Compliant Wellness Programs Under Healthcare Reform. Wednesday, May 22, :00 pm 3:00 pm EST

Transcription

1 Compliant Wellness Programs Under Healthcare Reform Wednesday, May 22, :00 pm 3:00 pm EST

2 Today s Speakers Joe DiBella Executive Vice President of the Health & Welfare Practice Conner Strong & Buckelew Phyllis Saraceni Senior Vice President, Compliance & Audit Practice Leader Conner Strong & Buckelew 2

3 Health & Wellness

4 Why Wellness? Increased health risk awareness Enhanced employee health status According to the U.S. Department of Health and Human Services: - 59% of employees do not get adequate exercise - 50% or more have high cholesterol - 27% have cardiovascular disease - 26% are overweight by 20% or more - 24% have high blood pressure Ever-increasing health care costs Medical cost containment 4

5 Past, Present and Future 20 Years Ago Today The Future Annual cost to provide coverage for a family $4,040 $18,000 At current trend rates, annual costs will double in 10 years Average employer share of premium 76% 78% - 80% Remain steady? Health spending as % of GDP 11% 17% By 2017, 20% Number of Americans with a chronic condition 118 million in 1995 More than 141 million in million in

6 So What To Do About It? Wellness is considered to be an important component of employer benefit packages - offer workers and their families access to programs to increase health - ultimately contributes to the development of less costly benefit packages Workplace wellness programs can take many forms, and may not even be called wellness programs. A comprehensive wellness program can include, among other features, healthrelated communications, health risk assessments, and rewards (or penalties) intended to raise employees health awareness and promote healthy lifestyles. Wellness programs can cover only employees, or can also cover employees spouses and other family members. The common goal of most workplace wellness programs is to help control health plan costs. 6

7 The Value of Health & Wellness Plans A 2010 study conducted by Harvard University found wellness program returns to be about $3.27 per dollar spent in reduced medical costs and $2.73 per dollar spent in reduced absenteeism costs 7

8 Strategies for Wellness Secure C-suite buy-in Develop a Wellness Committee Collect base line data Choose the right plans that align with your company Evaluate outcomes Change the culture Lead by example Get engagement Know what the problem is Know your population Measure success Create Incentives Carrots and not sticks Align benefit plans No barriers 8

9 Incentives Carrot over Sticks. Incentives work and drive behaviors. There are a variety of incentives that can be used to motivate proper behavior that can lead to flattening the trend curve and increasing productivity. These include: Monetary rewards for completing a Personal Health Appraisal/Health Risk Assessment Premium reduction for getting an annual physical with documented physician proof Contributions to a Flexible Spending Account or Health Reimbursement Account Gym Reimbursements Personal Perks 9

10 Incentives Less Intrusive Undefined/lower ROI The Continuum Most Aggressive Measurable/high ROI Reward for Activity Reward Based On Risk Reward for Achievement Reward for Adherence $ for completing an PHA Waived co-pays on diabetes medication $ to maintain low cholesterol Lower premium for non-smokers $ for enrolling in a chronic disease management program $ for completing an online or telephonic wellness program $ for participation in biometric screening 100% preventive care Reduced copays for use of premium providers $ for colonoscopies 100% benefit for compliance with EBM care $ to reduce cholesterol 10 points $ to stop smoking $ to maintain BMI below 25 $ to hit biometric screening results $ to maintain a target BMI for 12 months $ to maintain low blood pressure for 12 months 10

11 Consider the Rules

12 Continuing Legal Developments Ever evolving body of law applies to wellness and disease prevention. - keep an eye on continuing legal developments - evaluate whether wellness programs need modification due to changing regulations - various wellness concerns under HIPPA, PPACA, ADA and other laws 12

13 Various Wellness Concerns Wellness program design should be evaluated for compliance with: The Health Insurance Portability and Accountability Act (prohibits group health plans from discriminating in eligibility, benefits, premiums or contributions because of employee s health condition). The Americans with Disabilities Act (ADA) and Other Federal Laws: the Patient Protection and Affordable Care Act (PPACA) the Genetic Information Nondiscrimination Act (GINA) the Age Discrimination in Employment Act (ADEA) Title VII of the Civil Rights Act the National Labor Relations Act (NLRA) the Internal Revenue Code Medicaid State laws and tax consequences must also be considered. 13

