The Affordable Care Act What Employers Need to Know
Jan 03, 2016
The Affordable Care Act What Employers Need to Know
Objectives
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Review the tenets of the Affordable Care Act (ACA)1
Identify elements of the ACA that affect employers2
Review small and large employer market reforms3
Understand requirement for wellness programs under the ACA4
Reform existing insurance laws1 Expand Coverage
Basic tenets of health care reform
References: 1. Centers for Medicare and Medicaid Services. http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/. Accessed June 22, 2015. 2. Kaiser Family Foundation. http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/. Updated May 26, 2015. Accessed June 10, 2015. 3. America's Health Insurance Plans. Time for Affordability website. http://ahip.org/Issues/January-1-2014-Provisions.aspx. Updated June 25, 2014. Accessed June 22, 2015. 4. Kaiser Family Foundation. http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/. Accessed June 22, 2015.
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Essential health benefits
actuarial value
cost-sharing limitations
grandfathering rules
employer mandate MLR
rescission
internal/external reviews
Medicaid expansion2
30 states including DC3 states open debate
18 states not moving forward
Premium subsidies for low- and moderate-income Americans to buy health insurance3
14 states/DC state-based marketplace 7 states partnership marketplace
27 states with federal marketplaces4
Individual mandate3
•No determination of eligibility based on health status1
•No exclusions for pre-existing conditions1
•Dependent children covered up to age 261
•No annual dollar limits, no lifetime limits1
•No cost-sharing for certain preventive services1
•Must provide comprehensive coverage; eg, essential health benefits (fully insured), metal tiers, cost-sharing limitations1
•90-day maximum waiting period1
Key provisions of the ACA
Reference: 1. Patient Protection and Affordable Care Act. US Government Publishing Office website. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 22, 2015.
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ACA
•Reporting cost of coverage on Form W-21
• Applies to employers that filed more than 250 W-2s in the prior year
•Summary of Benefits and Coverage (SBCs)2
•Exchange notice• Employers must have furnished by October 1, 20133 • Also, must furnish to new employees within 14 days
of start date (no DoL penalty for failure to provide notice)3,4
• Reporting health coverage to the IRS5
Notice and disclosure requirements
References: 1. Internal Revenue Service. 2013. http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage. Updated December 22, 2014. Accessed June 22, 2015. 2. Federal Register. http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25818. Published February 14, 2012. Accessed June 22, 2015. 3. US Department of Labor. http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html. Accessed June 22, 2015. 4. US Department of Labor. http://www.dol.gov/ebsa/newsroom/tr13-02.html. Accessed June 22, 2015. 5. Schreiber SP. http://www.journalofaccountancy.com/News/20149733.htm. Published March 5, 2014. Accessed June 22, 2015.
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Taxes and fees
References: 1. Mojiri-Azad RL. http://www.irs.gov/pub/irs-drop/n-14-56.pdf. Accessed June 22, 2015. 2. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-03-11/pdf/2014-05052.pdf. Published March 11, 2014. Accessed June 22, 2015. 3. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-03-04/pdf/2013-04836.pdf. Published March 4, 2013. Accessed June 22, 2015.
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Fully insured plans only
• Insurer excise tax: based on carrier market share3 • Adds estimated aggregate
fee of $3.3B in 20163
• Likely increase 2016 through 20193
Fully and self-insured plans
• PCORI excise tax:$2.08/covered life in 20151 • Indexed to annual CPI (ends
with 2019 plan year)1
• Reinsurance fee: $44/covered life in 20152
"Cadillac tax" effective 2018
Reference: 1. Excise tax on high cost employer-sponsored health coverage, 26 USC §4980I (2010).
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High-risk professions include1:• Qualified retirees • Electrical/telecommunications repair
workers • Law enforcement/fire protection workers• Out-of-hospital emergency medical
providers • Longshore workers • Construction, mining, agriculture,
forestry, and fishing workers
Higher threshold for high-risk professions1:
$11,850/single $30,950/family
Fully and self-insured plans
$10,200/single $27,500/family
40% excise tax on plan value in excess of1:
It doesn't stop there…
References: 1. Internal Revenue Service. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax. Updated March 5, 2015. Accessed June 23, 2015. 2. American Institute of CPAs. http://www.aicpa.org/interestareas/tax/resources/trustestateandgift/toolsandaids/pages/estateandtrustimpactof38medicaresurtax.aspx. Accessed June 23, 2015. 3. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21157.pdf. PublishedAugust 30, 2013. Accessed June 23, 2015.
