ACA Not Enough to Save Penn State’s Employee Wellness Program

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Recent negative media reports caused Pennsylvania State University to modify its employee wellness program, making clear that considering compliance with the Patient Protection and Affordable Care Act of 2010 (ACA) alone is not enough when employers launch such programs. Penn State followed the ACA requirements and, so it believed, implemented an effective tool to fight health care inflation. But it lost the public relations battle as opponents of the wellness program claimed that certain aspects of the program violated a number of privacy and civil rights laws.

The program imposed a $100-a-month penalty on any employee who declined to answer questions, including sensitive issues such as their marital situation, and for female employees, whether they planned to become pregnant. Penn State eventually backed down and modified its program. And this is the important lesson for any employer or consultant that looks only to the ACA as it develops an employee wellness program: Be sure to consider, in addition to the ACA and its implementing regulations, the broader range of laws that bear on employer-sponsored wellness programs, and understand how a potential negative public reaction to your program might affect your business’s reputation and workforce morale.

ACA Final Regulations
The ACA amended and codified the rules previously applicable to employer-sponsored wellness programs. To implement these rules, the Internal Revenue Service and the Departments of Labor and Health & Human Services released on May 29, 2013, final regulations regarding wellness programs integrated with employer-sponsored health plans.

The final regulations, among other things, set forth criteria that wellness programs must satisfy to qualify for an exception to the prohibition on discrimination under the Health Insurance Protection and Affordability Act of 1996 (HIPAA). HIPAA generally prohibits health plans from discriminating against any participant on account of eight health factors, including health status, medical condition (both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) and disability. The regulations essentially set forth criteria for an affirmative defense that can be used in response to a claim that the wellness program discriminated under the HIPAA nondiscrimination provisions.

The preamble to the regulations makes clear that (1) many other laws regulate plans and issuers in their provision of benefits to participants and beneficiaries and (2) compliance with the wellness program regulations is not determinative of compliance with other applicable requirements, such as the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Genetic Information Nondiscrimination Act, the Internal Revenue Code, and privacy and state law.

Remedies Sought and Provided
On September 23, 2013, Congresswoman Louise Slaughter (D-NY), in a letter to the Equal Employment Opportunity Commission, raised her concern about the Penn State wellness plan requesting that the EEOC issue sub-regulatory guidance that would provide “strong nondiscrimination protections for employees in wellness plans.” Congresswoman Slaughter, along with others, is calling into question whether wellness programs such as the one implemented by Penn State violate civil rights and other laws.

In response, Penn State has launched a new wellness health program in which employees will be rewarded for their participation. The university will give $100 to each employee who completes an online health profile through WebMD, has a biometric screening done and agrees to see a doctor for a preventative-care medical exam. If spouses or same-sex partners participate, the bonus will increase to $150.

Employers, health plans, issuers and others involved in the development of employer-sponsored wellness programs should work with an attorney as they consider, in addition to the ACA, the newly issued wellness program regulations and potential negative public fallout as well as whether any other laws or public relations concerns are applicable to their circumstance.