Wellness programs are an effective method to maintain group health plan costs, motivate employees to take control of their health, while assisting employees lead happier, healthier and more productive lives. Employers seek solutions by offering incentives that are tangible, easily accessible and tailored to the employees work/life balance for voluntary participation. Prior to the passage of the Affordable Care Act, navigating the legal landscape of wellness programs and incentives could be treacherous. However, the Affordable Care Act seemed to be a clear endorsement of standards-based wellness programs by the government. PPACA generated even more opportunities to get creative with these wellness programs, but it is important to understand the risks.

1. Wellness in the Corporate Environment
and Complying With PPACA
Presenters
Host
Judith Wethall,
Shareholder, Littler
Mendelson
Sarah Michele Hunt,
Education & Engagement
Coordinator, Corporate
Health & Wellness
Association
Ralph Lardieri, Wellness
Manager, Wawa, Inc.
Moderator
Edward Shulkin, President,
GiftCard Partners, Inc.

2. Today’s Overview
1.
2.
3.
4.
5.
Wellness Programs – The Background
Final Regulations – DOL Issued 6/3/13
Wellness and Employer Mandate Affordability/Minimum Value
Wellness Programs as ERISA Plans
Other laws (ADA, ADEA, GINA)

3. Wellness Program – The Background
• Born from the HIPAA nondiscrimination rules
– Group health plans cannot discriminate against
individuals based on health status:
• Exception for discrimination in favor of individual with adverse
health status (disease management)
• Exception if program meets the “wellness rules”
(See DOL Field Assistance Bulletin 2008-02)

4. Final Wellness Regulations – Effective
1/1/2014
• Increased incentive limits from 20% to 30% of
cost of coverage (tobacco cessation to 50%)
• Distinguished between TYPES of wellness
programs:
– Participatory vs. Health-Contingent

5. Final Wellness Regulations – Effective
1/1/2014
Participatory
Health-Contingent
Reward not based on a health factor
Reward based on a health factor
Five wellness criteria not applicable
Five wellness criteria applicable
Subject to ERISA, ADA, GINA, Tax and
Privacy rules
NEW! Broken down into two
subcategories:
• Activity-Only Wellness Programs
• Outcomes-Based Wellness Programs

6. “Participatory” Wellness Programs
• Reward is not based on health factor:
– Fitness Center
– Healthy Choices in Cafeteria
– Walk-a-thons
– Completion of HRQ (health risk questionnaire)
regardless of results
– Weight Watchers - goals not linked to rewards

7. “Participatory” Wellness Programs
• Similarly situated individuals must be allowed
an opportunity to participate
– Allowances for differing locations etc.
– Cannot discriminate in favor of highly
compensated individuals

8. “Health-Contingent” Wellness
Programs
• Reward is based on health factor
• Must comply with 5 criteria in “wellness
regulations”
• Applies to insured, self-funded/self-insured
and grandfathered plans

9. “Health-Contingent” Wellness
Programs
• Premium surcharge based on tobacco use (or reward
based on tobacco-free)
• Incentive based upon attainment of one or more
health goals (e.g. cholesterol, BMI, blood sugar
levels)
• Requirement applicable to individuals based upon
health status
– Pregnancy management program
– Coaching

10. “Health-Contingent” Wellness
Programs
Activity-Based
Outcome-Based
Individual required to complete activity
related to health factor to obtain reward,
but not required to attain a specific
outcome
Individual required to attain or maintain
specific health outcome in order to
obtain reward
Example: Walking, diet or exercise
program where some individuals may be
unable to or have difficulty participating
or completing due to a health factor (
such as asthma, pregnancy, or recent
surgery)
Example: Reward for non-tobacco use;
reward for results in biometric screening;
reward for favorable BMI while those
who do not meet criteria must meet with
health coach to obtain reward

11. “Health-Contingent” Wellness Programs
• Five Factors:
1.
2.
3.
4.
5.
Annual Qualification
Amount of Incentive
Reasonable Design to Promote Health
Participant Disclosures
Reasonable Alternatives
These Five Factors apply to both activity-based and outcomebased … but there are some differences in administration!

12. #1 - Annual Qualification
• Must give every eligible employee the ability to
qualify for the FULL reward at least once a year.
– Practice Reminder – include in open enrollment
materials or other materials.
– Make sure you do not pro rate the amount for late
finishers

13. #2 - Amount of Incentive
• Reward for all health-based wellness programs
cannot exceed 30% of cost of employee coverage
(unless dependents may participate in wellness –
then based on employee plus rates)
• For tobacco-use programs, reward/penalty cannot
exceed 50%
• Cost of coverage is Employee + Employer (without
2% COBRA admin)

14. #2 - Amount of Incentive
• EXAMPLE:
– Employee premium $150
– Employer premium $550 (Total premiums $700)
• Reward limit is $210 for health-based
• Reward limit is $350 for tobacco use

15. #3 - Reasonable Design to Promote
Health
• Must have “reasonable chance” of improving
health or preventing disease
• Must not be overly burdensome
• Must not be a subterfuge for discriminating
based on a health factor
• Must not be highly suspect in the method chose
to promote health/prevent disease

16. #4 – Participant Disclosures
• Plan must disclose availability of alternative
standard in materials describing the wellness
program (but not SBC)
• Must include contact information
• Must include statement that the recommendations
of an individual’s doctor will be accommodated
• New Safe Harbor language

17. #5 - Reasonable Alternative Standard
(RAS)
• The incentive must be available to ALL
similarly situated individuals
– This is accomplished by providing a reasonable
alternative standard (RAS)
• [NOTE: This is where the difference between activitybased and outcome-based programs comes into play]

18. Reasonable Alternative Standards
Wellness Programs
Health-Contingent
Activity-Only: Must
provide RAS where
medically inadvisable
or unreasonably
difficult
Outcome-Based:
Must provide RAS to
ALL!!
Participatory

19. Reasonable Alternative Standard
• Activity-Only
– Plan must provide RAS if:
• Medically inadvisable for the individual to attempt to satisfy
the wellness standard; OR
• It is unreasonably difficult due to a medical condition for the
individual to obtain the reward
– The plan is not required to determine RAS in advance of
request, but a RAS must be furnished upon request
– Must be reasonable

20. Reasonable Alternative Standard
• What is reasonable?
– Facts and circumstances test...
• Is time commitment reasonable?
• Has employer made program available and free?
• If doctor indicates the RAS is not reasonable, must
provide RAS that accommodates doctor’s suggestions
• RAS may be activity-based or outcome-based

21. Wellness and the Employer Mandate
• Tobacco Usage Incentives – considered for
calculation of “minimum value” and
“affordability”
• All Other Wellness Incentives – NOT
considered for calculation of “minimum value”
and “affordability” (assume premiums if no
incentive/reward)

22. Wellness Programs as ERISA Plans
• Both Participatory and Health-based programs
can be ERISA plan if they provide “medical
care” (e.g. biometrics, flu shots)
– SPDs, plan document, Form 5500, COBRA,
– Offered to those in medical plan or entire
employee population?

23. Other Laws to Watch
• Americans with Disabilities Act (ADA)
• Age Discrimination in Employment Act (ADEA)
• Genetic Nondiscrimination Information Act
(GINA)
• HIPAA Privacy
• Tax – Gift card programs
• State Laws – CA pending legislation

24. Questions
For additional questions or comments send email to
info@WellnessAssociation.com

25. Save the Date for the 6th Annual
Corporate Wellness Conference
For more information visit www.CorporateWellnessConference.com.