14 Wellness Plan Incentive Options Establish points system for the various aspects of the plan Points may have dollar value or percentages of premium contribution value Points could be valued on amounts to be deposited into Flexible Spending Account or Health Savings Account Incentives can use rewards based on prizes, goods, services Paid time off, Preferred Parking, Other Cash Tax implications involved with items of value and/or cash 14

15 General Tax Rule Some employer-sponsored wellness incentives have tax consequences. General rule is any compensation provided by an employer to its employees is taxable unless a specific Internal Revenue Code provision excludes it from income. Employer is responsible for withholding all appropriate federal income and other employment-related taxes from the recipient s cash compensation. 15

16 Financial Incentives Some wellness programs provide financial incentives such as gift certificates, cash, premium reductions, or dollars in a health reimbursement arrangement (HRA), flexible spending account (FSA) or health savings account (HSA). - When incentive is related to a group health plan, such as reduced cost-sharing (premium reduction) or contributions or a payment into a health FSA, HRA or HSA, then incentive may be excluded from taxation. - When incentive is cash or a cash equivalent (no matter how small), such as gift certificate, gift card, check, coupon or cash bonus, incentive will be treated as fully taxable wages. The amount must be included as taxable income on employee s Form W-2 for year, and federal employment taxes must be paid. 16

17 De Minimis Rule Special de minimis rules may apply. For example, consider a wellness program, which is not a part of employer s group health plan, that awards points for certain activities, such as taking a health risk assessment, walking, or going to a health club. - Employees who earn a prescribed number of points receive tickets for a prize raffle, as well as $25 gift card. All participants receive T-shirts. - Must the rewards be reported as income on Form W-2? > Gift cards and raffle prizes (e.g., an evening at a hotel) are includible in income at fair market value. > T-shirts are not includible in income as they would likely be considered de minimis fringe benefits (because it would be unreasonable or administratively impracticable to account for them). 17

18 Healthcare Reform Compliance Issues for Wellness Plans

19 Healthcare Reform - Affordability Generally employers can t include healthcare premium contribution discounts offered employees who participate in wellness programs to determine if coverage passes HCR affordability and minimum value test. Tests effective in 2014 (coverage affordable if premium paid by employee for individual coverage does not exceed 9.5% of wages - otherwise coverage is unaffordable and subject to $3,000 penalty) New rule wellness premium discounts are excluded when running affordability test (and minimum value test) - other than for tobacco cessation programs Example: Monthly premium $100 for single coverage if participate in wellness program and $120 if not - employer would use $120 premium assessment to test affordability (but if discount offered for tobacco cessation, employer can use lower premium) Delayed effective date - for plan years beginning before 1/1/15: - All wellness premium discounts (including those unrelated to tobacco use) can be included for affordability and minimum value tests - One-year delay applies only for programs in effect on May 3,

20 Healthcare Reform - HIPAA The Health Insurance Portability and Accountability Act: prohibits group health plans from discriminating in eligibility, benefits, premiums or contributions because of employee s health condition. - HIPAA does allow some exceptions for wellness programs. - In November 2012, agencies released rules addressing changes made to wellness programs by HCR -- rules updated existing HIPAA nondiscrimination requirements for wellness programs, without making significant changes across the board. - New rules apply to both insured and self-insured group health plans, and are effective for plan years beginning on or after 1/1/14. 20

21 Wellness Program Checklist

22 Wellness Program Checklist Checklist to determine whether plan offers program of health promotion or disease prevention that complies with Department of Labor (DOL) HIPAA and healthcare reform rules on wellness programs. 22

23 A. Wellness Program Offered? A. Does the plan have a wellness program? Yes No Wide range of programs promote health and prevent disease but programs not always labeled wellness programs. Examples include: program reduces individual s cost-sharing for complying with preventive care plan; diagnostic testing program for health problems; and rewards for attending educational classes, following healthy lifestyle recommendations, or meeting certain biometric tests TIP: Ignore the labels wellness programs called many things. Other common names include: disease management programs, smoking cessation programs, and case management programs. If you answered No, STOP. The plan does not maintain a program subject to the group health plan wellness program rules. 23

24 B. Part of Group Health Plan? B. Is the wellness program part of a group health plan? Yes No Only wellness programs that are, or relate to, a group health plan must comply with HIPAA nondiscrimination rules. If employer operates wellness program as employment policy separate from group health plan, program may be covered by other laws, but is not subject to group health plan rules discussed here. Example: Employer institutes policy that any employee who smokes will be fired. Here, plan is not acting, so wellness program rules do not apply. compliance with the HIPAA nondiscrimination rules, including the wellness program rules, is not determinative of compliance with any other provision of ERISA or any other State or Federal law, such as the Americans with Disabilities Act (ADA) If you answered No, STOP. The plan does not maintain a program subject to the group health plan wellness program rules. 24

