Everyone’s concerned about healthcare costs, and that means most are offering wellness programs. But rather than offering “informational” wellness programs, more organizations want to offer mandatory programs that demand results. It’s legal to do so, but …
For the money you spend on it, wouldn’t you want a wellness program that goes beyond information and demands positive action from participants?
While it’s possible to have one under the law, the regulations are detailed and the penalties can be high. Two expert attorneys from Ogletree Deakins, Stephanie Smithey from the Indianapolis office and Timothy Stanton from the Chicago office, point out some of key issues that many miss.
Penalties
At first blush, the penalties for an illegally drawn program seem not too onerous—$100 a day. But as they say on TV, wait, there’s more! That’s $100 per day for each participant to whom the failure applies.
Do the math if you like frightening yourself.
If you have, say, 100 such participants, you’re looking at $10,000 a day in penalties. However, lest the government appear too punitive, take comfort that there is a cap … $500,000 or 10 percent of the aggregate amount the employer paid for the group health plan during the preceding year. Seems fair to the regulators, anyway.
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Penalties may also be excused for reasonable cause in some circumstances. But why test what “reasonable” means? Do the job right from the start.
Smithey and Stanton point to a handy government checklist that helps employers fight their way through the definitions and conditions that govern what employers may do to reward employees for managing their health. (You can find the checklist at www.dol.gov/ebsa )
Benign Discrimination
One interesting concept the checklist covers is “benign discrimination.” Normally, you cannot discriminate against someone based on a health factor, but if you are discriminating in favor of someone with a health factor, that may be acceptable as “benign discrimination.”
Uncle Sam offers the following example: Say a plan grants participants who have diabetes a waiver of the plan’s annual deductible if they enroll in a disease management program that consists of attending classes and following a doctor’s recommendations. This is benign discrimination—discrimination in favor of individuals based on a health factor.
However, the benign discrimination exception is not available if the plan asks diabetics to meet a standard related to a health factor (such as maintaining a certain body mass index) in order to get the reward.
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More than One Program
Another area that often confuses HR managers is the rule governing organizations that want to offer rewards in more than one wellness program. The rule is this: If you have more than one program requiring participants to meet or achieve a standard related to a health factor, a 20 percent cap applies to the total reduction from participation in all wellness programs.
For example, an organization with two wellness programs with standards related to a health factor could not offer a 20 percent reduction for one program and a 10 percent reduction for the other—the rewards would have to be a total of 20 percent for both.
However, a program that does not have a standard related to a health factor could offer a reduction that would not count against the total.
For example, if you have one program that offers a 10 percent reduction to meet a body mass index target, a 10 percent reward for hitting a cholesterol target, and a 10 percent reward for completing a health risk assessment (but just for participating, no requirement to meet a standard), that would be OK because the third program does not require individuals to meet a standard related to a health factor.
In the next Advisor, we’ll look at the “reasonableness” and “alternative standard” requirements for wellness programs—and offer an introduction to a wellness program that takes all these complexities into account up front, so you’re clear on them from the start.