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Worker health, company headache

July 13, 2016
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(IL Illustration/Brad Turner)

The overall goals required of any company wellness program sound simple — improve health and prevent disease.

Pricking an employee’s finger, putting him on a scale and offering advice for making healthier choices is touted as having the potential to lower a business’s medical insurance costs and improve the well-being of the worker. Employers apparently see a benefit in providing wellness programs. A study by the think tank RAND Corp. found that 69 percent of businesses offered these kinds of programs and on average saved $30 per month in health care costs per participant.

Wellness programs are regulated by the federal government to ensure employee medical information is protected and that companies don’t discriminate against workers with chronic conditions or poor health. However, different federal agencies oversee these programs and each agency has its own regulations. The agency and rules that govern depend on what the program offers and what it requires the employees to do.

In May, the Equal Employment Opportunity Commission published new rules that regulate wellness programs that fall under the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act.

These rules come three years after the departments of Health and Human Services and Labor along with the Internal Revenue Service updated the wellness program rules under the Health Insurance Portability and Accountability Act as amended by the Affordable Care Act.

Creating a headache for employers is that the rules from the separate agencies do not align with each other and a company’s program may be governed either by HIPAA, the ADA or GINA exclusively or by some combination of the three. Because of the new EEOC rules, employers cannot assume their wellness program that complied under the previous regulations will meet the agency’s new standards that take effect in January 2017.

“The thing that’s unusual is the fact that we have three separate sets of rules that could all apply at once,” said Stephanie Smithey, shareholder at Ogletree Deakins Nash Smoak & Stewart P.C. She noted the three rules are “adding a level of complexity and confusion that is a little bit uncommon.”

Differing incentives

Although many businesses offer wellness programs, the potential benefit of being healthier is apparently not enough enticement for workers to participate. Without some type of incentive like a financial reward or discount on the insurance premium, the median participation rate in company wellness programs was 20 percent, according to the RAND Corp. But that figure doubled when incentives were offered.

Those incentives are at the center of the new EEOC rules that provide guidance on what kind of inducements employers can dangle to get workers to sign on to the wellness program. Michael MacLean, partner at Faegre Baker Daniels LLP, explained the federal agency wanted to ensure that wellness programs were voluntary and that employees had a choice of whether to participate. The agency was concerned that very high incentives could potentially be seen as coercing employees to enroll.

MacLean MacLean

The new EEOC rules under the ADA cover participatory wellness programs. These initiatives require the employees undergo a medical exam or biometric screening, like testing blood sugar levels, and answer disability-related questions in order to receive the incentive. Also, participatory wellness programs that extend to spouses are governed by GINA under the EEOC’s rule.

Programs that are health-contingent or require the participants to meet certain health goals like lowering blood pressure or losing weight in order to receive the incentive are governed by the HIPAA standards.

All the rules pretty much cap the incentive at 30 percent of the insurance premium, but how they calculate the cap is different.

Basically, programs under HIPAA can offer a maximum reward of 30 percent of the total costs (the amounts paid by both the employer and employee) of the group health plan. If the employee opts for family coverage, then the cap is raised to the total cost of the family premium. Conversely, ADA-governed programs can provide a maximum benefit of 30 percent of the self-only costs of coverage (the share of the premium paid by the employee). That cap does not increase if the worker buys the family insurance plan.

Employees who smoke highlight a major difference between the rules. Under a HIPAA-regulated program, the company may offer up to a 50 percent discount on the cost of self-only coverage to workers who take a smoking cessation class. But, if the company also requires the employee to take a blood test to confirm he is no longer using tobacco, then the incentive cannot exceed 30 percent.

Attorneys are unsure the impact the new EEOC rules will have, with some saying the 30 percent limit is lower than most incentives currently offered and others believing the cap is higher than the market norm.

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While the regulations might discourage some employers from starting wellness programs, Calvin Chambers, attorney at Hall Render Killian Heath & Lyman P.C., does not expect businesses to scrap the health initiatives they may already have in place. Those companies that already have a culture of wellness will be likelier to restructure their programs to meet the new requirements.

“What I’ve seen and read is that there are a broad range of opinions on the effectiveness of wellness programs,” Chambers said. “My personal opinion is wellness programs are good and serve a purpose and raise awareness of a healthy lifestyle.”

Safe harbor

A case pending before the 7th Circuit Court of Appeals could put a charley horse in the EEOC’s enforcement of its new regulations.

The federal agency had filed a suit against Flambeau Inc., a Wisconsin company, charging the business’s wellness program violated the Americans with Disabilities Act. Essentially, the EEOC held Flambeau’s requirement that all employees undergo a health screening before they can get on the company’s insurance violated the ADA’s ban on employer-mandated medical examinations.

In Equal Employment Opportunity Commission v. Flambeau, Inc., 14-cv-638, the U.S. District Court for the Western District of Wisconsin found the business’s wellness policy was allowed under the ADA’s safe harbor provision.

The court noted, in particular, that the information gleaned from the wellness screening assisted the company in its health care costs. The data was used to calculate the projected insurance costs for the benefit year and to determine the premium charged to the plan’s participants.

“These types of decisions are a fundamental part of developing and administering an insurance plan and therefore fall squarely within the scope of the safe harbor,” Judge Barbara Crabb wrote in the December 2015 ruling.

In its brief filed with the 7th Circuit, the EEOC disputed Flambeau’s program was voluntary. Employees who did not submit to the medical exam and disclose their personal medical information were penalized by having to do without the employer-sponsored health insurance. The EEOC described this as “a Hobson’s choice that flunks the ADA’s ‘voluntary standard.’”

The District Court’s decision comes after a similar 2012 ruling from the 11th Circuit Court of Appeals in Seff v. Broward County, 691 F.3d 1221.

MacLean noted the language of the ADA insurance safe harbor provision does not specifically mention wellness programs. While the language is not clear how the safe harbor applies to such programs, these federal courts concluded that since the wellness initiatives were part of assessing the underwriting risk, they fell within the insurance safe harbor.

If the courts continue to apply the safe harbor provision in that way, MacLean said, it may make it difficult as a practical matter for the EEOC to enforce its new regulations.

Need for review

In the interim, attorneys say companies will have to give their wellness programs a check-up to ensure they comply with the new EEOC regulations. Even businesses that are not making any changes will still have to examine their offerings.

Smithey acknowledged the HIPAA, ADA and GINA standards are burdensome and complex, and attorneys will have to parse through the programs to determine which regulations apply. Still, she said, the rules do give employers a roadmap for such programs.

Most employers are used to complexity, Smithey said, but that “doesn’t make it any less painful.”•

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