25 C. Discrimination Based on Health Factor? C. Does the program discriminate based on a health factor? Yes No Plan discriminates based on a health factor if it requires individual to meet standard related to a health factor in order to obtain reward (a health contingent wellness program ). What Are Health-Status Related Factors? The following are health status-related factors: health status; medical condition (including both physical and mental illnesses); claims experience; receipt of health care; medical history; genetic information; evidence of insurability (EOI) (including conditions arising out of acts of domestic violence); disability; and any other health status-related factor determined appropriate by the Secretary of HHS (this catch-all category was added under HCR) 25

26 Participatory Wellness Programs Certain programs of health promotion or disease prevention (called participatory wellness programs ) are an exception to general prohibition on discrimination based on health statusrelated factor. Programs that provide incentives to promote healthy behaviors, but do not require individual to meet specific health-related factors (or if program does not provide reward), do not violate HIPAA nondiscrimination rules. Participatory wellness programs are permissible if participation is available to all similarly situated individuals. Examples include - Program that reimburses fitness center costs. - Diagnostic testing program providing reward for participation, not outcomes. - Program waiving copays or deductibles for prenatal care or well-baby visits. - Program reimbursing costs of participating in smoking cessation, regardless of whether employee quits smoking. - Program rewarding employees who complete an health risk assessment (HRA), without further action related to health issues identified as part of HRA. 26

27 Health Contingent Wellness Programs Health-contingent programs require satisfaction of standard related to health factor to obtain reward. Reward can be discount/rebate of premium/contribution, waiver of all or part of cost-sharing mechanism (such as deductibles, copayments, or coinsurance), absence of surcharge, or value of benefit that would otherwise not be provided under plan. Rule provides examples: Program imposing premium surcharge based on tobacco use, or program requiring participants have cholesterol level under 200 to receive premium reduction of 20%. Two-step program: - step 1 uses a biometric screening or health risk assessment to identify employees with medical conditions or risk factors (such as high cholesterol, blood pressure, BMI, or glucose level). - step 2 requires employees identified as at risk take additional steps, such as meeting with health coach, taking fitness course, or complying with provider's plan of care, to obtain same reward as healthy employees. Step 1 requirement to complete assessment/screening does not, itself, discriminate based on health factor. However, since identification of individuals who are at-risk under step 1 is based on health standard, this type of program is considered a health-contingent program. If you answered No you do not offer a health contingent wellness program, STOP. The plan does not maintain a program subject to five specific conditions (as described below). If you answered Yes, you do offer a health contingent wellness programs, then you must meet five specific conditions (as described below in the checklist). 27

28 D. Benign Discrimination? D. If the program discriminates based on a health factor, is the program saved by the benign discrimination provision? Yes No Rules permit discrimination in favor of individual based on a health factor. Example: Plan grants participants who have diabetes a waiver of plan s annual deductible if they enroll in disease management program that consists of attending educational classes and following doctor s recommendations regarding exercise and medication. This is benign discrimination because program is offering reward to individuals based on adverse health factor. TIP: Benign discrimination exception is NOT available if plan asks diabetics to meet standard related to health factor (such as maintaining certain BMI) in order to get reward. In this case, intervening discrimination is introduced and plan cannot rely solely on benign discrimination exception. If you answered Yes, the program meets the benign discrimination exception, STOP. The plan does not maintain a program subject to five specific conditions (as described below). If you answered No, the wellness program must meet the following five criteria. 28

29 First Criteria - Reward Limits E. Compliance Criteria for Health Contingent Wellness Program 1. Is the amount of the reward offered under the plan limited to 20% (30% starting in 2014) of the applicable cost of coverage? Yes No Currently the reward, combined with any other rewards for standard-based programs provided under same plan, must not exceed 20% of the cost of coverage under plan. Under HCR, effective for plan years beginning on or after 1/1/14, limit increases to 30% of cost of coverage, and under new rules would rise to 50% to extent additional amount is for programs designed to prevent or reduce tobacco use. For wellness program that is exclusively a tobacco use prevention program, incentive could be as high as 50%. 29

30 Participant Question Does the 30% wellness incentive apply to the employer s cost of health insurance or employee s discounted cost? As in current rules, when calculating maximum permissible reward, the full cost of coverage under the plan, including both the employer-paid and employee-paid portions, is counted. Example: Employee portion is $1,500 and employer portion is $4,500. The applicable percentage would be calculated based on the total cost of coverage of $6,000 ($1,500+$4,500). I 30

