1 Many Federal Agencies Are Involved in PPACA and Three Have Issued - - PDF document

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Patricia M. Olsson SHRM Idaho 2016 Employment Law Conference September 30, 2016

Workplace Wellness Programs - Healthy for Idaho Employers

www.moffatt.com

PATRICIA M. OLSSON

• Ms. Olsson’s practice emphasizes employment,

health care law, and medical malpractice

• defense. Since 1983 she has tried numerous cases

before state and federal trial courts and has conducted an active appellate practice in the federal and state courts of appeals.

• Ms. Olsson was inducted into the American

College of Trial Lawyers in October 2003, and served as Idaho State Chair for three years.

• The Patient Protection and Affordable Care Act (“PPACA”) (also

known as Obamacare) intends to improve the health of all Americans.

• It does this by trying to incent physicians and extended care

providers from the “fee-for-service” model that has held so long, to a situation where they will be rewarded if they keep their regional population healthy. Example: The Treasure Valley YMCA has a program called The Healthy Living Center. It is a partnership between the Treasure Valley YMCA, area health

• rganizations, and the community, including employers.

But:

Where Did the Idea of Employee Wellness Programs Originate?

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• These departments are the Internal Revenue Service (“IRS”), the

Department of Labor (“DOL”), and the Department of Health & Human Services (“DHHS”), hereinafter referred to as “the Tri- Agencies.”

• The regulations they developed can be found at 26 C.F.R. pt. 54

(IRS), 29 C.F.R. pt. 2590 (DOL), and 45 C.F.R. pts. 146 and 147 (DHHS).

• A good source for reviewing these regulation is

https://www.law.cornell.edu.

Many Federal Agencies Are Involved in PPACA and Three Have Issued Guidelines, Working Together, for Wellness Programs

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• 26 C.F.R. pt. 54 (IRS)
• 29 C.F.R. pt. 2590 (DOL)
• 45 C.F.R. pts. 146 and 147 (DHHS)

SUMMARY: The final regulations, consistent with the Affordable Care Act, regarding nondiscriminatory wellness programs in group health coverage, provide:

• These final regulations increase the maximum permissible reward

under a health-contingent wellness program offered in connection with a group health plan (and any related health 2 insurance coverage) from 20 percent to 30 percent of the cost of coverage.

The Rule of the Tri-Agencies:

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• These regulations also include other clarifications

regarding the reasonable design of health-contingent wellness programs and the reasonable alternatives they must offer in order to avoid prohibited discrimination.

• Lastly, these regulations also include other clarifications

regarding the reasonable design of health-contingent wellness programs and the reasonable alternatives they must offer in order to avoid prohibited discrimination.

The Rule of the Tri-Agencies (Cont’d)

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• The EEOC also regulates employer wellness programs.
• On April 20, 2015, the EEOC issued a Notice of Proposed

Rulemaking.

• On May 17, 2016, the EEOC issued its final rule and an

Interpretative Guidance implementing Title I of the Americans with Disabilities Act (“ADA”) as they relate to employer wellness programs.

• This rule becomes effective January 1, 2017.

What Does the EEOC Think About Wellness Programs?

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• Wellness program generally refers to health promotion and

disease prevention programs and activities offered to employees as part of an employer-sponsored group health plan, or separately as a benefit of employment.

• Many programs ask employees about their medical history to

perform a Health Risk Assessment (“HRA”), and/or have their employees undergo biometric screenings for risk factors.

• Other wellness programs provide education on various things,

including nutrition, weight loss, smoking cessation, and coaching employees to meet health goals.

The EEOC’s Definition of a Wellness Program

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• Title I of the ADA prohibits discrimination against

individuals on the basis of disability.

• Effective January 1, 2009, the definition of a “disability” was

so broadly expanded that almost everyone has a disability of

• ne kind or another.
• The ADA also restricts employers from obtaining medical

information from applicants and employees, although it does allow post-offer physical examinations.

What Is the Basis for the EEOC’s Purported Jurisdiction Over Employer Wellness Programs?

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• Employers can only inquire about their employees’ health or do

medical exams in conjunction with a wellness program if it is a voluntary employee health program.

• According to the EEOC, Title I of the ADA prohibits employers from

denying employees access to wellness programs on the basis of disability.

• It requires employers to provide reasonable accommodations that

allow employees with disabilities to participate in wellness programs.

• All medical information gathered as a part of the wellness program is

confidential.

How Does This Pertain to Wellness Programs?

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• Although PPACA involves the IRS, the DOL, and the DHHS, as

well as the EEOC, the EEOC chose to go its own way in developing its regulations.

• These regulations conflict with the regulations agreed upon and

issued by the Tri-Agencies.

• The EEOC stated that while it would try to provide consistency

with HIPAA and PPACA, it determined that employers’ wellness programs had to be voluntary, and incentives to participate could not be so high as to become coercive.

The EEOC’s Reason for Issuing Its Own Rules

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• Offer voluntary wellness programs.
• These wellness programs can be part of an employer-

sponsored group health plan.

