Wellness and the ACA
January 22, 2013 by BLR
An attorney who specializes in benefits points to a study showing that for every $1 an employer spends on a wellness program, it saves $3 in insurance claims and an additional $2.73 in reduced absenteeism. He is Frank C. Morris Jr., a member of the firm Epstein Becker Green in its Washington, DC, office.
Popular, but tricky to navigate. A recent survey found that 70.3 percent of 539 employer respondents reported offering wellness initiatives, with a little more than half saying their programs are less than 5 years old. And some 63 percent said they’d boosted their wellness budgets over the past 5 years.
So what’s a wellness program? They’re all over the lot, from comprehensive efforts that include professional disease management to far less formal initiatives such as an occasional on-site Weight Watchers® series or health fair, and/or a lunch-and-learn or two sponsored by the organization’s healthcare insurer.
There is no statutory definition of a wellness program, even in the Affordable Care Act. Programs can include initiatives that are conditioned on a health status factor such as smoking or overweight, or on general health. But any program faces a number of barriers contained in HIPAA (the Health Insurance Portability and Accountability Act), the ADA (the Americans with Disabilities Act), and GINA (the Genetic Information Nondisclosure Act).
HIPAA, GINA and ADA barriers. HIPAA bars program discrimination based on health factors but does allow some incentives for participation. A wellness program under HIPAA must meet five requirements:
- Before 2014, an incentive may not exceed 20 percent of the cost of coverage.
- It must reasonably promote health and/or prevent disease.
- Participants must be given the chance to earn at least one reward a year.
- Reasonable alternatives must be offered to people with disabilities who cannot achieve an award, or perhaps even participate, without great difficulty.
- The program and alternatives must be clearly disclosed.
Meanwhile, GINA bars employers from requiring employees to divulge any genetic information, such as individual genetics or family history, and no health risk assessment can require disclosure of GINA-protected information.
Finally, under the ADA, employers may not require employees to participate in any medical exam or otherwise reveal disability-related information. Therefore, any information obtained through a health risk assessment must be given voluntarily, and any and all participation in the program must be voluntary.
But a landmark 2011 legal ruling made ADA’s restrictions clearer and easier to deal with. In Seff v. Broward County, a Florida county tied its wellness program to its healthcare plan and required all participants to undergo health risk assessments that measured, among other things, cholesterol and glucose levels. Employees could refuse the assessment and still get coverage, but they paid an additional $40 a month for healthcare insurance.
One plaintiff sued on behalf of all county employees, contending the required assessment violated the ADA. Federal district judges studied the program’s structure and ruled that the county’s requirements were covered by a “safe harbor” provision of the ADA that permits employers to establish, sponsor, observe, or administer terms of a bona fide benefit plan based on underwriting risks, classifying risks, or administering risks, so long as the program isn’t a “subterfuge” to evade the ADA.
Attorney Morris notes that the Equal Employment Opportunity Commission interprets the ADA and has so far refused to take a position on the place of health risk assessments under the law, as it refused to do in this case. That eased the judges’ ruling. The upshot? Morris and others recommend that you attach your wellness program to your healthcare benefit plan.
It will soon be all the more important. There are already many benefits to wellness programs, but Morris is convinced they will become even more crucial as the Affordable Care Act (a.k.a. healthcare reform or the ACA) unfolds. Beginning in 2014, the ACA will allow for between 30 percent and 50 percent premium differentials for employer-sponsored healthcare coverage. The ACA may also remove the voluntariness aspect of wellness program restrictions, predicts Morris.
But the biggest impact of wellness programs, he feels, will be on mitigating the impact of what’s been dubbed the “Cadillac tax.” Beginning on January 1, 2018, he explains, insurance companies and plan administrators of self-insured plans will face a 40 percent nondeductible tax on so-called Cadillac healthcare coverage. That’s any plan that costs at least $10,200 for an individual or $27,500 for a family, including both employee and employer contributions. Such expensive plans may provide good care, but under the ACA, they’re simply too pricey.
The answer, Morris urges, is wellness programs to fill in the gaps and avoid employer taxes. Here’s one more cost-saving option: On-site medical clinics cost employees and employers far less for more care than visits to outside providers. Think your company is too small to offer such an option? Consider your location: If you operate in a high-rise building or an industrial park, you may be able to cooperate with neighboring businesses to create a jointly sponsored clinic that would serve all your employees.
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