As enrollment nears, are there any special compliance concerns or notices required for our wellness program?

With any wellness program, the compliance considerations and required disclosures vary depending upon the specific design, activities, and rewards. Numerous benefits compliance laws can be implicated, as explained at a high-level below.

ERISA, COBRA, and Other Group Health Plan Laws
First, some wellness programs provide medical care (e.g., a medical exam); others simply provide general health and fitness information (e.g., a nutritional webinar). The determination of whether a program provides medical care is normally based upon whether it involves individualized diagnosis and treatment as opposed to broad-based education and general recommendations.

If a wellness program provides medical care, it generally would be considered a group health plan and thus required to comply with group health plan laws, including the ACA, ERISA, COBRA, and HIPAA. In such case, the employer would typically offer the wellness program only to those participating in the major medical plan because it would be difficult for the wellness program to satisfy these laws independently. Among other items, the ERISA plan documents and COBRA materials would need to be updated to incorporate the wellness program, and a HIPAA business associate agreement should be entered with the wellness vendor.

HIPAA, ADA, and GINA Wellness Plan Rules
Second, specific wellness plan nondiscrimination rules may be implicated.

HIPAA’s health status nondiscrimination rules classify wellness programs as “participatory” or “health contingent”. Participatory programs provide a reward to participants who complete some wellness-based health activity that does not require satisfying a health standard. Participatory standards may involve completing a health risk assessment or receiving preventive care. Participatory programs must be made available to all similarly situated individuals.

Health contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Health contingent programs can be either activity-based, requiring completion of a physical activity (e.g., walking) or outcome-based, requiring attainment of a particular outcome (e.g., not smoking, achieving certain blood pressure level). HIPAA requires such programs to be reasonably designed and available to all similarly situated employees at least once per year, with the reward amount not more than 30% (or 50% if tobacco-related) of the group health premium. Additionally, and importantly, notice of a reasonable alternative standard (i.e., another way to achieve the reward) must be included in all materials, including enrollment materials, involving the health contingent wellness program. HHS has provided sample language for this purpose.

The ADA wellness rules apply if the wellness program involves a medical exam (e.g., biometric screening) or disability-related inquiries (e.g., as part of a health risk assessment). The ADA rules require voluntary participation, confidentiality, and reasonable design and accommodation (so those with a disability can participate). Notice must also be provided explaining how any medical information is collected and used. The EEOC, which enforces the ADA, has provided a sample notice.

The Genetic Information Nondiscrimination Act (GINA) comes into play if the wellness program involves the collection of genetic information, such as family medical history (including that of a spouse), as part of a health risk assessment. GINA requires, among other items, specific written authorization from a program participant using a form that describes the type of genetic information that will be collected, the purposes for which it will be used, and the restrictions that will apply.

A concern with any wellness program that implicates the ADA or GINA is the lack of any current guidance regarding permitted reward incentive limits. (Prior EEOC rules were withdrawn in 2019 after a legal challenge and never replaced.) Employers should consult with legal counsel for guidance on this issue.

Internal Revenue Code
Third, employers should consider potential tax implications when providing wellness program rewards. Generally, employer contributions towards the group medical premium or to an HSA, HRA or FSA (within permitted limits) would be nontaxable. However, cash or cash equivalent rewards (e.g., gift cards) are taxable, and the employer should make sure these amounts are properly reported.

ACA Employer Mandate
Additionally, an applicable large employer subject to the ACA employer mandate would need to consider the effect of any premium discount on the determination of whether the coverage offered to a full-time employee is affordable. Generally, employer wellness program discounts, except for tobacco-related discounts, are not factored into the employee premium rate for ACA affordability purposes.

Enrollment season is a great time for employers to review their wellness program compliance and ensure any required notices are provided to employees. Given the complexity of laws that can be implicated with any wellness program, it is advisable for employers to engage their legal counsel in the review process.