Tips for Maintaining a Compliant Wellness Program

 October 5 2018     Shelly Hodges-Konys and Diane Cross

Recently, HORAN hosted a seminar on wellness programs and compliance.  Regulations surrounding wellness programs are quite complex, making compliance a “hot topic” for employers who administer a wellness program. To help maintain a compliant wellness program, we share our top five tips: 

1.  Know What Type of Wellness Program You Offer

To begin considering wellness programs and compliance, you will need to know what type of program you offer.  Wellness program design directly impacts how regulations apply.  Programs can be participatory, health-contingent activities-based, or health-contingent outcomes-based.  Participatory programs are those which rewards are not contingent on satisfying a health factor, such as health education seminars and gym membership reimbursement.  Conversely, health-contingent programs require an individual to satisfy a standard related to a health factor in order to earn a reward - examples include obtaining a specific body mass index or being smoke-free.

2.  Understand what Legislation Applies

Wellness programs are regulated by several federal agencies and sets of regulations. It is important to know and understand the regulations that may apply to your wellness program including: the Health Insurance Portability and Accountability Act (HIPAA), the Affordable Care Act (ACA), the Americans with Disabilities Act (ADA), and the Genetic Information Nondiscrimination Act (GINA).  For more information, Legislation Impacting Wellness Program Design provides an overview of key legislation.

3.       Provide Appropriate Notices and Disclosures

Notice requirements are often overlooked or misunderstood when it comes to wellness programs.  Based on the type of wellness program offered and whether the program is also considered a group health plan, employers may be responsible for providing employees with appropriate notices and disclosures, such as an EEOC Notice, Notice of Availability of Reasonable Alternative Standard, Summary Plan Description (SPD), and COBRA notices.

4.  Calculate Incentives Properly

Employers should include all rewards, cash and in-kind, in any incentive calculations.  The type of wellness program offered also determines the incentive limit (if any) an employer can provide to employees for participating in the program.  Limits apply to certain programs under HIPAA, the ACA, the ADA and GINA – and the limits are calculated differently depending on applicable regulation.  Important to keep in mind, current EEOC guidance under the ADA and GINA is vacated as of January 1, 2019, and employers must assess the variable level of risk associated with incentives tied to the collection of health information on an ongoing basis.

5.  Tax Incentives as Required

With so many other regulations to consider, it is easy to overlook federal tax implications of wellness program rewards.  Cash, gift cards, gift certificates, and other rewards provided to an employee through a wellness program create a taxable event.  This requires an employer to include rewards in income, except for those that are considered de minimus (goods or services that are so small as to make accounting for them by the employer unreasonable).  Note that cash rewards are never considered de minimus. 

Given the above, careful consideration is required to ensure compliance with the various legislation regulating wellness programs.  Please contact your HORAN representative with any questions.