Wellness plans have become very popular over the past decade. There are many vendors who often make it very easy for an employer to offer a wellness program. And while wellness programs can be a great thing for employers to offer, employers often don’t realize the rules that wellness programs must comply with in order to be legal.

In order for a wellness program to not be seen as a violation of HIPAA, it must comply with the regulations issued by HHS. The HIPAA requirements vary based on whether the wellness program is participatory only or is contingent on the participant meeting a health status. Last year, the EEOC issued regulations on the requirements a wellness program must comply with in order to not be in violation of the ADA or GINA, which included a new notice requirement. If you would like more information on the EEOC requirements, you can view are prior posts on the EEOC notice requirement and incentive limitations.

This post is focused on the requirement that we feel is the most misunderstood – the requirement under HIPAA to offer a reasonable alternative. If your wellness program is a participatory only program, meaning that a reward isn’t offered based on a participant meeting a certain standard, you do not need to worry about the reasonable alternative standard. Participatory programs are permissible under HIPAA as long as the wellness program is available to all similarly situated individuals. However, if your wellness program requires an individual to satisfy a standard related to a health factor to earn a reward, it must satisfy 5 requirements under HIPAA. The requirements are slightly different if the program is an activity-only program (e.g., reward for walking 10,000 steps a day) or an outcome-based program (e.g., not using tobacco or attaining a certain result on a biometric test).

Regardless of whether the program is an activity-only or outcome-based program, the wellness program must offer a reasonable alternative to obtaining the reward. In an activity-only program, a reasonable alternative must be offered to any participant for whom it is unreasonably difficult due to a medical condition to satisfy the standard or for whom it is medically inadvisable to attempt to satisfy the standard. In an outcome-based program, the reasonable alternative must provide for a reasonable alternative regardless of whether it was unreasonably difficult due to a medical condition or medically inadvisable for the participant to attempt to satisfy the standard.

So what does this reasonable alternative standard really mean? If you have a wellness program that gives a premium reduction for participants who average 10,000 steps per day or more, that program would be an activity-based program and you would have to provide some alternative way for a participant to obtain the premium reduction if it is difficult for a participant to meet the goal (e.g., if they had a bad knee that made walking difficult, you may have them watch a wellness video instead). If you have a wellness program that gives a premium incentive to non-smokers, that program would be an outcome based program and you would need to provide a reasonable alternative to anyone who requested it. Many employers require an employee to complete a smoking cessation program as the reasonable alternative. A smoking cessation program would be a reasonable alternative as long as the program wasn’t too strenuous and as long as it was free for the employee and the incentive was provided retroactively upon completion of the program. If the employee completes the smoking cessation program, you must give them the reward given to non-smokers even if they continue to use tobacco. This last part is what is frustrating to many employers and often overlooked.

Just last month, the DOL brought a lawsuit against Macy’s alleging violation of this rule for Macy’s alleged failure to provide a reasonable alternative and failure to disclose the alternative when its health plan had a tobacco surcharge. While this case is still pending and it is unknown how the decision will come out, this litigation should serve as a strong reminder the DOL and HHS are serious about enforcing the HIPAA nondiscrimination rules. Therefore, if you haven’t reviewed your plan’s reasonable alternative standards recently, we recommend reviewing them now so that you are well prepared if you receive an audit or investigation.