31 How to Calculate Limit Employee only: If wellness program only offered to employees (not dependents), plan should use single rate, even if employee has family coverage. Employee plus dependents: If wellness program offered to dependents as well, plan uses rate for option in which employee or dependents are enrolled (single, single+1, family, etc.). Multiple programs: The % limit applies to all health-based wellness programs offered. Example: If plan has cholesterol program and diabetes management program, health-based incentives for both programs must be added together to determine compliance with 20% (or upcoming 30%) limit. Some plans mistakenly add up all incentives when calculating compliance with current 20% (soon to be 30%) limit, including participation-only incentives. Example: If plan rewards $50 for taking biometric screening and $25 if screening shows favorable BMI, only $25 must be counted toward 20% limit. Tobacco and non-tobacco programs: If plan uses new 50% limit for tobacco use, may need to test incentives for tobacco programs and non-tobacco programs separately. Example: If wellness program only based on tobacco use, incentive may be up to 50% of cost of coverage. However, if program based on both tobacco use and other healthcontingent factors (such as cholesterol or blood sugar), incentives not related to tobacco are still capped at 30%, but incentive related to tobacco use may go up to 50%. 31

32 Second Criteria Reasonable Design 2. Is the plan reasonably designed to promote or prevent disease? Yes No Program should have reasonable chance of improving health of or preventing disease in participating individuals, not be overly burdensome, not be subterfuge for discriminating based on health factor, and not be highly suspect in method chosen to promote health or prevent disease. New rule also adds requirement that if standard for obtaining reward is based on measurement, screening, or test relating to health factor, such as a health risk assessment or biometric screening, program must make available "different reasonable means of qualifying for the reward" for any individual who does not meet standard. Significant change from 2006 HIPAA rules. Requirement to offer different means of qualifying for reward in addition to reasonable alternative standard (discussed below) that must be provided to those who cannot meet standard due to medical condition. New rule essentially expands "reasonable alternative" requirement to all participants, regardless of their medical situation. This means an individual who fails to meet a standard based on measurement, test, or screening must be offered different, reasonable means of qualifying for reward without having to show that medical condition made it unreasonably difficult to satisfy standard. 32

33 Third Criteria - Frequency 3. Are individuals who are eligible to participate given a chance to qualify at least once per year? Yes No A standard-based program must give individuals who are eligible for program an opportunity to qualify for reward at least once per year. This is bright-line standard that establishes minimum frequency of qualification opportunities. Program could offer more frequent qualification opportunities, but not less frequent opportunities. 33

34 Fourth Criteria - Reasonable Alternative Offered? 4) Is the reward available to all similarly situated individuals? Does the program offer a reasonable alternative standard? Yes No Rules require reward be available to all similarly situated individuals. Program must have reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining reward for any individual for whom, for that period: o o It is unreasonably difficult due to medical condition to satisfy otherwise applicable standard; OR It is medically inadvisable to attempt to satisfy otherwise applicable standard. As in existing rules, plan may seek verification, such as physician's statement, that it is unreasonably difficult or medically inadvisable for individual to meet initial standard, so individual should be given reasonable alternative. If reasonable alternative is compliance with recommendations of medical professional engaged by plan, and individual's personal physician believes recommendations are not medically appropriate, plan must provide another reasonable alternative that accommodates personal physician's recommendations. Plan may impose standard cost sharing for medical items and services furnished pursuant to physician's recommendations. 34

35 Reasonable Alternative Offered? As under the current rules, program must provide "reasonable alternative" to healthbased standard, or waive health-based standard, to earn same reward for individuals for whom it is unreasonably difficult or medically inadvisable to meet initial standard. Plan is not required to determine reasonable alternative in advance, but must provide one if individual requests. New rule provides that whether standard is reasonable will depend on facts and circumstances and also provides guidelines: If reasonable alternative is completion of educational program, plan must make program available and not require individual to find a program unassisted. Plan also may not require individual to pay for program. If reasonable alternative is diet program, plan must pay any membership or participation fee, but is not required to pay cost of food. 35

