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Don't Let Your Wellness Program Get You Down
Corridors - News for North Carolina Hospitals

6.1.2008

Health care costs aren't the only thing on the rise - so are obesity and chronic health conditions. Increasingly employers are looking for ways to manage the cost of health care benefits provided through their group health plans, and wellness programs can be an effective means for cost control by providing employees incentives to lead healthier lifestyles. However, due to the uncoordinated web of laws and regulations impacting these programs, an employer's best intentions can result in an unfortunate legal outcome. Pay attention to the following issues so that your wellness program doesn't get you down.

HIPAA Privacy. Wellness programs that include health risk assessments, monitoring of health conditions or otherwise provide medical care may be subject to the privacy and security rules under the Health Insurance Portability and Accountability Act (HIPAA). These rules require special handling of protected health information and prohibit employers from using information obtained from the wellness program in making any employment-related decisions.

HIPAA Nondiscrimination. The Department of Labor recently issued Field Assistance Bulletin 2008-02 providing group health plan sponsors guidance for compliance with the wellness program exception to HIPAA nondiscrimination regulations. HIPAA generally prohibits discrimination based on "health status-related factors" including physical and mental illnesses, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.

Under the HIPAA wellness program exception, however, group health plans may offer premium discounts, rebates, reduced co-payments, and/or lower deductibles to participants and beneficiaries who take part in "programs of health promotion and disease prevention." Under the HIPAA regulations, wellness programs that provide a reward merely for participation in the program (e.g., a heart disease educational program for participants with high blood pressure) are not subject to the HIPAA nondiscrimination rules. The only requirement for these participatory wellness programs is that they be made available to all similarly situated individuals. Programs requiring participants to meet a health-related standard to obtain a reward, such as a target cholesterol level, are subject to additional scrutiny. These standards-based wellness programs must ensure that:

  • the total reward does not exceed 20% of the cost of coverage;
  • the program is reasonably designed to promote health and prevent disease;
  • eligible persons have the opportunity to qualify at least once a year;
  • the reward is available to all similarly situated persons and a reasonable alternative standard (or waiver of initial standard) is available if attainment is unreasonably difficult due to a medical condition (plans can require hardship verification); and
  • plan materials describing the wellness program must disclose the availability of a reasonable alternative standard the possibility of a waiver of the initial standard, or state that the plan will work with individuals to develop an alternative standard at their request.

Field Assistance Bulletin 2008-02 provides a checklist for plan sponsors to determine whether a wellness program is subject to the HIPAA nondiscrimination rules and assess the compliance of their programs. The FAB is available at http://www.dol.gov/ebsa/regs/fab2008-2.html.

ADA. The American with Disabilities Act (ADA) generally prohibits employers from making disability-related inquires. Often wellness plans use health risk assessments. Under the ADA, an employee's completion of a health risk assessment must be voluntary and refusal to complete one must not subject the employee to penalty. Employers should be cautious that "incentives" to complete the health risk assessment could not be construed as a "penalty" for not completing the assessment.

ADEA. Mandatory programs may also raise issues under the Age Discrimination in Employment Act (ADEA). The ADEA protects individuals aged 40 or older against employment discrimination based on age. Mandatory wellness programs requiring achievement of specific health targets must take into account limitations that an older employee might face, or the program could violate the ADEA.

Other Considerations. Wellness programs offering health care services such as blood screenings, physical exams or flu shots are subject to the group health plan rules under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Attention must be paid to some of the COBRA traps that wellness plans can trigger. In addition, the provision of these types of health care services through a wellness program can prevent a participant from being able to contribute to a health care savings account if the services constitute more than insignificant medical care. Furthermore, programs that provide flexible spending account credits under a cafeteria plan or other credits or subsidies relating to a self-insured health plan may raise additional issues under the nondiscrimination rules applicable to these types of plans. This article merely scratches the surface of the legal issues involved with wellness programs. Employers would be well-served to have even the most seemingly simple program reviewed for compliance.

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