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• Medicare surtax• 0.9% on wages (individuals with $200,000+ MAGI
or joint filers with $250,000+ MAGI)1 • 3.8% on non-wage income2
(+half for a child) or 1% of the family income3
2014
$95/person
(+half for a child) or 2% of the family income3
2015
$325/person
(+half for a child) up to $2,085/family or 2.5%
of family income over filing limit3
2016
$695/person • Individual
responsibility tax3
•2016: small employers defined as 1-100 employees1
•All fully insured, small group plans must cover the 10 essential health benefits2
•”Metal levels” meet an actuarial value ±2%2,3
Small group market reforms
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Bronze 60% AV
Silver70% AV
Gold80% AV
Platinum 90% AV
References: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-10-30/pdf/2013-25326.pdf. Published October 30, 2013. Accessed June 23, 2015. 2. Patient Protection and Affordable Care Act. US Government Publishing Office website. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 23, 2015. 3. US Department of Health and Human Services. https://www.cms.gov/CCIIO/Resources/Files/Downloads/av-calculator-methodology.pdf. Accessed June 23, 2015.
• All employees treated as a single risk pool regardless of where coverage is obtained1
Risk pooling
Small group market reforms (cont’d)
Reference: 1. Patient Protection and Affordable Care Act. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 23, 2015.
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• Premium rate may only vary by:1 • Age (3:1 ratio) • Tobacco use (1.5:1 ratio) • Single or family coverage • Rating area (geography)
Insurance companies prohibited from setting premiums based on health status1
2015 maximum out-of-pocket (MOOP) now $6,600 for single, $13,200 for family coverage (same as small groups)1
• Delayed for most group plans to plan years beginning January 1, 2015 or later2
2015 high-deductible health plan (HDHP) MOOP limits are now $6,450 for single, $12,900 for family coverage3
Large group market reforms
References: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-03-11/pdf/2014-05052.pdf. Published March 11, 2014. Accessed June 23, 2015. 2. US Department of Labor. http://www.dol.gov/ebsa/faqs/faq-aca18.html. Published January 9, 2014. Accessed June 23, 2015. 3. Ruane B. Internal Revenue Service website. https://www.irs.gov/pub/irs-drop/rp-14-30.pdf. Accessed June 23, 2015.
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•Limits on deductible and out-of-pocket maximums1
•Nondiscrimination for insured plans determined under IRC 105(h)2
• Internal and external appeals process rules1 •Coverage of in-network preventive services without cost sharing1 •Special rules on choosing a primary care provider1 • No prior authorization (PA) for OB-GYN visits1 •Coverage of out-of-network emergency services using
in-network cost sharing and no PA requirement1 •Coverage of treatment for those in clinical trials1
Mandates for non-grandfathered plans only
References: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013. 2. Dvoretzky J. http://www.irs.gov/pub/irs-drop/n-11-01.pdf. Accessed June 23, 2015.
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Employers are subject to a tax penalty if1:
• Health coverage is not offered to at least 95% of FTEs (70% for 2015) and dependent children age <26
• Employer offers coverage, but it’s unaffordable or does not provide "minimum value"
• Employee purchases health insurance through the exchange and gets a premium subsidy
Employer mandate (shared responsibility)
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.
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Applies to employers with ≥50 FTEs
employers with 50-99 employees
get transitional relief in 20151
• If multiple coverage options are offered, the affordability test applies to the lowest-cost option that also meets the minimum value requirement1
•Employers are prohibited from using incentives offered through wellness programs to calculate affordability or minimum value1
• Tobacco cessation programs excepted1
Employer mandate: a few caveats
Reference: 1. http://www.gpo.gov/fdsys/pkg/FR-2013-05-03/pdf/2013-10463.pdf. Published May 3, 2013. Accessed June 23, 2015.
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•2015 transitional relief for employers with 100+ FTEs1
• Penalty calculated after subtracting employer’s allocable share of 80 full-time employees—instead of 30
Penalty for failure to offer coverage
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.
