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Employee Benefit News

Without clarity, wellness incentive goes up in smoke

By Bruce Shutan | 3-min read


Any communication about financial incentives associated with workplace wellness must be crystal clear for employees, and programs need to be carefully designed, industry experts suggest, in light of an unusual lawsuit on a wellness plan initiated by the Department of Labor.

In Acosta v. Macy’s Inc., the DOL alleges that a smoking cessation program sponsored by the department store failed to meet nondiscriminatory requirements under the Employee Retirement Income Security Act. Macy’s declined to comment, saying the company does not comment on ongoing litigation.

The takeaway for employers is that “the DOL will enforce the plan design and notice requirements for wellness plans strictly with regard to the offer of a specified reasonable alternative standard,” explains Christine Roberts, an attorney with Mullen & Henzell. She says that also means providing the same wellness reward upon satisfaction of the RAS as the health-contingent activity or outcome. Those efforts include informing smokers that they can avoid a surcharge even if they fail to stop using tobacco.

“Not all tobacco cessation and wellness programs are created equal,” cautions Don Powell, Ph.D., president and CEO of the American Institute for Preventive Medicine whose doctoral work on smoking cessation at the University of Michigan launched his career in the field.

Also see:Wellness plans face scrutiny by DOL.”

He suggests HR departments be advised to meet all the RAS criteria, including embracing approaches with a proven track record for success and a design that makes it reasonable for employees to complete program tasks.

Employers with outcome-based, health contingent wellness programs should confirm they are offering the required RAS and adequately communicating those alternatives to their employees, adds Kirsten Stewart, a member of Sherman & Howard’s employee benefits group.

Simply allowing someone to participate in a smoking cessation program would qualify as an RAS, which she says ensures that “all employees, regardless of health status, have the opportunity to earn a reward for achieving modified health goals.” These alternatives must be reasonably accessible and offered at no charge, she says, acknowledging that “it takes a lot of the teeth out of the program, but it is necessary under the federal requirements.”

At issue in the Macy’s suit is the absence of an adequately explained RAS to help smokers avoid a surcharge ranging from $35 to $45 for participants who couldn’t meet the program’s standards. Macy’s only waived the surcharge for people who became tobacco free and did not specify that the RAS was actually participating in smoking cessation activities. Anthem and Cigna subsidiaries also stand accused of charging a less-favorable reimbursement rate to process out-of-network treatment that caused participants to overpay certain claims.

Not specific enough
Macy’s failed to meet the wellness program design requirements and notice requirements under both the Affordable Care Act and HIPAA, according to Roberts. She says an affidavit form did disclose that the surcharge would be waived for participating in an RAS, but didn’t specify what it actually was and merely advised program participants to contact HR for details.

Another RAS wellness program example she cites might involve employees who fail to attain a certain cholesterol count. In those cases, she says employees with elevated levels may need to follow recommendations for medication and additional screening made by a physician who can modify the standards as medically necessary over the year.

The Macy’s case marks one of the first lawsuits by the DOL involving a large employer’s wellness plan. One possible explanation is the failure of similar high-profile court challenges by the Equal Employment Opportunity Commission, Roberts says. She says the litigation also could have been triggered by a participant complaint.

The EEOC’s legal challenges against wellness programs adopted by Honeywell International Inc. and Flambeau Inc. failed, while its case against Orion Energy settled out of court. One court recently held that the EEOC didn’t adequately “explain its reasoning for determining that the incentive levels it allows in the regulations meet the voluntary participation requirements under ADA and GINA,” Stewart adds.

This article was written by Bruce Shutan from Employee Benefit News and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.