Does Your Wellness Plan Need a (Legal) Check-Up?

by Davis Wright Tremaine LLP
Contact

Wellness plans must comply with complex final regulations that were issued last year by the Departments of Labor, Health and Human Services, and the Treasury (collectively, the “Departments”). To help plans from falling off the treadmill, the Departments have issued additional FAQ guidance on three wellness topics (see Q8, Q9, and Q10). Plan sponsors should take note of the guidance (which also contains other FAQs related to health care reform), and check in with a personal trainer (er, lawyer) regarding the wellness plan’s legal health.

Overview of the final regulations
The scheme of the final regulations is summarized in this diagram. Broadly, wellness programs are divided into participatory-only and health-contingent. From a regulatory compliance perspective, participatory-only programs (i.e. those that are not based on an individual satisfying a standard that is related to a health factor or do not provide a reward) are relatively straightforward, and are compliant if they are available to all similarly situated individuals, regardless of health status. However, health-contingent programs (i.e. programs under which to obtain a reward, an individual must satisfy a standard related to a health factor, or do more than a similarly situated individual based on a health factor), are subject to greater scrutiny and regulation. Health-contingent programs are further subdivided into activity-only programs and outcome-based programs.

All health-contingent programs must satisfy five criteria. The precise details depend on whether the program is classified as either activity-only or outcome-based. Activity-only programs do not require the participant to attain or maintain a specific health outcome, whereas outcome-based programs do. The distinction is important. An activity-only program must provide a waiver or reasonable alternative standard only for individuals for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to attempt to satisfy the standard, whereas an outcome-based program must provide a waiver or reasonable alternative standard to any individual who does not meet the initial standard. That, coupled with other requirements, creates a difficult obstacle course for wellness plans to navigate.

Here is what the Departments have clarified in the FAQs:

  1. Plan does not have to provide multiple opportunities to satisfy the standard.
    The Departments clarified that the plan does not necessarily have to provide multiple opportunities for an individual to satisfy the plan’s standard(s). The specific example is of a plan that charges participants a tobacco premium surcharge, but also provides an opportunity to avoid the surcharge if, at the time of enrollment or annual re-enrollment, the participant agrees to participate in (and subsequently completes within the plan year) a tobacco cessation educational program.

    According to the Departments, the plan is not required to provide the opportunity to avoid the surcharge, or provide another reward, to a participant who is a tobacco user and initially declines the opportunity to participate in the tobacco cessation program, but joins in the middle of the plan year. The plan’s only obligation to such individuals is to provide a reasonable opportunity to enroll in the tobacco cessation program at the beginning of the plan year, and subsequently for following plan years. However, the employer could allow rewards (including pro-rated rewards) for mid-year enrollment in a wellness program.

    Presumably the reasoning is not limited to tobacco cessation programs. For example, if a plan conditions a lower premium on obtaining certain biometric test results within, say, a six-week period preceding the plan year, it is assumed that this opportunity does not have to be offered again later in the year to a participant who refuses to take the biometric tests during that six-week period.
  2. Plan may have input into appropriate reasonable alternatives
    The second clarification is that the plan may have an opinion with respect to a participant’s proposed reasonable alternative. The FAQs provide the example where a participant's doctor advises that an outcome-based standard for obtaining a reward is medically inappropriate for the plan participant. The doctor suggests a weight reduction program (an activity-only program) instead. The Departments clarified that the plan does have a say in the program that the participant chooses and the participant should discuss different options with the plan. However, we assume that the doctor’s opinion would prevail if the doctor were to specify a particular program.
  3. Plan may revise sample language
    The final regulations provide sample language to satisfy the requirement to provide notice of the availability of a reasonable alternative standard. The FAQs clarify that plans and issuers are permitted to modify this language to reflect the details of their wellness programs, but the notice must include all of the content required by the regulations. Plan sponsors know their participants, so it is a good idea to write the notice in language that is meaningful to them.

Although the FAQs provide welcome guidance, there remains confusion as to the correct categorization of certain types of programs, complicated further because walking, diet, and exercises programs that were classified under the former regulations as participatory-only, are now classified as activity-only programs. Thus, plan sponsors may be under the impression that they are offering a participatory-only program because participants choose their wellness options—but if a participant chooses a walking program, presumably the employer now has to comply with the rules relating to activity-only programs for that participant.

Also, plan sponsors should ensure that their wellness plans are compliant not only with the final regulations, but also with other applicable laws including the Employee Retirement Income Security Act, Internal Revenue Code, Genetic Information Nondiscrimination Act, and Americans with Disabilities Act, among others.

Join us in Portland on Jan. 30 for a breakfast briefing where we will discuss the final wellness plan regulations and the FAQs, other aspects of health care reform, and the impact of DOMA’s demise.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Davis Wright Tremaine LLP | Attorney Advertising

Written by:

Davis Wright Tremaine LLP
Contact
more
less

Davis Wright Tremaine LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!