Getting Your Wellness Plan in Shape for New Regulations

Over the past few years, wellness plans have been adopted by businesses large and small across the United States.  Ranging from informal pedometer challenges to comprehensive efforts to improve employees’ diet, fitness and overall health, a wellness program is often an easy way for employers to limit the escalating cost of group health insurance and curb employee absenteeism.  The clear benefits that employers receive from adopting a wellness program are however coupled with an increasing amount of legal risk.  Different agencies of the federal government have begun regulating these programs, and not always in a consistent or easy-to-understand manner.  Beginning in 2017, new regulations under the Americans with Disabilities Act (the “ADA”) and the Genetic Information Nondiscrimination Act (the “GINA”) will govern many wellness programs. [1]  To avoid potential liability under these regulations and older regulations enacted under the Affordable Care Act (the “ACA”) and the Health Insurance Portability and Accounting Act (the “HIPAA”), employers would be well-served to review their wellness programs to ensure compliance with all of the applicable regulations.

            Employers should begin by answering two preliminary questions:

Is the wellness program linked to the employer’s group health plan (including a self-insured group plan)?

Does the wellness program request disclosure of medical information (either through a medical examination or by questioning participants about personal medical issues or their personal or family medical history)?   

            If the wellness program is linked to a group health plan, the regulations issued under the ACA and HIPAA will apply to the program.  If the program requests a medical examination or makes medical inquiries, the regulations issued under the ADA will apply if employees are the subject of the examinations or inquiries, while the regulations under the GINA apply to examinations or inquiries directed towards spouses of employees.  Of course, based on the structure of the wellness program, the regulations issued under all of these laws could be applicable, or, if the program is not linked to a group health plan and does not involve medical examinations or inquiries, none of the regulations could apply.

            The regulations uniformly require wellness programs to be reasonably designed to promote health and/or prevent disease.  Programs that collect health information from employees or their spouses satisfy this duty by providing results, follow-up information or advice designed to improve health.  In contrast, a program having the primary effect of shifting insurance costs to unhealthy employees, which only serves to give the employer information about future health costs, or which requires excessive time commitments (such as nightly attendance at a one hour class) will likely violate this requirement.  Additionally, any wellness programs that require participants to satisfy a health standard (such as lowering blood pressure) in order to receive an incentive must offer a reasonable alternative to participants who cannot achieve the standard to obtain the incentive (for example, complying with a plan developed by the participant’s physician).  It is therefore recommended that employers make certain that any wellness program they offer improves health or decreases the risk of disease and/or injury for all participants and document the ways it does so.

            A wellness plan subject to any of the regulatory regimes is also obligated to maintain the privacy of any medical information obtained from participants.  The ADA and GINA regulations provide that any medical information from an employee or dependent can only be provided to the employer in aggregate terms that are not reasonably likely to disclose the identity of the individual.  Further, employers are also barred from conditioning participation in a wellness plan or the incentives available under a wellness plan on a waiver of confidentiality or an agreement to sell or otherwise transfer personal medical information.  Since wellness plans subject to the HIPAA and ACA regulations are by definition linked to a group health plan, the HIPAA privacy rules apply to those plans.  The HIPAA privacy rules require employers not to use individually-identifiable health information for employment-related actions, to limit access to individually-identifiable health information only to those employees who administer the group health plan and to ensure that appropriate safeguards are taken to protect health information.

            The regulations also require that wellness programs be voluntary.  This obviously means that employers cannot compel their employees to participate, either by denying or limiting insurance coverage to those who do not participate or by otherwise retaliating against employees who do not join the wellness program.  The regulations issued under the ADA and GINA additionally require employers to distribute a notice to participants describing the type of information that will be collected, who will view the information and for what purpose, disclosure limitations and how the information will be kept private.  A sample notice is available by clicking this hyperlink:

            The primary conflict between the regulations under the ADEA and GINA and the ACA and HIPAA regulations concerns the incentives that can be offered for participating in a wellness program.  For many wellness programs, the incentive for participation is often a rebate or discount on the employee’s portion of the premium for benefits under the employer’s group health plan.  Regardless of the form of the incentive however, under the ADEA and GINA regulations, the maximum incentive for participation cannot exceed 30% of the total cost (including the employer and employee’s contribution) of employee-only coverage under the employer’s group health plan (although if a spouse also participates in the wellness program, the maximum incentive can rise to twice that amount).  In contrast, the HIPAA and ACA regulations impose no limitations on incentives on wellness plans that do not condition the incentives on satisfying a particular health metric (for example, if incentives are offered for attending a health-education seminar or for merely participating in diagnostic testing).  Under the HIPAA/ACA regulations, the maximum incentive for wellness programs that require participants to satisfy some form of health standard (for example, achieving specified results in a biometric screening or engaging in an exercise regime) cannot exceed 30% of the total cost (including the employer and employee’s contribution) of coverage for the employee and all participating dependents, and, if the wellness program is designed to prevent or reduce tobacco use, the incentive is increased up to 50% of this cost.  Obviously, the ADEA and GINA regulations are more restrictive and if a company’s wellness program is subject to both sets of regulations, it will need to limit its offered incentive to the level permitted under the ADEA/GINA regulations.

            As can be seen, compliance with the multiple sets of regulations applicable to wellness programs is complicated and requires substantial analysis of the provisions of the wellness program.  Employers are recommended to spend the final few months before the ADA/GINA regulations go into force to ensure that their wellness plans will not rule afoul of these new rules.

[1] The new regulations under the ADA and GINA will go into force on the first day of the first plan year beginning after January 1, 2017 for the group health plan that is used to calculate the permissible amount of incentives.