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New Plan Year, New Wellness Program – Some Things to Keep in Mind

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As a follow-up to our recent blog Count Down to Open Enrollment – Some Quick Thoughts, below is a little more detail on how seemingly simple wellness program design changes can have significant legal consequences.

  • HIPAA – Employers feeling extra generous this plan year may want to increase their wellness program’s financial incentive.  It is important that such employers remain mindful of the limitations under HIPAA, i.e., 30% of the total cost of health plan coverage, or 50% for programs designed to prevent or reduce tobacco use.  As noted in our previous blog “Wellness Rules Under the ADA – Will There Ever Be Certainty?” effective January 1, 2019, the EEOC’s 30% threshold is no longer applicable.  Employers with tobacco cessation programs may also want to consider how the increased financial incentive may impact their affordability calculation under Code Section 4980H.
  • ADA – To the extent a wellness program is disability-related inquiry or medical examination, it is subject to the ADA, including the ADA’s requirement to provide employees with a notice (sample notice available here) that generally explains what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential.  To the extent an employer changes its wellness program’s design, it may need to revise its ADA notice to make sure the notice is up-to-date.
  • ADA – Employers that impose a tobacco surcharge and are concerned about potential dishonesty may contemplate switching from an employee attestation to a blood test.  Although permissible, this change would cause the program to be subject to the ADA and its various wellness program requirements that are discussed in more detail in our previous blog “EEOC Final Rules on Wellness Programs and the ADA – Worth the Wait?
  • GINA – If a wellness program consists of a health risk assessment (“HRA”) and biometric screening and an employer decides to open it up to spouses, this change would cause the HRA and biometric screening to have access to genetic information.  That is because GINA considers a spouse’s current or past health status to be the employee’s genetic information.  Although permissible, under GINA an employer may collect genetic information as part of a wellness program, but only if certain conditions are satisfied (e.g., the individual provides a knowing, voluntary, and written authorization in advance).
  • Internal Revenue Code – Employers may decide to make changes to their wellness program’s rewards to incentivize employee participation.  To the extent an employer decides to offer employees cash or cash equivalents (e.g., gift cards or gym membership reimbursements) this is taxable compensation that must be reported by the employer on the employee’s Form W-2. Furthermore, employers should be wary of any wellness program vendor that claims to provide “tax-free” payments to employees for merely participating in a wellness program because many of these arrangements have been deemed impermissible by the IRS.