Although the prevalence of drug and alcohol addiction among Americans has been no secret, the rapid ascent of the opioid epidemic in recent years has thrust the issue of substance abuse back into the public eye.
In addition to the damage addiction causes individuals and their families, the estimated economic costs of employee substance abuse—a staggering $442 billion in annual losses due to decreased worker attendance, lower productivity, and poor health—have grown into a financial leviathan for employers. But because nearly 16 million (75%) of the estimated 21 million Americans who suffer from addiction are part of the workforce, two particular types of benefit programs, if more widely adopted and utilized, could play a meaningful role in combating a disorder that many consider to have reached “epidemic” status.
2 Options for Treatment
An employer-sponsored major-medical group health plan (GHP) may include a disease-management program in which the insurance carrier or third-party administrator (TPA) will work directly with a participant who suffers from a substance abuse disorder. An employee assistance program(EAP) is a non-major-medical plan that provides a wide variety of services, including (in most cases) assistance with alcohol and substance abuse.
Disease-management programs and EAPs must be structured to comply with (or otherwise be exempt from) a variety of complex federal employee benefits laws, including the Mental Health Parity and Addiction Equity Act (MHPAEA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and the Affordable Care Act (ACA).
Importantly, the medical information obtained and used by these programs, defined as “protected health information” (PHI) under HIPAA, cannot be shared with the participant’s employer for employment-related purposes. The lack of such a restriction would likely deter most, if not all, employees from participating in the programs.
Treatment kept private from employer. HIPAA prohibits a GHP from disclosing a covered individual’s PHI to the plan’s employer sponsor for employment-related reasons. The HIPAA penalties for such a violation can (and often do) range in the millions of dollars. So an employer cannot, for example, use its GHP data to identify and contact participants with a substance abuse disorder. But the GHP itself can, as an entity independent of the employer, include a disease-management program designed to treat substance abuse disorders.
Under a disease-management program, commonly used to treat illnesses like diabetes, the GHP’s insurer or TPA will use the plan’s claims information and other data to identify and work with covered individuals in the target group to improve their health. In the context of substance abuse disorders, the insurer or TPA could include in the target group participants who have a history of filling opioid prescriptions at numerous pharmacies, which is often considered a sign of addiction.
MHPAEA and HIPAA considerations. Disease-management programs geared toward treating substance abuse must comply with MHPAEA and HIPAA rules. MHPAEA in particular has been the focus of many recent investigations by the U.S. Department of Labor (DOL). As explained below, a substance abuse-management program that is punitive in nature (e.g., imposes additional preauthorization requirements on its participants) arguably violates both the MHPAEA and HIPAA—and would be difficult to defend in the event of a DOL audit.
The MHPAEA rules are extremely complex and require some degree of mathematical testing. But as a general matter, those rules essentially provide that financial requirements (e.g., cost-sharing) and treatment limitations (e.g., preauthorization and supply limits) imposed on mental health and substance abuse disorder benefits cannot be more restrictive than the “predominant” financial requirements and treatment limitations that apply to substantially all medical and surgical benefits. Similarly, HIPAA prohibits a GHP from discriminating based on a participant’s “health status”; substance abuse disorder is arguably a health status for that purpose.
Given these legal restrictions, substance abuse disease-management programs that use the “stick” approach risk violating both the MHPAEA and HIPAA—and triggering hefty penalties. But neither the MHPAEA nor HIPAA prohibits such a program from using the “carrot” approach—that is, providing more favorable treatment under substance abuse disorder benefits. So, for example, the GHP (but not the employer) might reach out to target participants, notify them of the availability of the substance abuse management program, and offer to waive certain copayments or coinsurance if they participate in the program. Such an incentive would theoretically increase program utilization—and decrease substance abuse among employees, their spouses, and their dependents who participate in the GHP.
Self-funded plans have more flexibility in the design of disease-management programs. Insured plans must first be approved by the applicable state’s insurance commissioner. In any event, employers and other GHP sponsors may wish to ask their insurance carrier or TPA about the availability of substance abuse management programs—and seek the advice of qualified benefits counsel before adopting such a program. For example, the waiver of cost-sharing for a particular benefit might not be viable if the GHP is a high-deductible health plan and the benefit isn’t considered preventive care (i.e., it isn’t a type of benefit that can be covered before the deductible is met).
An EAP is another employee benefits plan through which individuals who suffer from addiction can seek treatment without risk of adverse employment action (e.g., discipline or termination of employment). EAPs are not major-medical GHPs but often include a wide variety of benefits, such as assistance with alcohol and substance abuse. Most EAPs provide certain benefits (generally, counseling) through third-party vendors and use referrals to qualified individuals for the remaining benefits (e.g., legal assistance and financial planning).
EAPs are not subject to the MHPAEA or the ACA if they qualify as “excepted benefits.” An EAP qualifies for this exemption if:
- The EAP does not provide “significant benefits in the nature of medical care.”
- The EAP is not coordinated with another GHP. Impermissible coordination includes (1) requiring exhaustion of EAP benefits before the GHP will cover a service and (2) conditioning EAP eligibility on GHP participation.
- Participation in the EAP does not require employee premiums or contributions.
- The EAP does not impose any cost-sharing.
Generally, the MHPAEA does not prohibit a plan sponsor from adopting both (1) an MHPAEA-compliant major-medical GHP and (2) an EAP that separately provides mental health or substance abuse disorder benefits. But the GHP’s employer sponsor cannot use that two-tiered structure to game the system—that is, avoid compliance with the MHPAEA by moving all the major-medical GHP’s substance abuse disorder benefits to an EAP. Rather, final DOL regulations clearly prohibit that “separate plan” approach.
As with major-medical GHPs and substance abuse management programs, EAPs are generally subject to HIPAA’s privacy and security protections. An EAP cannot share substance abuse information it obtains from a participant with the participant’s employer for employment-related purposes (e.g., termination of employment). Given those protections, EAPs are another opportunity for employees (and their family members) who suffer from substance abuse disorders to seek and receive help.
When evaluating EAP vendors, an employer should pay particular attention to each vendor’s qualifications and experience with substance abuse disorder issues. Some EAP vendors may be better suited for purposes other than counseling and treatment of substance abuse disorders (e.g., referrals for financial planning).
Unprecedented Opportunity to Help Millions Overcome Substance Abuse
Properly structured and utilized substance abuse management programs and EAPs provide an arguably unrivaled level of access to (and the opportunity to treat) the nearly 16 million employees in the United States afflicted by drug and alcohol abuse—a population that has otherwise largely remained elusive.
Most employers already sponsor GHPs. Yet many GHPs don’t include a robust, legally compliant substance abuse management program that participants know about. And not only do a significant percentage of employers not sponsor EAPs, many of those that do have witnessed anemic levels of participation.
Employers interested in playing a larger role in combating the substance abuse epidemic should consult qualified legal counsel to evaluate their use or expansion of disease-management programs and EAPs so their employees receive the help they need.