(A)(1). Because the Program pays incentives in cash rather than reducing Medical Plan premiums, the Program’s incentives do not affect the first component of the affordability determination. See Treas. Reg. § 1.36B-2(c)(3)(v)(A)(4) (“Nondiscriminatory wellness program incentives offered by an eligible employer sponsored plan that affect premiums are treated as earned in determining an employee’s required contribution for purposes of affordability of an eligible employer-sponsored plan to the extent the incentives relate exclusively to tobacco use.” (emphasis added)).
To the extent the Program’s rewards increase household income, the rewards have the effect of making coverage more affordable, not less.

21. ACA Requirements Solution 2 – Split the Wellness Program
Part A includes all of the “group health plan” requirements, then combine with group health plan
Part B include non-group health plan benefits

22. ACA Requirements Solution 3 – On-site Medical Clinic
Not the same thing as first aid facility
Additional requirements
Solution 4 – Grandfathered health plan
Solution 5 – Employee Assistance Plan
First, it must not “provide significant benefits in the nature of medical
care,” taking into account the amount, scope, and duration of covered services. Treas. Reg. § (c)(3)(vi)(A). Programs that provide disease management services like laboratory testing and counseling for individuals with chronic conditions (e.g., diabetes) provide significant medical care. Preamble to Final Regulations, 79 Fed. Reg , (Oct. 1, 2014). Second, the benefits under the Program may not be coordinated with benefits under a group health plan. An EAP benefit is coordinated with benefits under a group health plan if participants must exhaust benefits under the EAP before becoming eligible for benefits under the group health plan, or if eligibility for benefits under the EAP depends on participation in the group health plan. Third, the EAP must not require employee premiums or contributions as a condition of participation. Fourth, the EAP must not impose cost sharing requirements.

23. HIPAA Requirements
Privacy, security and portability rules for group health plans
On-site medical clinics are HIPAA excepted benefits
HIPPA generally prohibits discriminatory health plans from discriminating among similarly situated individuals.
Employers can, however, create plans that establish discounts for adherence to health promotion programs (wellness plans).
Could establish more favorable rules for employees with an “adverse health factor”

24. HIPAA Requirements
Participation-only programs – reward is not conditioned on the participant’s attainment of a standard related to a health factor.
Questionnaire
Annual physical
Pregnancy check-ups
Standard-based programs – reward is conditioned on a standard related to a health factor
Tobacco cessation
Metabolic syndrome
“Score of 85”

25. HIPAA Requirements Standard-based Program Requirements
Employees must have the opportunity to qualify for the plan once a year.
Program cannot provide a reward exceeding 30% of the cost of coverage (or 50% to the extent the additional percentage is designed to prevent or reduce tobacco use)
Sponsor must design the program to promote health or prevent disease.

26. HIPAA Requirements Standard-based Program Requirements (cont.)
The program must make the award available to all “similarly situated individuals”
The program must disclose availability of alternative standards or waivers.
4. The plan must group similarly situated individuals according to bona fide employment classifications, including: full or part-time status, current or former employee status, or different geographic locations. The plan must also provide a reasonable alternative standard for individuals for whom it is unreasonably difficult to meet the standard due to a medical condition.

27. HIPAA Requirements
3. 4. The program must make the award available to all “similarly situated individuals”
5. The program must disclose availability of alternative standards or waivers.
4. The plan must group similarly situated individuals according to bona fide employment classifications, including: full or part-time status, current or former employee status, or different geographic locations. The plan must also provide a reasonable alternative standard for individuals for whom it is unreasonably difficult to meet the standard due to a medical condition.

28. HIPAA Requirements
Don’t allow the rewards of a standard-based program to exceed 30% of the total cost of coverage.
Do group similarly-situated employees together for purposes of the wellness plan.
Do develop reasonable alternative
standards or waivers for the plan.
4. The plan must group similarly situated individuals according to bona fide employment classifications, including: full or part-time status, current or former employee status, or different geographic locations. The plan must also provide a reasonable alternative standard for individuals for whom it is unreasonably difficult to meet the standard due to a medical condition.

29. ADA Requirements
Plans cannot require disabled individuals to participate to obtain plan benefits.
Physical examinations must be voluntary.
Wellness program is voluntary if –
Must be reasonably designed to promote health or prevent disease
Employees are not required to participate
Must not deny coverage under the group health plan or particular benefits package
Cannot take adverse action or retaliate
Provide notice meeting requirements of ADA Regulations

30. ADA Requirements Maximum incentive 30% of –
A particular health plan, if no choice
Lowest cost health plan, if enrollment not necessary
Lowest cost health plan, if choice
40-year-old non-smoker silver coverage if no health plan
Maximum incentive - 50% (tobacco users on your honor)
*REMOVED by 29 CFR 1630 (12/20/2018), effective January 1, 2019, in response to the decision of the U.S. District Court of the District of Columbia, (Aug. 22, 2017)
Maximum Incentive. The final ADA regulations clarify how to calculate the 30% limit on incentives that may be offered to employees for answering disability-related questions or undergoing medical examinations as part of a wellness program. Four situations are addressed: (1) where the employer requires employees to be enrolled in a particular health plan in order to participate in the wellness program, the limit is 30% of the total cost of self-only coverage under that plan; (2) if the employer offers a single health plan but employees do not have to be enrolled in the plan to participate in the wellness program, the limit is 30% of the cost of self-only coverage under the employer’s plan; (3) where the employer offers more than one health plan but does not require enrollment in a particular plan as a condition of participating in the wellness program, the limit is 30% of the employer’s lowest-cost self-only major medical coverage; and (4) if the employer does not offer a health plan, the limit is 30% of the total cost to a 40-year-old non-smoker purchasing self-only coverage under the second-lowest-cost plan at the “silver” coverage level on the Exchange in the location of the employer’s principal place of business. The GINA rules apply the same standards to spouses for providing information about current or past health status. [EBIA Comment: Varying the incentive limit based on whether the employee is enrolled in the employer’s health plan is a change from the proposed rule, which applied the 30% limit only to wellness programs offered through group health plans. The ADA and GINA limits are now identical because the proposed GINA limit—which was based on the total cost of the plan in which the employee and any dependents are enrolled and then apportioned between the employee and spouse—was overly complicated, and the EEOC saw no reason to adopt a different threshold for spouses.]