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$2,000 x (#FTEs - 30) x 1/12 = $ penaltyAssessed only if FTE receives a premium subsidy1
•The penalty for any calendar month is capped at the penalty the employer would have paid had it not offered coverage1
•MV calculator is available at www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html
Penalty for unaffordable or less than minimum value coverage
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.
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$3,000 x #FTEs x 1/12 = $ penaltyfor each month health coverage is not affordable1
•To determine "applicable large employers" status, add together1:• FTEs who work 30+ hours/week during a calendar
month; or at least 130 hours/month • Aggregated part-time employees (add up all the
hours worked and divide by 120) • Include hours actually worked plus paid time for
sick leave, holiday, vacation, military duty, etc
Penalties for employers with 50 or more employees
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.
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Penalties are not tax deductible1
Seasonal workers• Seasonal workers who work 120 or
fewer calendar days may be excluded from this calculation1
What about…?
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.
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• Individuals are not eligible for subsidies offered through the Exchange if eligible for employer-sponsored coverage1
BUT… • If employer-sponsored coverage is either
unaffordable or does not provide minimum value, employees may1: • Opt out of employer coverage • Go to the Exchange for coverage • Depending on income, access subsidies
General rule regarding subsidies
Reference: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013.
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An individual is eligible if1:
Who is eligible for a premium subsidy?
Reference: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013.
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Household income is 133% to 400% of the federal poverty level
Not enrolled in an employer group health plan
Plan premium is >9.5% of household incomeOrPlan share of covered health expenses is less than 60%
• ACA stated that subsidies will be provided to individuals who purchase insurance on an exchange "established by the state"1,2
• IRS regulations allowed the government to provide subsidies regardless of whether the insurance was purchased on a state-based or federally facilitated exchange1,2
Legal challenge: King v. Burwell
References: 1. Eligibility for premium tax credit, 26 CFR §1.36B-2 (2013). 2. Premium tax credit definitions, 26 CFR §1.36B-1 (2015). 3. King v Burwell, 759 F3d 358 (4th Cir 2014). 4. Families USA website. Victory for the ACA at the Supreme Court. http://familiesusa.org/initiatives/king-v-burwell. Accessed July 24, 2015.
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• Whether the federal government may provide subsidies to individuals who purchase insurance on federally facilitated exchanges3
• Plaintiff claimed that the IRS misinterpreted the ACA provision3 • Plaintiff argued that subsidies should only be available for insurance purchased on an exchange
"established by the state"3
The situation
The issue before the Supreme Court
The arguments
• Case decided on June 25, 2015, in favor of ACA4
• The government may continue to provide subsidies to individuals who purchase insurance on federal exchanges4
The verdict
• ACA requires employers with more than 200 FTEs that offer health coverage to automatically enroll new FTEs in a coverage option1
• Existing elections for current FTEs must also automatically continue on a yearly basis1
• Employers are not required to comply until regulations are issued1
Automatic enrollment
Reference: 1. US Department of Labor. http://www.dol.gov/ebsa/newsroom/tr12-01.html. Published February 9, 2012. Accessed June 23, 2015.
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Estimated release date of regulation is uncertain
• Reward not based on health factor (eg, obesity)
• HIPAA rule not applicable • Other rules may apply
(eg, ERISA, ADA, GINA)
Wellness programs and the ACA
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/2013-12916.pdf. Published June 3, 2013. Accessed June 23, 2015.
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• Reward based on health factor
• HIPAA rules applicable • 2 categories:
• Activity-only: must complete activity related to health factor to get reward, but not required to attain specific health outcome
• Outcomes-based: must attain or maintain specific health outcome to get reward
Participatory1 Health-contingent1
Wellness programs and the ACA1
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/2013-12916.pdf. Published June 3, 2013. Accessed June 23, 2015.
