Wellness plans have and continue to be the subject of significant litigation. HIPAA-contingent wellness programs — ones that require engaging in an activity or achieving a wellness goal — are particularly under the microscope. A contingent wellness program must meet the following five criteria:
- It must be reasonably designed to promote health or prevent disease.
- Individuals must have the opportunity to qualify for the program at least once annually.
- Incentive cannot exceed 30% of the cost of individual coverage (30% of applicable family rate if offered to family). The maximum incentive is 50% for tobacco cessation programs.
- The program must be available to all similarly situated individuals, and there must be a reasonable alternative for participation.
- The plan must provide notice and a description of the wellness program and the available alternative.
The reasonable alternative and the full reward are the components being challenged most often. Many of these cases have settled. A recent case, Mehlberg v. Compass Group, is notable because it is not settling.
The court found that plaintiffs had standing to challenge the surcharges and seemingly alleged that the surcharges violated the ERISA fiduciary rules. The court found that the requirement that a participant must be eligible for the full reward of a wellness program and the reward should apply retroactively, relying on the 2013 HIPAA wellness program regulations. Of note is the court’s rejection of the defendants’ Loper Bright argument that wellness program rules are not the best interpretation of the HIPAA non-discrimination rules.
If you sponsor a contingent wellness program, make certain that a reasonable alternative is available and clearly communicated. Also, make certain that if a participant follows the reasonable alternative that the full reward, not just a pro-rated portion of the reward, is made available.
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