Does your wellness plan need a compliance check?

Polsinelli PC. In California, Polsinelli LLP
Does Your Wellness Program Need a
Compliance Check-up? The EEOC
Thinks So!
W. Andrew Douglass and
Anne Prenner Schmidt

real challenges. real answers. sm
Topics Covered Today
General overview of wellness programs, including a
discussion of health screening features, premium
incentives, and other common plan designs
Compliance issues for wellness programs under the
Americans with Disabilities Act (ADA), Affordable Care
Act (ACA), and other federal laws
Discussion of the EEOC’s recent lawsuits brought
against employers and expectations for the EEOC’s
upcoming regulations for wellness programs
Action items for companies to navigate the uncertainties
and risks in offering wellness programs to their
employees

Wellness Plans
These are lifestyle programs designed to
improve long-term employee well-being
and might include weight loss, smoking
cessation, exercise and stress
management

Why do companies offer wellness programs
to their employees?
Improves overall health and fitness of
employees
Potential cost savings for employers on
group health plan costs
– According to recent studies, company’s return
on investment (ROI) as high as 6:1 -- i.e., $6
in savings for every $1 invested in wellness
program

Types of Wellness Programs
Part of employer-sponsored medical plan or
stand-alone plan administered by employer or
third-party administrator
On-site or off-site locales or online
Ongoing interactive program, single activities or
education seminars
May provide various types of rewards as
incentives to encourage certain behaviors,
including contributions to health savings
accounts, cash, promotional items, etc.

Wellness Program Examples
Health Risk Assessments
Biometric Testing
Health Promotion Programs, including
annual physicals and goal setting
Discounts on fitness club
memberships
Smoking cessation programs

Incentives
Monetary rewards
Reduced health insurance premium
contributions
Gifts
Reduced gym membership fees
Raffles to win trips

HIPAA Nondiscrimination & Wellness Rules
The Basic Rule is that group health plans cannot
discriminate against an individual based on a health
status factor relating to:
1. Eligibility for plan coverage
2. Premium and contribution amounts
Remember every rule has an exception…
– Plans may establish premium discounts or rebates or
modify copays and deductibles in return for the
establishment of wellness programs i.e. “programs of
health and disease prevention.”

How does HIPAA define a wellness plan?
It is a broad term-” any program
designed to promote health or
prevent disease”
Disease management
“Well-baby” programs
Gym discounts
Lactation counseling
Smoking cessation
Wellness exception is for
“rewards.”
A discount on a premium or a
contribution
A waiver of any mechanism of
cost sharing
the value of the benefit that
otherwise would not be
provided under the plan.

Participatory Wellness Plans
The reward is based on an action not related to
health status, or the program does not have a
reward attached to it
Program is available to all similarly situated
individuals
Program is automatically covered by the
wellness plan exception
Program does not have to meet additional
criteria to qualify

Health Contingent Wellness Programs
Activity
Based
• Only requires an individual
to perform or complete an
activity to obtain an award
Outcome
Based
• Requires an individual to
maintain or attain a specific
health outcome

Additional Requirements for Certain
Wellness Programs
1. Reward limited to 30% of the cost of
coverage (50% if tobacco is included)
2. Reasonable program design
3. Must be able to qualify at least annually
4. Reasonable alternative standard
5. Disclosure of reasonable alternative

Reasonable Design
Must be reasonably designed to promote
wellness and prevent disease
Not a large hurdle does not require scientific
analysis
The program must:
1. Have a reasonable chance of improving health or
preventing disease
2. Cannot be overly burdensome
3. Cannot be a subterfuge for discrimination

Reasonable Alternative Standard
How does the plan ensure that rewards are made available
to similarly-situated individuals?
Activity Based
Must provide alternative for individual for whom it is
unreasonably difficult due to a medical condition to
satisfy the standard or medically inadvisable to attempt
the standard
If reasonable under the circumstances the plan may
request verification from the participant’s personal
physician of why the standard is inadvisable

Reasonable Alternative Standard
Outcome based
Must provide alternative for any individual who does not
meet the initial standard based on a measurement, test,
or screening that is related to a health factor
Alternative required regardless of participants medical
condition
Other Factors
Decided on a case by case basis
Could conceivably require multiple alternatives

Must Disclose the Alternative Standard
Plan materials describing wellness programs
must disclose in writing that an alternative
standard is available ( do not have to describe
what it is in the plan materials)
The regulations include sample language
If the plan materials just mention that a wellness
reward is available without describing the terms,
they are not required to disclose the alternative
standard.

ACA Penalties and Grandfathered Plans
ACA imposes immediate reforms for group health plans,
with certain exceptions for grandfathered plans.
Grandfathered plans – generally plans (as they existed) as of
March 23, 2010.
Penalties such as cost sharing surcharges need to be evaluated
Certain plan design changes such as certain increases in the
premium share that an employee pays or in cost sharing
requirement can cause a plan to lose grandfathered status
Plans that want to maintain grandfathered status must evaluate
penalties when implementing new wellness programs or
changing the incentive structure

ACA and Wellness Plans
Easiest way to connect a wellness program to a group
health plan is to limit wellness program eligibility to
participants in the group health plan
Lowest-risk course of action for employers is usually a
true stand-alone wellness program
– Program that is not connected in any way to a group health plan
satisfying the requirements of ACA
– Must avoid offering any benefits under the program that are in
the nature of “medical care”
Alternatively, employer can try to structure stand-alone
wellness program to fit into one of the exceptions

