March Flabness: Wellness Programs, the ADA, and the Rising Costs of Employer-Provided Health Coverage
March Madness presents one of those occasions where your employees’ diets and exercise may fall by the wayside, and by the wayside, we mean potentially off a cliff. And when this happens, your workforce is increasing not just their weight and risk of disease, but it may also increase your cost to employ them. The productivity time you’re losing when they stop working to watch the games is nothing compared to the loss of productivity and increased health care costs due to poor health.
Some estimate that employers in the United States collectively lose tens of billions of dollars a year in productivity because of the health and productivity consequences of worker obesity. Employers in the United States are alternatively frustrated and alarmed at the rate at which health care costs are rising. For the most part, they feel powerless in the face of annual double-digit premium increases that have become the norm. Wellness programs offer one of the few bright spots. Employers look to wellness programs to incentivize healthier lifestyles among their employees thereby putting downward pressure on health care costs. Support for wellness programs in not universal, however. Critics insist that wellness programs discriminate against sick people or those with chronic conditions. They also cite to what they view as the lack of clear evidence the effectiveness of wellness programs.
Wellness programs are subject to regulation at the Federal level under two laws—the Affordable Care Act (ACA) and the Americans with Disabilities Act (ADA)— and establish the legal framework under which wellness programs operate. The ACA codified prior law (the Health Insurance Portability and Accountability Act of 1996) standards that among other things barred discrimination based on health status. These rules were set out in a 2006 regulation that was codified in the ACA with minor changes.
The ACA generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductibles, copayment or other cost sharing requirements based on a health factor. However, there is an exception that allows plans to offer wellness programs. There are two types of wellness programs provided in connection with a group health plan. Participatory wellness programs are generally available without regard to an individual’s health status. Either no reward is offered, or none of the conditions for obtaining a reward are based on an individual satisfying a standard related to a health factor. Health-contingent wellness programs require participants to satisfy a standard related to a health factor to obtain a reward. There are two types of health-contingent wellness programs: activity-only and outcome-based:
Activity-only programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward. Examples include a walking, diet or exercise program.
Outcome-based programs require an individual to attain or maintain a specific health outcome (such as not smoking or attaining certain results on biometric screenings) in order to obtain a reward. Final regulations set out requirements that health-contingent wellness programs must meet. For example, an outcome-based program might require an employee to achieve a certain body-mass index (BMI) to receive a waiver of health insurance deductible or copayment.
These rules have been around in some form since 2006, and employers are generally familiar with them. In contrast, employers are only now becoming aware of the rules that apply to wellness programs under the ADA, principally because of the reticence (until recently) on the part of the Equal Opportunity Employment Commission (EEOC) to issue regulations.
The ADA generally bars employers from asking health-related questions or conducting medical examinations. The ADA also makes it illegal to discriminate against an individual based on disability, which is broadly defined under the Act. To these general rules, the ADA provide two exceptions:
Voluntary wellness programs
The ADA specifically permits employers to collect certain medical information within the context of providing health or genetic services as part of a “voluntary wellness program.” A wellness program is “voluntary” if an employer neither requires participation nor penalizes employees who do not participate.
Bona fide insurance arrangements
The ADA permits employers, insurers, and plan administrators to establish and/or observe the terms of an insured health insurance plan that is bona fide, based on “underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law, and that is not being used as a subterfuge to evade the purposes of the ADA.” While the EEOC insists that this provision is not available to employer-sponsored wellness programs, the courts are not in full agreement. (Nor are we. For an explanation of these exceptions and the current controversy over bona fide insurance arrangements, please see our earlier post on the subject.)
Final EEOC Regulations
Last year, the EEOC started weighing in on wellness programs by issuing new rules regulating the extent to which those programs can offer incentives and still be considered voluntary and compliant with the ADA. For its wellness program to continue to be considered voluntary, an employer:
may not require any employee to participate;
may not deny any employee who does not participate in a wellness program access to health coverage or prohibit any employee from choosing a particular plan; and
may not take any adverse action or retaliate against, interfere with, coerce, intimidate, or threaten any employee who chooses not to participate in a wellness program or fails to achieve certain health outcomes.
Employers with good intentions may feel trapped after reading this, but the regulatory scheme is far from placing wellness programs in danger of extinction. Employers and insurers can design and manage wellness programs in such a way as to encourage healthier habits and remain compliant with the kaleidoscope of laws that protect employee rights. Under the ADA regulations, following these requirements will insure that a wellness program that is part of an insured or self-insured group health plan remains voluntary:
The program must be reasonably designed to promote health or prevent disease. The program must have a reasonable chance of improving the health of employees. In addition, the program must not be: (a) a subterfuge for violating the ADA; (b) overly burdensome to the participant; or (c) highly suspect in the method chosen to promote health or prevent disease.
An employer may not: (a) require an employee to participate in the program; (b) deny coverage under its health plans or benefits packages; (c) limit the extent of coverage; (d) take adverse action against employees for refusal to participate or for failure to achieve certain outcomes; and (e) retaliate against an employee who does not participate. Together, these requirements will eliminate the denial of participation in health plans to employees who fail to complete a health risk assessment.
The employer must provide employees with a notice clearly explaining what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure of medical information.
Cap incentives at 30% of the total cost of employee-only coverage. These regulations would still permit employers to offer incentives in the form of either rewards or penalties.
These requirements don’t mesh with the ACA regulatory requirements. For example, the EEOC’s rules limit the incentive an employer can offer to encourage participation in a wellness plan to 30 percent of total costs of employee-only coverage. In contrast, the ACA permits employers to offer incentives based on the cost of the health plan the employee selects, whether employee-only or family coverage. And while the ACA allows wellness programs to serve as gateways to coverage—i.e., group health plan coverage is available only to employees who participate in the wellness program—the EEOC rules do not allow for this.
The Prospects for a Coordinated Rule
Legislation has been introduced in the current Congress that would harmonize the regulatory scheme around wellness programs and effectively nullify the new EEOC regulations. Called the “Preserving Employee Wellness Programs Act,” H.R. 1313 was approved on March 8, 2017 with amendments, by the House Committee on Education and the Workforce, and provides that if a wellness program is complying with the relevant requirements of the Public Health Service Act (“PHSA”), it is also complying with the ADA and the Genetic Information Nondiscrimination Act.
Employers can and should remain sensitive to the issues faced by employees challenged with obesity (and other health conditions), but can do so while maintaining wellness programs that actually improve health and lower costs.