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Activity-Only Outcomes-Based
Opportunity to qualify • At least 1x/year • Same
Size of reward • Max 30% of cost of coverage • Max 30% of the cost of coverage • Max 50% for programs to limit tobacco use
Design • Must have reasonable chance of improving health or preventing disease
• Must not be overly burdensome or discriminate based on health status
Same
Availability and alternative standards
• Alternative or waiver must be available to those for whom it is medically unreasonably difficult or inadvisable to attempt to participate
• Plan is permitted to require physician verification
• Alternative must be available to every individual who does not meet the standard or seeks an alternative
• Plan is not permitted to seek physician verification
Notice of alternative standards
• Plan must provide notice of alternative standard • Notice must include contact information, and state that
physician recommendations will be accommodated
• Plan must provide notice of availability of an alternative standard in all program materials and in disclosures informing individuals that they did not satisfy the original standard. Notice must include contact information, and state that physician recommendations will be accommodated
Heart disease prevention
ACA-recognized wellness programs1
Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/. Published June 3, 2013. Accessed June 23, 2015.
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Wellness and prevention efforts
Diabetes prevention
Smoking cessation
Weight management
Physical fitness
Health coaching
Health education seminars
Post-ACA wellness litigation
• Participatory program. Employees were required to complete: • Biometric testing • Health risk assessment (HRA)
• Plaintiff was unable to participate due to medical leave and hospital treatment
• Upon returning from medical leave, plaintiff’s attempt to participate was rejected and his benefits were terminated
• Plaintiff was told that his medical insurance was cancelled because he had not completed Flambeau’s requirements
• Plaintiff was informed that he could apply for medical insurance at the COBRA premium rate• If plaintiff participated in the wellness program, Flambeau
would have paid ~75% of his premium • Plaintiff was unable to pay the COBRA premiums
EEOC v. Flambeau, 20141
Reference: 1. EEOC v Flambeau, 3:14-cv-00638 (WD Wisc 2014).
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• EEOC claims the program is not voluntary biometric testing • Plaintiff's health insurance was
terminated and he was penalized by having to pay COBRA premium for reinstatement, thus violating ADA
• Plaintiff was told that participation was "mandatory" to be on the company's health plan• Employees were told that they
would be subject to disciplinary action for failing to participate
• New employees were not offered health coverage unless they participated
Allegations
• Participatory, activity-only program. Employees had to:• Complete a health risk assessment (HRA)• Undergo blood work• Use a range of motion machine in the company's physical
fitness room
• Plaintiff objected to participation• Questioned whether voluntary (ADA); questioned confidentiality
of the information • Plaintiff was told by personnel director and plaintiff's supervisor
not to express any opinion of the program to coworkers • Employer paid 100% of premium if the employee participated
• Non-participants were responsible for the entire premium ($4,961.16/year + $50/month penalty)
• Plaintiff alleged that she was terminated for not participating
EEOC v. Orion Energy Systems, 20141
Reference: 1. EEOC v Orion, 1:14-cv-1019 (ED Wisc 2014).
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• Employer inquiries were not job-related or consistent with business necessity, as required under the ADA • Program was not voluntary• Plaintiff received a financial penalty
and was terminated
• Employer retaliated against plaintiff for her good-faith objections
• Employer interfered, coerced and intimidated plaintiff for exercising her rights under the ADA*
*ADA, American with Disability Act.
Allegations
• Participatory, outcomes-based.1 Employees and spouses participating in the HDHP are eligible to participate in the optional program
• Biometric screening provided by company or personal physician: blood pressure, cholesterol, glucose, height, weight, BMI, and nicotine or cotinine
• Data sent directly to an independent health management company; Honeywell receives only aggregate data
• Ill or pregnant employees may obtain a waiver
• Financial incentives/penalties.1 HSA contributions: Participants qualify for HSA contributions from Honeywell up to $1,500 depending on employee’s annual base wage and the selected coverage. No company contributions if they do not participate
• Premium surcharge: $500 surcharge for non-participants applied to 2015 plan costs
• Tobacco surcharge: $1,000/year for employee, $1,000/year for spouse. Avoid surcharges by providing biometric screening report proving no tobacco use, enrolling in tobacco cessation program, Health Advocate confirmation of non-use
EEOC v. Honeywell International, 2014
References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. EEOC v Honeywell, 14-4517ADm/TNL, WL 5795481 (D Minn 2014).
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• Biometric testing is in violation of the ADA
• Spousal testing requirement violates GINA Title II
• Motion for temporary restraining order and preliminary injunction denied2
• No decision on EEOC's* ADA and GINA* claims
*EEOC, Equal Employment Opportunity Commission. GINA, Genetic Information Nondiscrimination Act.
