ACA & HIPAA Compliant Wellness Programs
There are several laws which come into play in assessing the legal compliance of wellness programs. This overview focuses on two of them, HIPAA and the ACA, because the ACA regulations which were issued in the Fall of 2012 clarify how wellness programs can comply with HIPAA.
There are two general categories of wellness programs described in the ACA regulations: Participatory Wellness Programs and Health-Contingent Wellness Programs. As you read this overview, please keep in mind that the stated intent of the ACA regulations is that regardless of the type of wellness program, every individual participating in the program should be able to receive the full amount of any reward regardless of any health factor.
Participatory Wellness Programs (PWP)
PWP either do not provide a reward or 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.
- The only requirement for PWP is that the program must be made available to all similarly-situated individuals regardless of their health status. PWP are considered to comply with the HIPAA nondiscrimination requirements without having to satisfy any additional standards.
- Examples of PWP include reimbursement for a gym membership; a reward for attending a monthly, free health education seminar; a reward for participating in a diagnostic testing program, without consideration of the testing outcomes; a reward for participating in a health coaching program, again without consideration of the coaching outcomes; a deductible/copayment waiver to encourage preventative care.
Health Contingent Wellness Programs (HCWP)
HCWP are subdivided into two additional types of programs: Activity-Only Wellness Programs and Outcome-Based Wellness Programs. They require individuals to satisfy a standard which is related to a health factor in order to obtain a reward. This standard may involve performing or completing an activity related to a health factor or attaining or maintaining a specific health outcome.
There are five requirements for HCWP to be compliant with the ACA regulations and HIPAA nondiscrimination rules:
- Opportunity to qualify for the full reward a minimum of once per year – once per year is the bright-line standard for determining the minimum frequency that is consistent with a reasonable design for promoting good health or preventing disease
- Total reward offered with respect to all HCWP cannot exceed 30% of the total cost of employee-only coverage under the employer’s group health insurance plan
- Program must be reasonably designed to prevent disease or promote health
- Full reward must be available to all similarly-situated individuals, and RAS (or a waiver of the applicable standard) must be provided
- Notice of RAS must be provided – the availability of RAS must be disclosed in all plan materials describing a wellness program’s terms, along with contact information for obtaining RAS and a statement that the recommendations of an individual’s physician regarding a RAS will be accommodated
Activity-Only Wellness Programs
AOWP require an individual to perform or complete an activity related to a health factor in order to obtain a reward but do not require the individual to achieve a specific health outcome.
- RAS must be provided based upon the individual’s health status — if it is medically inadvisable or unreasonably difficult due to a medical condition for the individual to achieve the standard required for the AOWP reward.
- Physician verification of RAS necessity may be required.
Outcome-Based Wellness Programs
OBWP allow group health insurance plans and issuers to conduct screenings and employ measurement techniques in order to target wellness programs effectively. Any wellness program that requires a less healthy group to do more than a healthy group to achieve the same reward is an OBWP.
- OBWP generally have two tiers: 1) a measurement, test or screening as part of an initial standard; and 2) a larger program that then targets individuals who do not meet the initial standard with wellness activities.
- When an OBWP is in place, RAS must be provided to anyone who makes a request for one regardless of whether the request is due to the OBWP outcome standard being unreasonably difficult or medically inadvisable to achieve based on a medical condition; therefore physician verification of a RAS request cannot be required (different from AOWP).
- Examples of OBWP include programs that test individuals for specified medical conditions or risk factors (such as high cholesterol or blood pressure, abnormal BMI, etc.) and provide a reward to employees identified as within a normal or healthy range, while requiring those outside this range to take additional steps (like meeting with a health coach, taking a health/fitness course, adhering to a health improvement action plan, etc.) in order to obtain the same reward.
Division of Responsibilities for ACA-Compliant Wellness Programs
Vendor: Creating and administering program, administering RAS, notifying employer of employee eligibility for rewards
Employer: Internal communication, implementing vendor recommendations, handling payroll, legal and tax implications of programs and rewards
Employee: Engaging in wellness program, requesting and completing RAS if needed to achieve the full reward
Penalties for Non-compliance with ACA Regulations
Federal agency regulators are actively auditing wellness programs for compliance. Non-compliance with the ACA regulations creates the risk of a lawsuit being filed by regulators and/or individual employees. Government regulators may impose an excise tax penalty of $100 per affected individual per each day of noncompliance; individuals can file suit claiming that a wellness program impermissibly discriminates against them based on their health status, resulting in fines and penalties in addition to individual damages and attorney fees. For more information about these penalties please review the following: Code Section 4980D penalties, ERISA penalties and HHS penalties.
Note that compliance with the ACA final regulations and the HIPAA nondiscrimination rules is not determinative of compliance with any other applicable federal or state laws, such as ERISA, GINA, ADA, FLSA, tax laws, etc., which may impose additional requirements and standards for wellness programs. Brokers and employers should consult with their attorneys to confirm whether a wellness program meets additional regulations. For more information on relevant sections of the ACA please review the Final Rule, 78 FR 33157 (June 3, 2013), including the following: Department of Health and Human Services, 45 CFR Parts 146 and 147; Department of the Treasury, IRS, 26 CFR Part 54; and Department of Labor, EBSA, 29 CFR Part 2590. http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=26880
The purpose of this document is to provide an overview for insurance brokers and employers of the general compliance obligations of the ACA and HIPAA for wellness programs. The information in this document does not constitute legal advice and is not intended to be a substitute for specific legal advice regarding any particular wellness program. Brokers and employers must make their own determination as to whether a particular program complies with all applicable laws and regulations including the relevant provisions of HIPAA and the ACA discussed above. CHP makes no representation regarding the compliance of its wellness programs with any laws or regulations.
CHP keeps up to date on the changing regulations and interpretations to ensure our wellness programs are compliant. If you have any questions regarding ACA or HIPAA compliance as it relates to employee wellness programs please contact us: firstname.lastname@example.org