The Don Draper days of excessive workplace drinking and smoking are long gone. In fact, it has become increasingly popular for employers to offer employees incentives to improve their health. The perk for employees is better health and potential rewards (often financial incentives) from employers. Employer benefits include a reduction in healthcare costs and an increase in employee productivity and attendance.
The Affordable Care Act (ACA), commonly referred to as Obamacare, includes regulations designed to help employers ensure that wellness programs they offer do not discriminate against employees with health conditions. The Obamacare wellness program regulations, which are set to go into effect on January 1, 2014, amend and expand the employee wellness provisions which originally went into effect under the Health Insurance Probability and Accountability Act (HIPAA) in 2007. This update provides a brief overview of the wellness programs an employer may offer under Obamacare and the rules or regulations the employer must consider when implementing that program.
PARTICIPATORY PROGRAMS
Participatory programs are programs that do not require participants to meet an individual health standard to receive an incentive. Examples of participatory programs include: programs reimbursing all or part of the cost of gym memberships; diagnostic testing programs that reward participation, but do not require any particular outcome or further action by the participant; a program that reimburses individuals for smoking cessation classes regardless of whether the individual quits smoking; and programs that reward employees for attending health education seminars.
Participation and rewards of participatory programs must be made available to all similarly-situated individuals.
HEALTH-CONTINGENT PROGRAMS
Health-contingent programs are programs that require a participant to satisfy a standard relating to a health status factor to obtain a reward. A health-contingent program complies with Obamacare if:
- It has a reasonable chance of improving participants’ health or preventing chronic disease;
- Is not overly burdensome;
- Is not a front for health-factor discrimination;
- Is not highly suspect in the method chosen to promote health or prevent disease;
- Provides individuals eligible for the program the opportunity to qualify for a reward at least once per year.
Like the participatory programs, the health-contingent programs require that any reward be made available to all similarly-situated individuals.
A reward is not considered available to all similarly-situated individuals participating in health-contingent programs unless the program provides a reasonable alternative standard (or waiver of an otherwise applicable standard) for obtaining a reward for participants for whom it is either (1) unreasonably difficult to satisfy the applicable standard due to a medical condition or (2) medically inadvisable to attempt to satisfy the otherwise applicable standard. If reasonable, an employer may require verification from a participant’s physician that it is unreasonably difficult or medically inadvisable for that participant to attempt to satisfy the applicable standard. In any material describing a particular program, the employer must disclose the availability of reasonable alternative standard or the possibility of a waiver. An example of reasonable alternative standard is a walking program in place of a jogging program.
Reasonable Alternative Standards
An employer implementing a health-contingent plan must take the following actions whenever they are applicable to his or her selected reasonable alternative standard.
- Paying for and assisting a participant to find an educational program;
- Selecting a reasonable time limit;
- Paying the membership or participant fee for any diet program. The employer is not required to purchase food associated with any diet program;
- Applying and accommodating recommendations of a participant’s physician.
This list is not exhaustive and an employer should use his or her discretion in ensuring that the alternative standards are reasonable.
Types of Health Contingent Programs
Health-contingent programs are divided into to two types of programs: activity-only programs and outcome-based programs.
- Activity-only programs require participants to complete an activity related to a health factor to obtain a reward, but do not require a specific health outcome. Examples include: walking, exercise, and diet programs.
- Outcome-based programs require individuals to attain or maintain a specific health outcome. Examples include: smoking cessation programs, programs that require participants to attain and maintain normal body mass index (BMI), blood pressure, or cholesterol.
Health-Contingent Program Rewards
Pursuant to the new Obamacare regulations, the maximum financial incentive a healthcare plan can offer for participation in wellness programs is 50% of the health plan’s premium for programs designed to prevent or reduce tobacco use and 30% of the premium for all other health-contingent wellness programs (it used to be 20%).
For example, if the annual premium for healthcare coverage under a group plan is $5,000 and the employer and employee respectively pay $4,000 and $1,000, the employer could reward the employee with $250 for successful completion of a health-contingent program designed to lower or maintain blood pressure because $250 is less than 30% of $1,000. If that employee entered a smoking-cessation program, the employer could offer him or her up to $500 as a reward. Another example is rewarding a participant who meets a certain weight loss goal with a gift certificate or actual prize (such as sporting event tickets, theater tickets, etc.).
INSIGHTS FOR EMPLOYERS
- Employers must remember to offer, and ensure employee awareness of, a “reasonable alternative” if your company offers employees a health-contingent program.
- Employers can ask for physician verification that a participant needs a “reasonable alternative” unless the validly of the request is apparent or it would be unreasonable to seek verification. For example, employers cannot demand verification from the physician of a participant in a wheelchair that they need a “reasonable alternative” to a jogging program.
- Make sure any wellness programs you implement also comply with other laws such as the Americans with Disabilities Act (ADA) or the Genetic Information Nondiscrimination Act (GINA).
- The maximum reward you can offer employees is 50% of the total premium if the reward is for smoking cessation and 30% of the premium for all other health-contingent programs (it used to be 20%).
Please contact a Gjording Fouser lawyer at 208.336.9777 if you would like any additional information about this topic or any other employment issues facing your company.