Allegations1
EEOC ADA allegations1 • Biometric screening is an unlawful medical examination
• Not intended to determine whether the employees can perform the essential job functions or pose a direct threat to the health or safety of themselves or others
• Not job-related or consistent with business necessity • Penalty imposed on individuals who do not participate, therefore not voluntary
Honeywell response • ADA's ”bona fide benefit plan" safe harbor "exempts certain insurance plans from the ADA's general
prohibitions, including the prohibition on 'required' medical examinations and disability-related inquires"2
• The wellness program was part of bona fide benefit plan2 • The wellness program is a term of the group health plan; information is used for risk assessment purposes • Identify and manage risks, lower claims cost, information sent to actuarial firm for underwriting purposes
• Voluntary wellness program3
• Financial incentives appear consistent with ACA guidelines: 30%-50% of the total cost of coverage depending on the program type
• EEOC cannot rely on enforcement guidance that conflicts with Congress's express approval of surcharges in conjunction with wellness programs under the ACA
EEOC v. Honeywell International - ADA
References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. Seff v Broward, 691 F3d 1221 (11th Circ 2012). 3. EEOC v Honeywell, 14-4517ADm/TNL, WL 5795481 (D Minn 2014).
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EEOC GINA allegations1 • Employer is offering inducement to receive employee genetic information
• Genetic information from a family member (including spouse) cannot be requested
• Requesting spousal health information for spouse participation results in unlawful request of genetic information as it relates to the employee
• No exception for a spouse who is also a plan participant
Honeywell response2 • Title I (group health plans and issuers) should apply because it is part
of a bona fide group health plan • EEOC can only enforce claims related to Title II of GINA (Title II applies to employers; eg,
adverse employment action)
• Even if the EEOC can bring action under Title II, Honeywell may request this information as part of a voluntary wellness program
• Honeywell argues it should be allowed to request spousal information when the spouse is a plan participant
EEOC v. Honeywell International - GINA
References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). Memorandum.
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Motion for temporary restraining order and preliminary injunction DENIED2
Court decision:
A hypothetical example
• Susan Ross, the corporate benefits manager at Acme Inc., would like to give employees a substantial discount on their health insurance premium if they participate in the program
• In particular, Susan has proposed wellness opportunities that employees undertake during the initial pilot year
Designing a corporate wellness program
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ACME
Acme Inc.'s proposed wellness program
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Smoking cessation programDiscount available to employees
who do not smoke or who participate in all cessation program activities.
”Appropriate body weight" programDiscount available to employees who maintain
appropriate weight or who make substantial progress toward achieving appropriate weight.
Immunization program
Discount available to employees who have received every immunization recommended for their age group.
Basic care program
Discount available to employees who visit a primary care provider at
least once during the year.
Basic safety programDiscount available to employees who agree not to own/ride on a motorcycle, bicycle, Ski-Doo®,
Sea-Doo® or engage in any dangerous sport (eg, skiing and diving).
Additional 5% discount On the premium if for 6 months the
employee does not use medical care covered by the health plan.
Questions:
Acme Inc. wellness program resolution
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Can Susan Ross institute these wellness programs and give premium discounts (assuming she has authorization from the VP of Human Resources and Legal)?
1How would you structure these programs to make them consistent with the limitations of the ACA?
2
The proposed program was leaked before management and legal had a chance to review it. Several employees complained
An overweight employee has a letter from a website from which he purchased a genetic test stating his obesity is at least partly due to genetic factors
Some object to the immunization program because they have decided to forgo immunizations for religious, medical, or philosophical reasons
A Christian Scientist objects to the requirement that he see a primary care provider once a year to obtain the discount
An employee who just bought a time share in a ski resort argues that it would be unfair to create the basic safety program
A pregnant employee argues that she will be excluded from some potential rewards because of her pregnancy
Issues will arise
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1
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• The ACA delivers important benefits to both working and retired employees
• ACA clearly defines the elements that affect employers• Wellness programs—a high-interest, high-value employee
benefit—must be developed within current ACA, HIPAA, GINA, ADA, and EEOC requirements and carefully vetted utilizing EEOC guidance
• Market reforms are manageable, and will continue to evolve
In closing…
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The ACA represents an important opportunity for employers
Questions, answers, and closing comments
Thank you!
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