EEOC vs. Employer Wellness Programs

Transcription

1 EEOC vs. Employer Wellness Programs Presented by Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

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3 Patrick C. Haynes, Jr. Today s speaker As Crawford Advisors GC and Vice President Compliance, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics. Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A. Admitted to Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia 3

4 Roadmap Litigation Compare & Contrast Outcomes Takeaways Poll Questions 4

5 The Cases

6 EEOC vs Orion Energy Systems Orion Energy Systems was sued by the U.S. Equal Employment opportunity Commission (EEOC) after they required an employee (Wendy Schobert) to submit to medical exams and inquiries or else face a penalty. These exams were labeled as part of voluntary wellness program which was not voluntary. When Schobert objected to the program, Orion shifted responsibility for payment of the entire premium for her employee health benefits from Orion to herself. Shortly thereafter, Orion fired Schobert. 6

7 Orion Lawsuit While media reports will have you believe the EEOC is going after Orion s wellness plan, but this is more about ADA violations than it is an attack on a sound wellness strategy. The EEOC maintains that Orion's violated the Americans with Disabilities Act (ADA) when they used their wellness plan as justification for what they did to Wendy, and that Orion retaliated against her because of her goodfaith objections to the wellness program. The EEOC brought the suit under Title I of the ADA, which prohibits disability discrimination in employment. 7

8 Current Orion Lawsuit This most recent lawsuit is the EEOC s first to directly challenge a wellness program under the ADA "Employers certainly may have voluntary wellness programs -- there's no dispute about that -- and many see such programs as a positive development," said John Hendrickson, regional attorney for the EEOC Chicago district. "But they have to actually be voluntary. They can't compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate. 8

9 Alleged ADA Violations Participation in the program is voluntary. Information obtained is kept confidential in accordance with the ADA requirements (and presumably HIPAA and GINA too). Information obtained is not used to discriminate against an employee. 9

10 Previous Orion Lawsuit The EEOC filed another disability discrimination suit against Orion in May In that lawsuit, the EEOC contended that Orion fired Scott Conant after he experienced a disabling condition that substantially limited his ability to walk and required that he use a wheelchair. The EEOC said that Conant's termination followed his request for accommodations, such as an automatic door opener, to allow him to enter and exit the Orion workplace. Orion never installed a door opener while Conant worked there. 10

11 EEOC vs Flambeau Inc. Another previous lawsuit by the EEOC regarding voluntary wellness programs was seen against Flambeau Inc. The "wellness program" required that employees submit to biometric testing and a "health risk assessment," or face cancellation of medical insurance, or unspecified "disciplinary action" for failing to attend the scheduled testing, and a requirement to pay the full premium in order to stay covered. In its lawsuit, the EEOC alleged that when employee Dale Arnold did not complete the biometric testing and health risk assessment, Flambeau cancelled his medical insurance and shifted responsibility for payment of the entire premium cost to him. 11

12 EEOC vs Honeywell The EEOC claims the company s wellness program violates the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) by imposing penalties on employees who decline to participate in the company s biometric screening program. In Honeywell s program, workers and their spouses are asked to undergo a biometric screening that includes drawing blood to test cholesterol levels and a determination of Body Mass Index (BMI) by measurement of height, weight and circumference. Opt-outs are assessed a $500 surcharge on their 2015 medical plan costs, can lose as much as $1,500 in company contributions to health savings accounts and be docked as much as $2,000 more in tobacco-related surcharges, according to the EEOC s complaint. 12

13 Orion Energy Comparison Flambeau Honeywell The complaint states that Orion covers 100 percent of the health care costs for employees who agree to participate in the wellness program, but if participation in the wellness program is declined, employees must cover 100 percent of the premiums plus a $50 monthly penalty Required employees to complete an HRA and biometric testing, which included blood work, measurements, and the disclosure of medical history. If an employee does not complete the biometric testing and HRA, the employee s coverage is cancelled, but the employee is offered the opportunity to participate in the plan as a COBRA participant, paying 100 percent of the premiums. (1) a $500 surcharge if an employee does not complete the test (there is no surcharge if a spouse does not complete the test); (2) a $1,000 tobacco surcharge if the employee does not complete the test; (3) a $1,000 tobacco surcharge if the employee s spouse does not complete the test; and (4) the non-receipt of an HSA contribution up to $1,500, which is distributed only to persons who complete the test (the EEOC failed to note that this benefit is not part of Honeywell s health plan). 13

14 EEOC Reasoning As outlined before, the EEOC is not against biometric screening, however they are fighting to keep wellness programs voluntary, and employees not be penalized for not enrolling. We are not seeking to stop testing and not seeking to stop the assessment of the smoking surcharge, Laurie Vasicheck, an EEOC attorney said, What they can t do is penalize employees who do not want to go through it. And, presumably by penalize they mean cancelling their coverage, increasing their payroll deductions to 100% or firing them. 14

15 Decision of one Court is in. The U.S. District Court for the District of Minnesota denied the Equal Employment Opportunity Commission s (EEOC) request for a temporary restraining order and preliminary injunction against Honeywell International Inc. The other two cases have yet to be decided in court. You can read the details here: 15