• That health plan can offer incentives for “health-contingent”

wellness programs.

• Such programs may offer rewards to employees who

perform certain activities or achieve health outcomes, or impose penalties if they do not perform an activity or fail to achieve a particular outcome.

What Can an Employer Do Under an EEOC Program?

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• No incentive limits are placed on participatory

programs (such as programs that only ask employees to complete an HRA or attend a smoking cessation class), so long as these programs are offered to all employees and incentives are available to all employees regardless

• f a health factor.

What Can an Employer Do Under an EEOC Program? (Cont’d)

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• The EEOC’s final rule interpreting the ADA clearly limits

incentives that apply to any bonus program that requires employees to answer disability-related questions or undergo medical examinations (whether they are participatory or health contingent).

• Incentives include both financial and in-kind incentives (such

as reduction in insurance premiums, cash, time off awards, prizes and other items of value, even including “trinket” gifts).

Limits Placed by the EEOC

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• According to the EEOC, it does.
• The EEOC’s Interpretation of the ADA is that there is no distinction

between wellness programs that are a part of a group health plan or simply offered by the employer.

• Its regulations require all wellness programs that obtain medical

information from employees to be voluntary.

• Note that HIPAA’s regulations concerning wellness programs applies
• nly to those that are offered as a part of a group health plan.

See: https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our- activities/resource-center/publications/caghipaaandaca.pdf.

Does This Rule Apply to Wellness Programs That Are Not Part of an Employer’s Group Health Plan?

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• According to the EEOC, the ADA’s Safe Harbor provision

allows insurers and plan sponsors, including employers, to use information about employees’ health conditions to make decisions about insurability and the cost of insurance.

• The inquiries and use of the information have to be

consistent with laws governing insurance, and cannot be a subterfuge to evade compliance with the ADA.

• The Safe Harbor provision does not apply to employer

wellness programs. Why not?

ADA “Safe Harbor” Applicable to Insurance

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• Because employer wellness programs are not collecting
• r using information to determine whether employees

with certain health conditions are insurable or to set insurance premiums, the Safe Harbor, according to the EEOC, does not apply.

• The final regulation explicitly states the Safe Harbor

provision does not apply to wellness programs even if they are part of an employer’s health plan.

ADA “Safe Harbor” Applicable to Insurance (Cont’d)

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• If an employer is offering a voluntary employee health program, any

disability-related inquiries or medical examinations that are a part of the wellness program must be “reasonably designed to promote health or prevent disease.”

• The program cannot require an overly burdensome amount of time

for participation.

• The program may not involve unreasonably intrusive procedures.
• The program cannot require employees to incur significant costs for

medical examinations.

What Standards Apply to the Voluntary Wellness Programs the EEOC Has Determined Are Allowable Under the ADA?

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• A wellness program that includes disability-related inquiries
• r medical examinations is considered voluntary if

– The employer does not require any employee to participate; – The employer 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; – The employer may not take adverse action or retaliate against, interfere with, coerce, intimidate, or threaten any employee who chooses not to participate in a wellness program, or who fails to achieve certain health outcomes.

According to the EEOC, When Is Participation in a Wellness Program Considered Voluntary?

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• Lastly, an employer must provide notice to all

employees that clearly explains what medical information will be obtained in connection with a wellness program, how it will be used, who will receive it, and restrictions on disclosure.

• The employer must comply with the EEOC’s permitted

incentives.

According to the EEOC, When Is Participation in a Wellness Program Considered Voluntary? (Cont’d)

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• This EEOC regulation applies only to wellness programs that

require employees to answer disability-related questions or to undergo medical examinations in order to earn a reward or avoid a penalty.

• It would not apply to a wellness program that simply requires

employees to engage in a certain activity (attend a nutrition class, walk a certain amount every day, attend a weight loss class) in

• rder to earn an incentive.
• Employers must provide reasonable accommodations to allow

employees with disabilities to participate in any such program.

What Incentives Are Permitted on Employer Wellness Programs?

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• Examples include:

– An employer must provide a sign language interpreter for a deaf employee who wants to attend a smoking cessation class, or any other kind of class; – Materials must be an accessible format (such as Braille or large print for employees who are blind or nearly blind); – An employer must provide an alternative to a program that requires a certain amount of walking for employees who use a wheelchair or other accommodations to ambulate.

What Incentives Are Permitted on Employer Wellness Programs? (Cont’d)

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• If a wellness program is open only to employees enrolled

in a particular health insurance plan, the maximum allowable incentive is 30% of the total cost of the self-

• nly coverage of the health plan.
• Under the Tri-Agencies regulations, an incentive of up to

30% of the total cost of family or dependent coverage, as well as employee coverage, is acceptable.

How High Can an Employer’s Incentive to Participate in a Voluntary Program Be?