36 Fifth Criteria - Disclosure 5) Does the plan disclose the availability of a reasonable alternative in all plan materials describing the program? Yes No Plan must disclose in all plan materials describing program availability of "other means of qualifying for the reward" or possibility of waiver of otherwise applicable standard. Existing rule required similar notice. If plan materials merely mention that program is available, without describing terms, disclosure is not required. New rule updates sample language for notice to read: "Your health plan is committed to helping you achieve your best health status. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at [inset contact number] and we will work with you to find a wellness program with the same reward that is right for you in light of your health status." Rule also provides examples where plan customizes this language to address a particular health standard. 36

37 Checklist Results If you answered Yes to ALL of the 5 questions, there should be no violations of wellness program rules. If you answered No to any of the 5 questions, plan has a wellness program compliance issue. Specifically, Violation of the general benefit discrimination rule If wellness program varies benefits, including cost-sharing mechanisms (such as deductible, copayment, or coinsurance) based on whether individual meets standard related to health factor and the program does not satisfy the requirements, plan is impermissibly discriminating in benefits based on health factor. Wellness program exception is not satisfied and plan is in violation. Violation of general premium discrimination rule If wellness program varies amount of premium or contribution it requires similarly situated individuals to pay based on whether individual meets standard related to health factor and program does not satisfy requirements, plan is impermissibly discriminating in premiums based on a health factor. Wellness program exception is not satisfied and plan is in violation. 37

38 Consider Strategies

39 New & Emerging Strategies Migration to consumer directed, account based plans Custom provider networks based on provider quality and outcomes Transparency tools around cost Value based benefit designs Care coordination and steerage models Defined contribution plans in place of defined benefit programs On site primary care services Pharmacy cost containment approaches Expanded contribution arrangements by family size Claim and Dependent Audits Use of technology to educate and inspire Adoption of contemporary health and wellness strategies based on outcomes 39

40 Consider a Multi-Year Plan Plan design alterations are key but you can only cost shift so much and so far. Significant increases in copayments and deductibles may have the reverse effect and create barriers to needed care Increases in employee contributions are necessary but unreasonable changes may create adverse selection and negatively impact the workforce Funding changes and vendor management are key, but after the appropriate changes have been implemented additional savings and benefits become more limited Employers need to construct a sustained and contemporary approach to benefit plan management that adopts best practices in key areas but integrates an effective focus on Health and Productivity Management 40

41 Year 1 Determine plan changes with emphasis on value based design Require employees to complete a Personal Health Appraisal in order to remain enrolled Arrange for bio-metric screenings at all locations Create initial incentives for bio-metric participation; bonus dollars or funds into one s FSA Offer smoking cessation plans to help employees quit smoking Implement a reduced contribution approach for non-smokers Review EAP plan Offer flu shots Build wellness home page to house all health and wellness tools Launch integrated Coaching and content platform 41

42 Year 2 Continue plan alterations Continue to require employees to complete a Personal Health Appraisal in order to remain enrolled Arrange for bio-metric screenings at all locations Require all employees to receive an annual physical to remain eligible to be enrolled in the health plan, paid at 100% in network Install financial incentives with varying values based on the metrics of the plan Maintain reduced contribution approach for non-smokers Continue wellness home page to house all health and wellness tools Evaluate what disease management plans may warrant purchase 42

43 Year 3 Continue plan alterations Continue to require employees to complete a Personal Health Appraisal in order to remain enrolled Arrange for bio-metric screenings at all locations Require all employees to receive an annual physical to remain eligible to be enrolled in the health plan, paid at 100% in network Maintain reduced contribution approach for non-smokers Sustain incentives with varying values based on the metrics of the plan Create incentives for chronic condition patients for compliance utilization; diabetes, asthma, other (generic physician compliance) Continue wellness home page to house all health and wellness tools 43

44 Resources

45 Agency Resources Agency Healthcare Reform Sites: Health and Human Services (HHS): Department of Labor (DOL): Internal Revenue Service (IRS): 45

46 Help from Conner Strong & Buckelew Conner Strong & Buckelew Healthcare Reform website page at: News updates» Online library of client updates and alerts» Summary of major provisions of the new law» Detailed Year-by-Year timeline of changes» Outline of all aspects of the new law Check back for updates, news and analysis, and updated tools to help you navigate this complex process Call Conner Strong & Buckelew at

47 Other Resources from Conner Strong Periodic Webinars - Web-based presentations on health care legislation, regulations and innovative ideas Alerts and Updates - High level, quickly produced articles about emerging issues intended to alert clients to legislative and regulatory developments - Historic library available on line Perspectives - Thought pieces intended to identify trends and issues, helping clients anticipate challenges 47

48 Thank You Thank you for your participation! 48