Every few years, there seems to be an uptick in wellness program-related litigation. While the lawsuits are typically of the class-action variety targeting large, deep pocket companies, the risk is still real enough to motivate any employer sponsoring a wellness rewards program to make sure they’re running those programs as compliantly as possible.
A recent string of lawsuits filed by the Department of Labor (DOL) and private plaintiffs primarily relate to tobacco incentive (or disincentive) programs. Many of these lawsuits allege similar violations under HIPAA’s nondiscrimination rules centered around the Reasonable Alternative Standard (RAS) requirements. While this litigation mostly relates to employers charging a premium surcharge for those employees who use tobacco-related products, similar issues can arise with any nicotine prevention or outcome-based wellness incentive program. This brief alert will discuss the basis of the lawsuits and provide ways to ensure your wellness program is less susceptible to being a civil suit target.
Alleged Failures in Tobacco-related Wellness Programs
The following are four of the most common allegations against employers offering tobacco-related wellness programs:
Employer offers a tobacco incentive (or assesses a premium surcharge) without offering an RAS.
An RAS must be offered to those employees who use tobacco. Basically, tobacco users must be offered another way to earn the full reward or avoid the full surcharge. The most common RAS for tobacco-related programs is completion of a tobacco-cessation program.
The availability of an RAS is not adequately disclosed or communicated.
Written materials describing the terms of outcome-based wellness program and the communication informing a participant of a failure, must include a notice about how that participant may earn the incentive by completing an alternative standard. RAS options, who to contact, and any deadlines for completion must also be included in the notice. These notices should appear in benefit guides, open enrollment presentations and in the tobacco affidavits, to name a few obvious places.
Not recognizing what constitutes completing the RAS.
In the case of tobacco related incentives, the employee merely needs to complete the tobacco-cessation program. Requiring the employee to successfully quit tobacco use in order to earn a reward or avoid a surcharge is not considered to be a reasonable alternative standard under the law.
Not providing the full incentive if the employee completes the RAS.
The employee must receive the full annual incentive (or avoid the full annual surcharge) if they successfully complete the RAS within a reasonable time period. If the employee does not complete the RAS until well into the start of the plan year and the employer has been charging the surcharge in the interim, the employer must refund the surcharge paid to date as well as discontinue the surcharge going forward until the end of the plan year.
Under the Affordable Care Act, health plans offer tobacco cessation programs at no cost to participants. Therefore, identifying a RAS for your tobacco incentive wellness program should be a straightforward process.
Contact your team at Cottingham & Butler for help in setting up a compliant RAS for your wellness initiatives and gain access additional wellness compliance resources.