16 Are there different types of wellness plans? There are different ways that employers can design their wellness plans. Different designs have different compliance implications. There are two main types of wellness plans. Of those, health-contingent wellness programs are divided into two subcategories. I. Participatory Wellness Programs II. Health-Contingent Wellness Programs A. Activity-only wellness programs B. Outcome-based wellness programs 16

17 I. Participatory Wellness Plans Participatory Wellness Plans are those wellness plans that either (1) do not provide a reward (2) do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. They must be made available to all similarly situated individuals regardless of health status Examples: Reimbursing Fitness Center Cost; Attending a no-cost education seminar; Completion of a health risk questionnaire; Reimbursing or providing a reward for participating in a smoking cessation program. 17

18 II. Health-Contingent Wellness Program Health-Contingent wellness programs require employees to satisfy a standard for a health factor in order to obtain a reward. There are two different types of healthcontingent wellness programs: A. Activity-only wellness plans- Require only that an employee perform or complete an activity related to a health factor. Walking Programs Diet Programs B. Outcome-Based Wellness Programs- Require that an employee satisfy a specific measurement/test/screening before they will be eligible for the reward. There needs to be two tiers so employees can have a second chance to satisfy the standard. Biometric Screening Requirements Cholesterol levels/ BMI/ Glucose 18

19 The Five Requirements for II. Health-Contingent Wellness Programs HIPAA requires that a health-contingent wellness program complete ALL of the following requirements in order to be permitted in a group health plan: 1) Frequency of Opportunity to Qualify (at least annually) 2) Size of Reward (20%, 30%, 50%) 3) Reasonable Design 4) Uniform Availability and Reasonable Alternative Standards 5) Notice of Availability of Reasonable Alternative Standards 19

20 Changes to the 5 Requirements for Health-Contingent Wellness Programs Final Regulations 20

21 1. Frequency of Opportunity to Qualify The frequency of opportunity to qualify is a provision that mandates that a healthcontingent wellness programs must allow eligible individuals the opportunity to satisfy the health factor in question at least once per year. The final regulations upheld that the onceper-year requirement is still the standard to satisfy the minimum frequency with relation to reasonable design for promoting good health or preventing disease. 21

22 2. Size of the Reward The final guidelines once again limit the amount of reward that a wellness plan can give for satisfying health standards. The previous HIPAA rules limited the amount of reward to 20% of a health plan s total cost of coverage. The new guidelines expand the reward to 30% of a plan s total cost of coverage. If the wellness program includes a program to reduce or prevent tobacco usage, then the maximum award is 50% of a plan s total cost of coverage. A plan s total cost of coverage is the equal to the COBRA rate the 2% administrative fee, or said another way, is the employer contribution + the employee contribution. The reward expansions are in effect for plan years after 1/1/

23 Are these plans in compliance? Example 1 An employer sponsors a group health plan. The total cost (ER cost + EE cont.) of the plan is $5,500 per employee per year. The employer offers a health contingent wellness program that offer the opportunity for employees to receive a $1500 reward if they get below a certain BMI. Is this reward compliant with final wellness guidelines? Yes. The $1500 reward is approximately 27% of the total cost of the health plan. While this would have been too rich of a reward under the previous guidelines, plans are now able to reward employees up to 30% of total cost for non-smoker cessation health contingent welfare plans. Example 2 An employer sponsors a group health plan. The total cost (ER cost + EE cost) of the plan is $6,500 per employee per year. The employer offers a health contingent wellness program that offers the opportunity for employees to receive a $800 reward if they participate in a diet program. The employer also includes a $2500 surcharge for individuals who have used tobacco in the past year and are not enrolled in a tobacco cessation program. No. Although the calculation for the non-tobacco percentage reward is fine (12% for the diet program), the cumulative smoking total is too high. The $3300 reward is more than 50% of the total plan cost by $50. *Please note there are other compliance items besides just the reward totals to consider. 23

24 3. Reasonable Design Final regulations say that a wellness plan must have a reasonable design to prevent abuse. Reasonable design must: o o Not be overly burdensome. Not be a subterfuge for discrimination based on a health factor and is not highly suspect in the method chosen to promote health or prevent disease. There is no accreditation for wellness plans, thus the federal departments are flexible in allowing creative designs. Benign discrimination, or the establishment of favorable eligibility/premiums for plan subscribers with adverse health conditions, is permissible. Under an outcome-based plan, an individual who does not meet the individual health standard must be offered a reasonable alternative to achieving the reward. o The rule has changed. Before (under HIPAA), only individuals who found the health standard unreasonably difficult due to a medical condition were afforded the opportunity for a reasonable alternative standard. Now ALL INDIVIDUALS are afforded that right. 24

25 4. Uniform Availability and Reasonable Alternative Standards Activity-Only Wellness Programs: o Must make the full reward available to all similarly suited individuals. o Must make a reasonable alternative available if: The health standard is unreasonably difficult due to a medical condition. The health standard is medically inadvisable. All the facts and circumstances are taken into account when considering whether a plan has furnished a reasonable alternative standard. Employers may request proof that an employees health condition makes it unreasonably difficult for the individual to satisfy a the plans health standard if the request is reasonable under the circumstances. 25