31. ADA Requirements Confidentiality Requirements
Only aggregate medical info or history
Cannot require employees to agree to selling medical info
But HIPAA likely applies anyway
EEOC does not agree with the “bona fide benefit plan” safe harbor recognized by recent court decisions.
Fourth, the EEOC regulations only permit disclosure of medical information
obtained in aggregate terms that do not disclose and are not reasonably likely to disclose the identity of the employee. 29 C.F.R. § (d)(4)(iii). Employers may not require participants to agree to the disclosure of medical information (except as necessary to carry out the wellness program), or to waive any confidentiality provisions as a condition for earning the reward. Based on the information in the Biometric Consent Form, the Program appears to meet these requirements.
Finally, EEOC regulations prohibit covered employers from requiring employees to “agree to the sale, exchange, sharing, transfer, or other disclosure of medical information (except to the extent permitted by this part to carry out specific activities related to the wellness program) …” See 29 C.F.R. § (d)(4)(iv).

32. ADA Requirements Notice Requirement
EEOC has provided a sample notice
Maximum Incentive. The final ADA regulations clarify how to calculate the 30% limit on incentives that may be offered to employees for answering disability-related questions or undergoing medical examinations as part of a wellness program. Four situations are addressed: (1) where the employer requires employees to be enrolled in a particular health plan in order to participate in the wellness program, the limit is 30% of the total cost of self-only coverage under that plan; (2) if the employer offers a single health plan but employees do not have to be enrolled in the plan to participate in the wellness program, the limit is 30% of the cost of self-only coverage under the employer’s plan; (3) where the employer offers more than one health plan but does not require enrollment in a particular plan as a condition of participating in the wellness program, the limit is 30% of the employer’s lowest-cost self-only major medical coverage; and (4) if the employer does not offer a health plan, the limit is 30% of the total cost to a 40-year-old non-smoker purchasing self-only coverage under the second-lowest-cost plan at the “silver” coverage level on the Exchange in the location of the employer’s principal place of business. The GINA rules apply the same standards to spouses for providing information about current or past health status. [EBIA Comment: Varying the incentive limit based on whether the employee is enrolled in the employer’s health plan is a change from the proposed rule, which applied the 30% limit only to wellness programs offered through group health plans. The ADA and GINA limits are now identical because the proposed GINA limit—which was based on the total cost of the plan in which the employee and any dependents are enrolled and then apportioned between the employee and spouse—was overly complicated, and the EEOC saw no reason to adopt a different threshold for spouses.]

33. GINA Requirements
GINA: Genetic Information Nondiscrimination Act of 2008.
GINA prohibits discrimination in health plan coverage based on genetic information.

34. GINA Requirements
Do not request genetic information under a health risk assessment.
Do not provide rewards for completion of an assessment that collects genetic information.
Do not collect any genetic information for any assessment which offers a reward
Do limit the HRA’s medical testing to those tests identified as non- genetic.
Do consider using two distinct assessments.

35. Wage Reporting Requirements
IRS Chief Counsel Advice (Apr. 14, 2016)
Generally, an employer must include the value of a wellness plan rewards in the employee’s gross income (e.g., tax withholding), unless–
The reward qualifies as “medical expenses” under Code § 213(d)
De minimis fringe under Code § 132(e) (but cash is never de minimis)
The IRS has released a Chief Counsel Advice (CCA) memorandum analyzing the tax treatment of certain wellness incentives, including cash rewards and reimbursements of wellness program premiums that were paid on a pre-tax basis. The CCA examines three factual scenarios—all involving wellness programs that provide health screenings and other health benefits and generally qualify as health coverage that can be excluded from an employee’s gross income under Code § 106(a). In one scenario, the program is provided at no cost to employees. In the other two scenarios, employees electing to participate in the wellness program must pay a premium on a pre-tax basis through a Code § 125 cafeteria plan. All three programs offer rewards for participation in the form of cash or other benefits that do not qualify as Code § 213(d) medical expenses.
EBIA Comment: Recently, certain wellness program designs have been promoted as a way to provide tax-free payments to employees. The details vary, but often they involve taking employee salary reductions as wellness program premiums and then returning some or all of the premiums to employees as untaxed “premium reimbursements” or other rewards. These and similar arrangements (a new twist of the classic “double-dipping” scheme) have been informally rejected by the IRS, and this CCA reinforces and explains that position. Employers who are offered any scheme to save on taxes by implementing a wellness program should consult legal counsel. For more information, see EBIA’s Consumer-Driven Health Care manual at Section VI.C.1 (“Taxation of Employer-Provided Rewards”) and EBIA’s Cafeteria Plans manual at Section X.H (“No Reimbursement for Health Insurance Coverage Already Paid on a Pre-Tax Basis”). See also EBIA’s Fringe Benefits manual at Section VII.F (“De Minimis Fringe Benefits: Wellness Rewards”).

36. KEITH PETERS – kpeters@clinewilliams.com
QUESTIONS?
KEITH PETERS –
These materials and program are being offered as an outline of general information on the subject to assist in development and implementation of employment practices and policies. They are offered for educational and informational purposes only and are not intended as legal advice.