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• If an employer wants to offer an incentive for employees to complete a Health

Risk Assessment (“HRA”), have annual tests that check their glucose and cholesterol levels, then – An employer can offer an incentive up to 30% of the cost that a 40-year-old nonsmoker would pay for self-only coverage under the second lowest cost Silver plan on the State or Federal Health Care Exchange in the location of the employer’s principal place of business.

• This regulation uses the Silver plan coverage and premiums because, to date, it

is the most popular plan on the Exchanges.

According to the EEOC, Can Employers Offer an Incentive to Employees to Participate in a Wellness Program If That Employer Does Not Offer Its Employees Group Health Insurance?

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• The EEOC’s regulations distinguish between smoking cessation

programs and other wellness programs.

• If a wellness program merely asks employees whether or not they use

tobacco, it is not a wellness program that asks disability-related questions and the regulations’ 30% incentive limit does not apply.

• An employer can offer an incentive up to 50% of the cost of self-only

coverage if they do ask employees whether or not they smoke.

• If, however, biometric screening or medical procedures that test for the

presence of nicotine are required by the employer, the rules’ 30% incentive limit applies.

What About Smoking Cessation Programs?

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• The EEOC claims it coordinated extensively with the

DOL, the DHHS, and the IRS in issuing its regulations.

• It sought consistency with HIPAA, as amended by the

PPACA, with respect to wellness program incentives.

• The EEOC’s regulations differ in significant ways

because it is much more protective in avoiding discrimination under Title I of the ADA.

According to the EEOC, It Coordinated with Other Federal Agencies

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• Employers must comply with the EEOC’s final

regulations concerning wellness plans prospectively.

• The regulations apply to the first day of the first plan

year that begins on or after January 1, 2017.

• For example, if a plan starts on March 1, 2017, the new

regulations apply.

When Do Employer Wellness Programs Have to Comply with This Rule?

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• On May 17, 2016, the EEOC issued regulations

implementing Title II of the Genetic Information Nondiscrimination Act (“GINA”), which are beyond the scope of this presentation but can be found at https://www.eeoc.gov/laws/regulations/qanda-gina- wellness-final-rule.cfm

• Employers may offer limited incentives for an

employee’s spouse to participate in a wellness program.

Other EEOC Guidance on Wellness Programs

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• The EEOC has already begun litigation over its

regulations.

• It has brought several lawsuits challenging certain

aspects of employee wellness programs.

• So far, the courts have unanimously said that under the

ADA, employers are allowed to offer wellness programs.

What Do Other Agencies Think of the EEOC’s Regulations?

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• The U.S. District Court for the Western District of Wisconsin

held that an employer’s requirement that employees complete HRAs and biometric screening in order to get employer-provided health coverage fell within the Safe Harbor provision.

• The EEOC contended it did not.
• The opinion was upheld by the Eleventh Circuit Court of

Appeals.

EEOC vs. Flambeau Inc., No. 3:14-00638 (W.D. Wis. 2014), 2014 WL 4854618 (E.E.O.C.)

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EEOC v. Orion Energy Sys., Inc., 145 F. Supp. 3d 841 (E.D. Wis. 2014).

• Former employee filed an administrative complaint with the EEOC 296 days after she was
• terminated. EEOC commenced action on behalf of former employee alleging former

employer administered involuntary medical examinations and disability-related inquiries as part of wellness program in violation of the Americans with Disabilities Act (ADA), and that employer retaliated against employee by firing her for objecting to program and intimidated her for exercising her right not to participate. Former employer moved to amend its answer and affirmative defenses to include a statute of limitations defense.

• Holdings:

1. Former employer failed to diligently pursue statute of limitations defense, and thus was not entitled to amend affirmative defenses to include statute of limitations defense after deadline to do so expired, and 2. Employer did not provide employee with unequivocal notice of termination when employee overheard that unnamed employee would be terminated.

Other Cases to Watch

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• The EEOC brought suit against Honeywell International, Inc. in a

Minnesota federal court, requesting a temporary restraining order enjoining the company from continuing to operate its wellness program, which required employee participants in the group health plan and their covered spouses to complete biometric screenings and refrain from tobacco use (or complete a tobacco cessation program).

• Noncompliance would result in surcharges to the employee's share of

their health plan premiums.

• The district court denied the EEOC's request for injunctive relief on the

grounds that the EEOC had not shown a threat of irreparable harm. The case was later voluntarily dismissed.

EEOC v. Honeywell Int’l (11/2/14, D.C. MN) 2014 WL 5795481

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• The EEOC continues to file lawsuits as it identifies

employer wellness plans that do not comply with its views

• n PPACA and the EEOC’s interpretation of

Title I of the ADA.

• We expect many more lawsuits to be filed by the EEOC.
• We hope at least one reaches the U.S. Supreme Court, so

that a final determination of which regulations apply can be made.

Bottom Line

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Patricia M. Olsson MOFFATT THOMAS 101 S. Capitol Blvd., 10th Floor Boise, ID 83702-7710 pmo@moffatt.com 208-345-2000 1-800-422-2889

www.moffatt.com

For more information or questions, please contact:

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