Well, here it is — the Health Care Reform and Control Act. Beginning January 1, 2014, every individual will be required to have “minimum essential coverage” through individual market, employer-provided or certain other coverage (e.g., Medicare or CHIP). Also, beginning January 12, 2014, any employer who employed an average of 50 employees on business days during the preceding calendar year must offer “minimum essential coverage” to full-time employees. If such employers fail to offer such coverage, they must pay substantial penalties designed to offset the cost of government-provided plans. Employers who employ less than 25 employees may be able to take advantage of tax incentives if they voluntarily provide such minimum essential coverage.
Obviously, employers are concerned about the possible penalties and with the fact that providing health insurance to employees — on any level — can be just plain expensive. Employers have already known that they should offer some type of health insurance as a benefit to attract the best employees. Although there have been many creative ideas over the years to try to hold down the costs, none of these programs has worked particularly well.
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It is clear that a major reason for the rising cost of health care in the United States is that Americans using the health care system are living longer, and, due to poor lifestyle choices, Americans are among the most unhealthy individuals in the world. Lifestyle challenges, including obesity, smoking, drug abuse, and physical inactivity have contributed to an increased use of our health care system. According to the Centers for Disease Control and Prevention (CDC), more than 75% of an employer’s health care costs and productivity losses are related to employee lifestyle choices.
In response, insurance companies have raised premiums and have raised them substantially. And, employers have tried to find ways to address the rising costs. In the 1980’s and 1990’s, HMOs were first introduced to hold down costs. When HMOs proved too restrictive, PPOs were introduced in the late 1990’s. By 2002, however, many employers realized that PPOs were not containing health care costs. In response, employers began to reduce benefits offered and instituted cost sharing.
Still, premiums have continued to rise. Now, employers have refocused their thought processes toward preventive care — if utilization is the problem, can employers offer a program that encourages employees to change lifestyle habits that will decrease utilization? Thus, the idea of wellness programs was born.
What is a wellness program? A wellness program may include the following:
- Annual health and lifestyle assessments;
- Health results evaluation session (group workshop);
- Set individual goals and action plan;
- Referral of high-risk persons (i.e., high blood pressure) for needed care;
- Opportunity for employees to participate in risk reduction interventions and health enhancement programs such as blood pressure reduction, weight control, fitness, cholesterol reduction, and wellness campaigns;
- Monthly tracking/accountability programs to monitor progress toward goals, including exercise logging, health events, health screening, self study projects, and wellness challenges; and
- Annual health outcome reports showing changes in whole organizations.
Other popular offers include health screenings, health fairs, subsidized flu shots, and health risk assessments and subsidized or discounted off-site programs or memberships.
Do wellness programs make sense? The Wellness Council of America says they do. It estimates that a $1 investment in a wellness program saves $3 in health care costs. But employers must be cautious that when instituting a wellness program that they avoid disability and privacy issues.
Any wellness program that provides a reward based on the ability of an individual to meet a health standard will violate the HIPAA nondiscrimination rules unless it satisfies five conditions.
- The reward for the wellness program, coupled with the reward for other wellness programs with respect to the plan that requires satisfaction of a standard related to a health factor, must not exceed 20 percent of the cost of employee-only coverage under the plan. If any of the employee’s dependents are enrolled in the program, the reward may not exceed 20 percent of the coverage in which the employee and his or her dependent(s) is enrolled.
- The program must be reasonably designed to promote health or prevent disease. This is satisfied if the program has a reasonable chance of improving the health or preventing disease in participating individuals and is not overly burdensome, is not a subterfuge for discriminating based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease. According to the preamble to the final regulations, “There does not need to be a scientific record that the method promotes wellness to satisfy this standard.”
- The program must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year.
- The reward under the program must be available to all similarly situated individuals. A reasonable alternative standard for obtaining the reward must be available for those with a health factor that makes it unreasonably difficult or medically inadvisable to satisfy or attempt to satisfy the otherwise applicable standard. The “reasonable” standard, according to the preamble to the final regulations, is designed to prohibit “bizarre, extreme, or illegal requirements in a wellness program.”
- The plan must disclose in all plan materials describing the terms of the program the availability of the reasonable alternative standard for obtaining the reward. If plan materials mention the program, but do not describe its terms, this disclosure of the reasonable alternative standard is not required. The final regulations include sample language plans can use to meet this disclosure requirement.
The new health reform act will begin to allow the incentives to participate in a wellness program to be increased from 20 percent to 30 percent beginning in 2014. The health reform law also gives some room for federal agencies to increase this amount after they conduct a study on wellness programs. In addition, the act creates a $200 billion, five-year program to provide grants to certain small employers (fewer than 100 employees) for comprehensive workplace wellness programs. The grants will go to small employers that did not have a wellness program when the law was enacted.
The health care reform act does not discuss the inherent conflict in these incentive payments with the Americans with Disabilities Act (ADA). The Americans with Disabilities Act prohibits employers from inquiring about employees’ medical conditions unless such inquiries are “job related and consistent with business necessity.” However, according to the EEOC’s 2002 Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees, employers may conduct voluntary medical examinations and activities, including taking voluntary medical histories, that are part of an employee health program. Employers may do so even if the questions are not job-related or consistent with business necessity. Medical records acquired as part of the wellness program must be kept confidential and separate from personnel records.
But what does it mean to be “voluntary”? The EEOC states that the wellness program is “voluntary” as long as an employer neither requires participation nor penalizes employees who do not participate. It is predicted that as employees are required to take on an increasingly larger share of the costs of employer-sponsored health coverage, wellness programs may face challenges that premium rebates or decreased copayments (or even tax incentives) are inherently coercive and violate the ADA.
There are no easy answers to the ever increasing health care costs. Wellness programs may be the answer, but employers need be aware that as with any new idea, litigation will inevitably ensue until the “kinks” are worked out of the program.
In the meantime, employers should proceed with caution in experimenting with the idea of wellness programs. Programs that encourage and reward lifestyle changes are more likely to withstand scrutiny than those that penalize for poor lifestyle choices. And, as with any new idea, it is imperative to monitor the program to ensure that it is actually reaching the goals that it is designed to reach. For example, monitor whether your employees are making better lifestyle decisions and whether they are using your group health plan less frequently.