Voluntary Wellness Programs
A wellness program is voluntary as long as the employer
neither requires participation nor penalizes employees
who do not participate
The EEOC has said that requiring completion of an
health risk assessment in order to enroll in a plan or
receive employer contributions is not voluntary
Informal statements from the EEOC that incentives are
effectively penalties

Americans with Disabilities Act
Wellness programs may be subject to the Americans
with Disabilities Act of 1990, as amended (“ADA”)
ADA prohibits employers from denying, on the basis of a
disability, qualified individuals with disabilities an equal
opportunity to participate in, or receive benefits under
programs or activities conducted by those employers.
ADA also prohibits employers from making disability-
related inquiries (any inquiry likely to elicit information
about a disability) or requiring medical examinations.
Exception: The EEOC says that employers may do so
as part of a “voluntary” wellness program, subject to
confidentiality requirements.

More ADA Considerations
Employer wellness programs may be based upon an
employee’s behavioral choices - but not on a disability
Healthy behavior-related programs - focus on behavior
not medical condition.
– Reward participants who: attend anti-smoking
program, attend annual checkups, or comply with
doctor-prescribed medicine regimen; etc.
– Weight-based programs are tricky because obesity,
depending if morbid or caused by another medical
condition, may be a disability.
Care should be taken when creating these programs
because the ADA may be interpreted to cover
participants who are addicted to nicotine, or have a
certain cholesterol or blood pressure measurement.

Age Discrimination Issues
Age Discrimination in Employment Act
(ADEA) and Title VII
Certain health conditions may be exhibited
more frequently in older employees or
employees of a particular race or national
origin
Programs related to such conditions could
violate the ADEA and/or Title VII

GINA and Wellness Programs
Genetic Information Nondiscrimination Act of
2008
Applies to group health plans
Also regulates employers by prohibiting
discrimination, including with respect to
conditions of employment such as the provision
of health benefits

Additional GINA Considerations
Implicated if employer or plan is
requesting or requiring the disclosure of
“genetic information” or the taking of a
genetic test
Genetic information includes family
medical history

Recent EEOC Lawsuits
Three lawsuits filed by the EEOC Chicago
office since August 2014
Alleged ADA and GINA violations
Key issue involves the “voluntary” aspect
Challenges to biometric screening,
penalties/incentives, and other very
common wellness program features

Case Study - Self v. Broward County
Wellness Program required biometric screening and a
completion of online HRA
Failure to participate resulted in a $20 biweekly charge
deducted from paycheck
Employee claimed that program was not voluntary and
violated ADA
Court allowed to proceed as class action and then ruled
for the county April, 2011

Case Study - Self v. Broward County
Court did not address whether it was a “voluntary”
wellness program
Instead the court relied on a safe harbor that generally
exempts establishing, sponsoring, administering the
terms of a bona fide benefit plan based on
underwriting risks, classifying risks, or administering
such risks
Court found program to be part of the group health
plan and part of an effort to improve overall employee
health
No ADA violation

Other Compliance Issues
State “Smoker’s Rights” laws
It is unclear whether these laws would
be preempted by ERISA.
COBRA
Tax treatment of rewards
Other state and federal laws that protect
employee rights

Risk Mitigation
Reward or penalize behavior - not health
conditions
Clearly communicate program
Clearly explain incentives, discounts, and
penalties
Consistent and uniform plan administration

Polsinelli Recommendations
Review plan documentation and SPD
disclosures relating to your wellness programs
– Also review metrics for evaluating program’s success
Monitor status of EEOC lawsuits and other
enforcement activities
– EEOC regulations expected in February
Diagnose potential compliance issues for your
wellness programs
– DOL “self-compliance” tool and other resources for
employers

Contact Information
Polsinelli PC
www.polsinelli.com
W. Andrew Douglass, Shareholder
adouglass@polsinelli.com
Anne Prenner Schmidt
aschmidt@polsinelli.com

About Polsinelli
Polsinelli, a national law firm ranked among the Am Law 100 with over 740
attorneys located in 19 offices, deliberately seeks constant improvement in all
that we do. At its inception more than forty years ago, the firm established a
culture of openness and entrepreneurship that still pervades today. As the
fastest growing U.S. law firm for the past six years as ranked by The American
Lawyer*, the firm’s growth has been fueled by the recruitment of like-minded
attorneys from top law firms across the country.
Polsinelli attorneys successfully build enduring client relationships by providing
practical legal counsel infused with business insight, and with a passion for
assisting General Counsel and CEOs in achieving their objectives. The firm
focuses on healthcare, financial services, real estate, life sciences and
technology, and energy and business litigation, and has depth of experience in
100 service areas and 70 industries.
*The American Lawyer 2013 and 2014 reports

Polsinelli provides this material for informational purposes only. The material
provided herein is general and is not intended to be legal advice. Nothing
herein should be relied upon or used without consulting a lawyer to consider
your specific circumstances, possible changes to applicable laws, rules and
regulations and other legal issues. Receipt of this material does not establish
an attorney-client relationship.
Polsinelli is very proud of the results we obtain for our clients, but you should
know that past results do not guarantee future results; that every case is
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© 2015 Polsinelli PC. In California, Polsinelli LLP.
Polsinelli is a registered mark of Polsinelli PC

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