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Workplace Wellness in the Legal Crosshairs Once More: This Time It’s HIPAA Incentive Rules!

The following article does NOT constitute legal advice and should not be used as such. It is for educational purposes only. Readers should retain legal counsel to obtain definitive answers.

The inactivity in legal suits for workplace wellness didn’t last long. After the three lawsuits brought by the EEOC a couple of years ago settled or just went away, two new legal actions surface. One is a court decision that could upend the incentive rules under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). You can read about that case here. The other case involves not the ADA or GINA, but the incentive rules under the Health Insurance Portability and Accountability Act (HIPAA), which were made part of the Employee Retirement Income Security Act of 1974 (ERISA). The relevance of this second case is the topic for this month’s blog.

Acosta v. Macy’s, Inc.

In a unique twist for workplace wellness program enforcement, on August 16, 2017, the United States Department of Labor (DOL), which enforces compliance with ERISA, sued Macy’s, Inc. as well as its third party administrators for its self-insured health plan: Anthem Blue Cross Life and Health Insurance Company and Cigna. The plaintiff, R. Alexander Acosta, is the current Secretary of DOL, a President Trump nominee.

The DOL sued Macy’s for a number of violations under ERISA. One issue was the amount the plan paid out-of-network providers; that amount did not align with Macy’s plan documents. The other issue is most relevant to workplace wellness programs, however. That issue involved Macy’s tobacco cessation surcharge. Since 2011, Macy’s has imposed a $35 to $45/month surcharge on employees who were enrolled in the company medical plan and who have used tobacco products within the last consecutive six months or have had participating dependents who have used tobacco products within the last consecutive six months.

The DOL alleged that Macy’s tobacco cessation program violated the HIPAA/ERISA incentive rules for a number of reasons. In plan years 2011 and 2012, the program failed to offer employees a reasonable alternative standard and notice of that reasonable alternative standard, as required by 29 CFR § 2590.702(f)(2). Macy’s offered a tobacco cessation program to employees, but the only way to avoid the surcharge was for the employee to declare that all covered members in his or her family remained tobacco free for a period of six consecutive months during the health plan year.

During plan year 2013, Macy’s included a notice within the Tobacco Affidavit alerting the employee to the availability of a reasonable alternative standard, so it satisfied the notice requirement. But, the Tobacco Affidavit also said “I understand that the tobacco surcharge will not be changed retroactively and no refunds or credits will be issued.” The DOL alleged that this refusal to refund or credit participants for the tobacco surcharge even if they met a reasonable alternative standard violated the HIPAA/ERISA requirement that the full reward be available to all similarly situated individuals of a wellness program.

Now would be a good time to review whether your wellness program is compliant with the various wellness laws, including HIPAA, ADA and GINA.

During plan year 2014, plan participants had to fill out the following “Associate and Dependent Tobacco Designation”:

  1. ____ I and/or one or more of my enrolled dependents is/are a Tobacco User.
  2. ____ I and all my enrolled dependents are Tobacco Free.
  3. ____ I and all my enrolled dependents who are not Tobacco Free have completed a reasonable alternative standard during the current plan year to avoid the tobacco surcharge for the current plan year. I further certify that:
    1. ____ I and/or one or more of my enrolled dependents is/are still a Tobacco User, or
    2. ____ I and all of my enrolled dependents are either Tobacco Free and/or no longer using Tobacco products and working towards Tobacco Free status.
  4. I mistakenly designated Tobacco User status during enrollment and I and all of my enrolled dependents were not a Tobacco User when I enrolled.

Thus, in order to avoid the tobacco surcharge in plan year 2014, participants had to certify that they were either tobacco free or working towards meeting the original standard of being tobacco free. The wellness program did not allow participants to avoid the surcharge if they completed a reasonable alternative standard. The DOL claims this violates HIPAA/ERISA wellness incentive rules.

It should be noted that although third parties helped administer the tobacco cessation program for Macy’s, Macy’s had ultimate control of the wellness program, including:

  1. Determining which participants were charged the tobacco surcharge
  2. Determining which participants are reimbursed the tobacco surcharge
  3. Withholding the tobacco surcharge from a participant’s paycheck and placing it in the health plan trust account; and
  4. Directing the third parties regarding how completions of the tobacco cessation programs are reported.

Because of these alleged violations, the DOL is asking the court for the following relief (in relation to the wellness program violations):

  • to have Macy’s stop its violations of HIPAA/ERISA
  • to reimburse all participants who paid the tobacco surcharge from July 1, 2011 to the present (plus interest)
  • to revise its wellness program to comply with HIPAA/ERISA wellness incentive rules, to prevent Macy’s from collecting tobacco surcharges until it revises tis wellness program to comply with the HIPAA/ERISA rules
  • to disgorge all profits received as a result of its fiduciary breaches, and
  • to pay the costs the government incurred to bring the lawsuit against Macy’s.

What Should Workplace Wellness Programs Do Now?

We now know that even under the Trump Administration, interest in enforcing the various wellness incentive laws is alive and well. We also know that compliance issues arise no matter the size of the company. The Macy’s case teaches us that wellness programs must not only offer a reasonable alternative standard, but must make sure that anyone who completes that reasonable alternative standard qualifies for the entire reward for that plan year. Providing adequate notice about the reasonable alternative standard is also mandatory. Now would be a good time to review whether your wellness program is compliant with the various wellness laws, including HIPAA, ADA and GINA. The Center for Health and Wellness Law will continue to monitor any developments in wellness law. As always, if you need compliance assistance with workplace wellness program development or implementation, contact the Center for Health and Wellness Law, LLC. We are here to help you.

Barbara Zabawa

Barbara J. Zabawa
President of the Center for Health and Wellness Law, LLC