An alphabet soup of laws can impact your program.
By Robert E. Boston and Brian M. Clifford
The comprehensive health insurance reform of the Affordable Care Act will be implemented over the next four years. Employers with 50 or more employees are presented with a choice: Offer affordable health insurance coverage to all employees or face civil penalties. Are there ways for a covered employer to decrease the cost of providing coverage?
There are. One option is to implement an employee wellness program with incentives. Wellness programs often require employees to complete health assessments or biometric screenings to be eligible to receive incentives. Restrictions apply to their use, and current law is less developed on the extent employers may offer financial incentives for participation, and how employers may track employee progress.
There are a handful of laws that do affect the design and implementation of wellness programs:
- The Americans with Disabilities Act of 1990 (ADA)
- The Age Discrimination in Employment Act of 1967 (ADEA)
- The Employee Retirement Income Security Act of 1974 (ERISA)
- The Fair Labor Standards Act of 1938 (FLSA)
- The Genetic Information Nondiscrimination Act of 2008 (GINA)
- The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
- Title VII of the Civil Rights Act of 1964
Various state laws
HIPAA, ERISA, the ADA, and GINA are likely to be the most involved. HIPAA prohibits group health plans and insurers from discriminating against individuals based on health factors. These factors include health status, medical conditions, claims experience, receipt of healthcare, medical history, evidence of insurability, and disability. The prohibition includes a safe harbor exception that enables employers to establish incentive wellness programs that encourage participation in health promotion and disease prevention. It further provides that:
- The program incentive offered to the employee may not exceed 20 percent—30 percent starting in 2014—of the total cost of that employee’s coverage under the plan (single coverage or family coverage if the family is eligible and enrolled).
- The program must be reasonably designed to promote health or prevent disease.
- The program must be available to eligible and similarly situated individuals every year.
- The program must provide a reasonable alternative standard for obtaining the incentive for any individual for whom it is difficult to satisfy the standard due to a medical condition or where a doctor has advised them not to attempt the standard.
Most wellness programs are also subject to ERISA, unless they are limited to promotion of health education or the provision of exercise facilities. ERISA requirements establish the need to have a plan description, issuance of annual reports, and provision of summaries of material modifications to the plan.
The ADA prohibits employers from discriminating against a recently expanded universe of qualified individuals with disabilities. The Equal Employment Opportunity Commission (EEOC)—charged with enforcing the ADA—has not promulgated a formal position on whether employers may require health risk assessments as a condition of eligibility for a wellness incentive. It has stated that doing so “could” violate the ADA requirement that employee medical examinations must be job-related and consistent with business necessity.
Medical examinations related to health and wellness programs may be proper under the ADA if they are part of a voluntary health program that neither requires participation nor penalizes employees who do not participate. Information from those examinations cannot be used to exclude any certain employee, or class of employees, from the wellness program or employment unless it shows that the candidate cannot perform her or his essential job functions with reasonable accommodations.
GINA prohibits discrimination in health coverage and employment based on genetic information. Employers are barred from requesting, requiring, or purchasing genetic information from or about an employee or the employee’s family members; using it for decisions regarding health plan rates; or using it for hiring, firing, promotion, or any decisions regarding terms of employment.
The EEOC allows employers to obtain genetic information when it offers a wellness program if the program is offered on a “voluntary basis” and the information gained is kept in “aggregate form.” An employer may not offer financial incentives to provide genetic information as part of a wellness program. It may offer financial incentives for completing a medical examination that includes questions about genetic information if the employer identifies each question that contains genetic inquiries and makes it clear that the employee is not required to answer those questions to obtain the incentive. If wellness programs offer incentives, the employer must open the program to all employees, including “employees with current health conditions and/or to individuals whose lifestyle choices put them at risk of developing a condition.”
The Affordable Care Act will require many employers to offer affordable health insurance coverage that were not previously doing so. When implemented correctly, a wellness program can be a safe, efficient, and legal way to decrease the employer’s cost of coverage. Employers should consider the various laws affecting wellness programs to decide whether and to what extent they offer financial incentives for employees to participate.
Robert E. Boston is a partner and Brian M. Clifford is an associate at Waller Lansden Dortch & Davis, LLP.