Update following EEOC's issuance of final regulations:
Well, my prediction below was proven wrong. I made the mistake of thinking a federal regulatory agency would be rational. The EEOC has finalized its wellness incentive regulations, expressly ignoring both the statutory language of the ADA and a recent Federal court decision. Despite its issuance of final regulations, the EEOC's war on wellness is far from over. Doubtless the courts will have to sort it all out.
Original post:
If you followed, even passively, the slew of Equal Employment Opportunity Commission (EEOC) lawsuits or proposed wellness regulations in 2015, then you know that wellness incentive programs—a key part of many employers' benefits strategy—face a new era of mind-boggling complexity. The federal courts, though, are working rather boldly to reduce employers' stress (as far as the EEOC is concerned, anyway) and help overworked HR departments achieve a little better zen balance.
On New Year's Eve a federal trial court in Wisconsin, which heard one of the EEOC's wellness lawsuits, ruled that the EEOC's challenge to the employer's wellness incentive program was entirely off-base, and the court dismissed it. The details of the employer's wellness program and the legal intricacies of the EEOC's challenge aren't all that important. What's significant is that the court used a long-standing statutory exception in the Americans with Disabilities Act (ADA) to bypass the entire ADA wellness regulatory regime—a statutory exception for bona fide benefit plans that the EEOC has acknowledged exists but refuses to recognize.
I want to be a little cautious, but I don't think it's overstating the matter to say that the EEOC will no longer be able to ignore Congress or the federal courts, and its proposed wellness regulations are either dead or will need to be entirely rewritten. (You can breathe a little sigh of relief, now. It's OK.)
Here's what you need to know going forward.
Remember HIPAA?
The court's decision didn't do anything to cut back the wellness incentive rules under HIPAA nondiscrimination. So all the stuff about different rules for participatory programs versus activity-only health-contingent programs versus outcome-based health-contingent programs and the 30% limitation (50% if smoking cessation is included) is still very much alive and well.Also worth mentioning is that HIPAA includes parts of the Genetic Information Nondiscrimination Act (GINA), so health risk assessment questionnaires still need to be bifurcated such that the part of the questionnaire asking about family medical history is kept separate, entirely voluntary and not at all tied to any incentive.
The Key Is Health Plan Risk Management
This recent court decision is not the first time the EEOC has been told its interpretation of the ADA is flat wrong. Another court did the same thing for the same reasons in 2011, and a trend is developing. In order to take advantage of this statutory exception in the ADA, courts want to see certain documentation from employers, and the theme is health plan risk management.1. Term of the Plan and Not a Condition of Employment
To avail one's self of the bona fide benefit plan safe harbor, the first thing employers need to do is document the extent to which the wellness plan is part of an ERISA-governed group health plan. As the Wisconsin District Court held, it doesn't have to be the same plan as the one with the major medical coverages, but the two should relate to one another, and that relationship should be in a document somewhere. Do employees have to be benefits-eligible to participate in your health fair? Do employees have to be enrolled in the medical benefit to participate? Are new hires eligible for wellness incentives? What are the mechanics of the wellness incentives? All of that needs to be written down, preferably in something cross-referenced by or within a plan document.Surprisingly few employers do this. In the minds of many HR folks, wellness incentives tend to be an extension of the medical plan, even though the medical benefit booklet or SPD makes no mention of the wellness program or its incentives. It's especially troublesome when the participation terms are different, such as when the wellness program is available to all employees and not just benefits-eligible employees, or when employees can participate in the wellness program without being enrolled in the employer's medical benefit.
There are reasons other than the ADA for documenting wellness programs. Technically speaking, if the wellness incentive program and its "reasonable alternative standard" are not documented, the plan loses the protection of HIPAA's wellness incentive regulation, and the entire wellness incentive program will violate HIPAA nondiscrimination. Also, wellness programs are generally "group health plans" under COBRA, so COBRA continuation coverage rights will apply independently to the wellness program if it is not properly incorporated into the medical plan.
2. Underwriting, Classifying and Administering Risk
The second thing to document is how the employer has used aggregated wellness program data to manage its medical plan. Both courts to opine on this issue have relied heavily on the fact that the employers in those cases used wellness program data (aggregated and de-identified to stay compliant with HIPAA, of course) to classify health risks, project plan costs and determine participant premiums—all the things a good benefits consultant like Wortham does, by the way. Both cases involved self-insured employers, which obviously have a strong interest in managing the risks presented by their plans, but I believe claims-credible insured employers have the same risk management concerns and should equally be able to avail themselves of the bona fide benefit plan safe harbor. Insured employers that are not claims-credible or are subject to community rating likely cannot use the ADA because there's no risk to manage.Employers need to document that it uses aggregated wellness program data; the bona fide benefit plan safe harbor is not automatic. This can be done by making sure your wellness vendor does, in fact, produce such a report and will deliver it to the employer. Keep documents or emails from your benefits consultant or internal benefits committee showing how the wellness data was used to adjust the employer-employee premium split recommendation and/or medical spend trend analyses that takes the wellness program data into account. Employers should also include a paragraph in their wellness plan documentation (see #1, above) stating that one of the intents of the plan is to underwrite, classify and administer health plan risk.