An Over-the-Counter Remedy for the Health Risk Assessment Headache

The following article was originally published on the Verrill Dana Employee Benefits & Executive Compensation group's blog EmployeeBenefitsUpdate.com.

A number of clients have recently asked a relatively simple question: Can they require an employee to take a health risk assessment (“HRA”) as a condition of participation in a wellness program or group health plan? This question seems simple enough. Nevertheless, the answer involves unraveling a complex web of federal and state privacy, discrimination, and disability-related laws – and that’s just the beginning! Parsing through these laws will give even the most savvy HR professional a headache. This post offers an over-the-counter remedy for that headache by describing some basic principles that employers can follow to determine what they can and cannot do in designing HRA incentives. But first a bit of background about HIPAA, the Americans with Disabilities Act Amendments Act (“ADAAA”), and a recent case that appears to help.

HIPAA and the ADAAA

As most readers know, HIPAA contains rules relating to the privacy and security of “protected health information” as well as consumer protections regarding the portability of health benefits and antidiscrimination rules. Given the structure of most HRA programs, privacy, security, and portability issues are not likely to arise. However, the antidiscrimination provisions of HIPAA are implicated. HIPAA contains an exception to the antidiscrimination rules for “bona fide wellness programs.” In order to be considered “bona fide” a wellness program (including a program with an HRA component) must be made available to all “similarly situated” individuals. The HIPAA regulations do not define the term “similarly situated,” but do permit a plan or issuer to treat participants as two or more distinct groups of similarly situated individuals if the distinction is based on a “bona fide employment based classification consistent with the employer’s usual business practice.” Bona fide classifications can include full-time versus part-time, geographic location, membership in a collective bargaining unit, date of hire, length of service, current employee versus former employee, and different occupations. See 29 C.F.R. § 2590.702(d)(1); 45 C.F.R. § 146.121(d)(1); 26 C.F.R. § 54.9802-1(d)(1).

In addition, a wellness program that provides a reward based solely on participation is not subject to additional HIPAA requirements. For example, a program that provides a 50 percent premium reduction to employees for attending monthly health seminars does not violate the antidiscrimination provisions (assuming the program is available to all similarly situated individuals) and is not subject to additional requirements. Conversely, programs that condition incentives (or rewards) on satisfying certain health-factors must meet five additional requirements, which we won’t go into here. See 26 C.F.R. §54.9802-1(f)(2) for the full list.

The ADAAA generally prohibits employers from discriminating against employees on the basis of disability, including in the area of employee compensation and benefits. Moreover, the ADAAA specifically forbids an employer from requiring employees to undergo a medical examination or from making medical inquiries unless an exception applies. The act does, however, include an exception for “bona fide benefit plans.” This so-called safe harbor provides that the ADAAA does not restrict an employer “from establishing, sponsoring, observing, or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law.” 42 U.S.C. § 12201(c). To establish that a wellness program falls within this safe harbor, an employer must meet three requirements: (1) the employer must either establish, sponsor, observe, or administer a bona fide health plan; (2) the plan term(s) in question must be based on underwriting, classifying, or administering risk and not be a subterfuge for discrimination; and (3) the HRA cannot contain terms or requirements that are inconsistent with state law.

Enter the Seff case.

The Seff Case

In a case of first impression, the Southern District of Florida recently applied the ADAAA safe harbor provision to an employer’s wellness program. In Seff v. Broward County, the employer’s health plan offered a wellness program that included an HRA questionnaire, biometric screening, and health counseling. As an incentive for participation, the employer required that employees take the questionnaire and submit to the screening or pay an additional $20 per pay period for group health insurance. To avoid this surcharge, the employee simply had to participate in the HRA program.

The court found that this design met the safe harbor requirements and did not violate the ADAAA. Specifically, because the employer’s plan was “designed to develop and administer present and future benefit plans using accepted principles of risk assessment” it met the first two safe harbor requirements. Moreover, there was no Florida law prohibiting the employer from administering the questionnaire or requiring biometric screening. Thus, the employer’s plan fell squarely within the safe harbor.

What You Can and Cannot Do

HRAs are subject to a seemingly endless array of complex legal restrictions, only a few of which are touched on here. Nevertheless, there are a lot of things that an employer can lawfully do. For instance, an employer can:

• Require employees to take an HRA as a condition of enrollment in a wellness program or health plan.
• Provide premium discounts for those employees who participate. If the discount is based solely on participation, and not achievement of a health-factor, employees can offer discounts greater than 20 percent.
• Increase premiums for employees who decline to participate.
• Condition incentives on participation in a series of wellness related events (i.e., condition premium discounts on attendance at monthly health seminars).

However, an employer cannot:

• Require employees to take an HRA as a condition of employment.
• Offer premium discounts greater than 20 percent if the discount is based on satisfying certain health-factors.
• Fail to offer a reasonable alternative for receiving the incentive, if the incentive is based on achievement of certain health-factors.
• Offer the incentive only to a select group of employees, unless the distinction is based on a bona fide employment classification such as part time versus full time.

A Final Word to the Wise

Despite these general principles, analyzing HRA incentives is a fact sensitive inquiry and there is no “one size fits all” approach. Before implementing an HRA component to your overall wellness program you should consult legal counsel to ensure your particular program meets all applicable legal requirements (which could potentially vary from state to state).