Compliance FYI: Lawsuits Targeting Tobacco Cessation Programs
Recent lawsuits filed in federal courts have brought renewed attention to compliance requirements applicable to wellness programs offered in conjunction with a group health plan, in particular tobacco cessation programs.
Wellness Program Requirements
The HIPAA nondiscrimination rules generally prevent a group health plan from charging employees different premiums based on health factors. There is an exception to this general requirement for wellness programs that promote health and prevent disease. The HIPAA nondiscrimination rules divide these wellness programs into participatory and health contingent wellness programs.
Tobacco cessation programs are generally health contingent wellness programs that require an individual to satisfy a standard related to a health factor to obtain a reward (i.e. cease/reduce tobacco use). Health contingent wellness programs are further broken down into activity only and outcome-based wellness programs. Depending on the exact details of the tobacco cessation program, it could either be an activity only or outcome-based wellness program.
A health contingent wellness program must meet the below requirements to comply with the HIPAA nondiscrimination rules:
- The program must give individuals the opportunity to qualify for a reward at least once per year.
- The program must be reasonably designed to promote health and prevent disease.
- The total reward must not exceed 30% of the cost of employee-only coverage under the plan. If dependents (such as spouses and/or dependent children) may participate in the wellness program, the reward must not exceed 30% of the cost of the coverage in which the employee and any dependents are enrolled. If the program is designed to prevent or reduce tobacco use, the financial incentive may increase to a maximum of 50% so long as the employer relies on an employee’s Affidavit of Non-Tobacco Use. However, if the employer requires the individual be tested for nicotine, the maximum financial incentive remains at 30%.
- The full reward must be available to all similarly situated individuals. The program must provide a reasonable alternative standard (or waiver of an otherwise applicable standard) to earn the same reward.
- The wellness program materials must disclose in all materials the availability of reasonable alternative standards or the possibility of a waiver if applicable.
Reasonable Alternative Standards and Tobacco Cessation Programs
A tobacco cessation program can either be an activity only, health contingent wellness program or an outcome based, health contingent wellness program. Regardless of which type of health contingent wellness program the tobacco cessation program is, the program must provide a reasonable alternative standard (RAS) for earning the same reward for individuals who cannot otherwise satisfy the program’s requirements.
For example, if a wellness program provides a reward to non-smokers, a RAS could be the completion of a smoking cessation program. Note that the RAS does not actually require the individual stop smoking, just completion of the smoking cessation program.
Employers, as plan sponsors, must disclose the existence of a RAS in all wellness program materials. Model language for this disclosure is at the bottom of the article.
Tobacco Cessation Lawsuits
Recent lawsuits have alleged violations of the HIPAA nondiscrimination requirements for tobacco cessation programs.
While the lawsuits make several allegations, one of the allegations is that employers failed to disclose the availability of a RAS in all wellness program materials as required. Other allegations include claims that the RAS did not provide the full reward and violations of fiduciary duty.
Although the outcome of these lawsuits is unknown, it is a reminder to employers who sponsor tobacco cessation programs, and wellness programs as whole, to take the regulatory requirements seriously. The requirement to disclose the availability of a RAS in all wellness program materials is important. Employers may be well served to review their existing wellness program materials to see if the necessary RAS disclosure is included.
Model Reasonable Alternative Standard Language
Your health plan is committed to helping you achieve your best health. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at [insert contact information] and we will work with you (and, if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status.
Key Takeaways:
Employers with a wellness program that implements a tobacco surcharge should carefully review the applicable regulatory requirements. While no decision has been made in any of the lawsuits, they serve as a reminder that failing to adhere to the wellness plan compliance requirements can result in legal action.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