26 4. Uniform Availability and Reasonable Alternative Standards Cont. Outcome based wellness programs may target specific health metrics. o E.g. a tobacco-cessation program or a cholesterol reduction program In order to avoid the plan being a subterfuge for discrimination or underwriting based on a health factor, all individuals must now be offered a reasonable alternative standard. Employers are not allowed to request proof from a doctor if an employee states that a standard is unreasonably difficult. o Individuals are always allowed to request a reasonable alternative standard. All facts are considered when determining whether an activity has a reasonable alternative standard. Two special rules regarding reasonable accommodations: o o If the reasonable alternative standard is a different level of the same metric an individual must be given sufficient time to meet this requirement. An individual must be given the opportunity to comply with a personal physician. The individual can request to include a personal physician at any time. 26

27 5. Notice of Availability of Reasonable Alternative Standard Final regulations mandate that plans notify individuals of their ability to qualify for a reasonable alternative standard in all materials that mention the health contingent program. The notice must also include contact information for receiving the alternative and a notification that accommodations for a participant s physician will be made. Outcome based plans must include the contact info in any disclosure that an individual did not complete the first-tier standard. If plan materials that mention the availability of a health contingent welfare program don t include a description of its terms, than this disclosure is not required. 27

28 Summary of Changes in the Final Regulations Increase in reward totals Outcome Based Wellness Programs: All individuals, not just those who find the standard unreasonably difficult due to a health condition, may request a reasonable alternative standard. Plan issuers are now not allowed to seek verification under an outcome based wellness program that an individual s health factor makes it unreasonably difficult to satisfy the health standard in question. Reasonable alternative standard availability must be disclosed in any plan materials describing the terms of a health-contingent wellness program. (Sample language found in final regulations) 28

29 Other Laws to Consider Compliance with wellness programs under the final regulation does not necessarily deem compliance with the following legislation: Other provisions of ERISA ADA Title VII of the Civil Rights Act of 1964 IRC Section 105(h) self insured health plan non-discrimination rules Genetic Non-Discrimination Act of 2008 (GINA) FMLA 29

30 9.5% Affordability Test and Wellness Penalties PPACA mandates that large employers offer plans that have minimum value and are affordable for their employees. Affordability Test: An employee s medical expense plan is considered to be affordable if the lowest cost plan at the EE-only tier passes one of the 3 safe harbor tests: The 9.5% of W-2 Income Test (Per IRS Rev. Proc , this can 9.56% for 2015, put the safe harbor regulations must be updated first; until then, we use 9.5%). The 9.5% of the Rate of Pay Test The 9.5% of the Federal Poverty Level for a Single Individual Test. MV Test: The health plan must have a MV of 60%. For the purposes of the affordability test, an individual in a wellness program is ALWAYS assumed to fail the health standard, thus the maximum penalty will be incorporated into their employee contributions during the 9.5% test. A MV Test also assumes that all individuals fail the health standard. The only exception to this rule are smoker cessation plans (That calculation is made assuming individuals earn the reward). This leaves an employer vulnerable to the $3,000 fine for each employee that goes to the exchange and receives a subsidy. 30

31 What does all of this mean? 31

32 Potential Outcomes The DOL only states that the Affordable Care Act creates new incentives and builds on existing wellness program policies to promote employer wellness programs and encourage opportunities to support healthier workplaces. Without reasonable guidance, the EEOC s actions may result in higher-cost wellness plans that expose employers to undue litigation and increased Cadillac tax risks, all of which may encourage employers to consider minimum benefit plans that do not carry the same risks and costs. 32

33 Lessons Learned Employers should consider implementing a conservative wellness program design that complies with PPACA, HIPAA, and all other applicable laws independently, including GINA and the ADA Employers should consider carefully any inducements offered and how they are presented, policed, enforced, etc. Employers should also insure that wellness programs are sensitive to the ADA s (and PPACA s) reasonable accommodations provisions. Employers should consider not tying incentives to receipt of information from an employee s spouse and other family members. 33

34 How much did you learn? Poll Questions 34

35 Question 1 What are the two forms of wellness programs under PPACA? A) Outcome based/activity only B) Medical/Biometric only C) Employee Tobacco/Spousal Tobacco D) None of the Above 35

36 Question 2 What does the EEOC state is illegal about wellness programs. A) Biometric screening B) Tobacco Surcharge C) Penalties for not participating D) Voluntary Wellness Programs 36

37 Question 3 True or false: The EEOC argues an employee CANNOT be fired because of their decision on a wellness program. A) True B) False 37

38 If you have any further questions about the conflicting court rulings or about any of the information discussed in this Webinar, please feel to contact us at Crawford Advisors, LLC Questions 200 International Circle, Suite 4500, Hunt Valley, MD Devon Square Two, 744 West Lancaster Avenue, Suite 215 Wayne, PA Via to: To Download These Slides: Questions & Requests: 38