As discussed in my earlier posts  here, congress has repeatedly extended the benefits to employees under COBRA. And now, for the third ime, the COBRA premium subsidy program has been extended, this time through May 31, 2010, under the Continuing Extension Act of 2010 (Act). The key provisions of the Act include:

• The extension of the eligibility period for the COBRA subsidy through May 31, 2010.
• A new special election period and related notice requirement for individuals who experience a qualifying event that is related to a termination of employment on or after April 1, 2010, and before April 15, 2010.

The excerpts below are from an article posted by the law firm of Drinker Biddle, a large national law firm.

Special Election Period

A health plan must extend a special COBRA election period to an individual who experienced an involuntary termination of employment on or after April 1, 2010, and prior to April 15, 2010, and who would be an “assistance eligible individual” (AEI) but who does not have a COBRA election in effect on April 15, 2010. The special election period runs from April 15, 2010, through the date 60 days after the Notice of Special Election Period is provided to that individual.

Note about effective date of COBRA subsidy. Although not specifically addressed in the Act, due to the short, 15-day gap between the expiration of the COBRA subsidy on March 31, 2010, and enactment of the Act, we believe that an individual’s COBRA subsidy becomes effective as of the first day of COBRA coverage if he or she elects coverage during the special election period.

Notice of Special Election Period

In the case of any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, a plan administrator must provide the general COBRA notice, including a description of the availability of premium reduction in the case of a qualifying event that is an involuntary termination of employment, within 60 days of enactment of the Act (i.e., by June 14, 2010). If the plan administrator has already distributed the general COBRA notice to such individuals, then the plan administrator may simply supplement it with an additional notice describing the extension of the availability of premium reduction with respect to involuntary terminations through May 31, 2010, and the special election period.

Note about the notice requirement. The Act is not clear on whether this notice applies only to AEIs, or to any individual who has a qualifying event related to a termination of employment, whether voluntary or involuntary, during the period April 1, 2010, through April 14, 2010. The more conservative approach is for a plan administrator to provide the special election notice to any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, in order to notify all individuals who may potentially be eligible for the COBRA subsidy, including those who an employer may have incorrectly classified as voluntarily terminated.

A Reminder – Expansion of Assistance Eligible Individuals

Under ARRA, only individuals who experienced a qualifying event that was an employee’s involuntary termination of employment could become AEIs and take advantage of the COBRA premium subsidy. The Temporary Extension Act of 2010 expanded the premium subsidy to include as a qualifying event for purposes of the subsidy, a reduction of hours that occurred at any time on or after September 1, 2008, and is followed by an involuntary termination of employment that occurs on or after March 2, 2010 (and before June 1, 2010). Individuals who experience a qualifying event that falls under this expanded definition and are otherwise eligible AEIs (Reduced Hours AEIs) will be eligible for the COBRA subsidy beginning with the first day of the first period of coverage for which the individual is a Reduced Hours AEI. The Reduced Hours AEI’s maximum continuation coverage period is determined as if the individual had elected COBRA when initially eligible due to the reduction of hours.

Action Items

Plan sponsors and administrators should consider the following immediate action items:

• Notices. Plan administrators should update their COBRA notices and other plan communications to include the extension of the eligibility period to May 31, 2010.
• Assess Prior Terminations. Identify covered employees (and their qualified beneficiaries) who became eligible for COBRA on or after April 1, 2010, and before April 15, 2010, as well as their COBRA elections. Provide an updated COBRA notice to these individuals that includes a description of the extended eligibility period and the special election period. Identify those employees and beneficiaries in the group whose qualifying event is the employee’s involuntary termination of employment and who are eligible for the COBRA subsidy.
• Continue to Monitor Reduced Hours AEIs. Plan administrators should continue to identify any Reduced Hours AEIs, and provide a new notice to them upon involuntary termination. An individual in this group may be eligible for the special election period if, upon a reduction in hours the individual did not elect, or elected and later discontinued, COBRA.
• Stay Tuned. Two separate bills in Congress propose to further extend the COBRA subsidy eligibility period through June 30, 2010, or year end.

COBRA Update, Again…

President Obama recently signed the Hiring Incentives to Restore Employment (HIRE) Act, containing more than $17 Billion in tax credits designed to stimulate employment. The Act also includes $20 Billion for highway and transit infrastructure programs as well. One of the most important provisions for businesses is a tax credit for hiring from the ranks of the unemployed.

Under the Act, when an employer hires a “qualified employee” the employer is excused from paying the normal Social Security match of 6.2% of the wages in 2010. What is a qualified employee you ask? A qualifying employee is one who

• is hired after Feb. 3, 2010 and before Jan. 1, 2011;
• is not hired to replace another employee;
• is not related to the employer;
• and certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer.

This incentive can save the employer over $6,000 annually for each qualified employee that is hired. Under certain circumstances, the employer who hires a new employee, and retains their services for 52 weeks, may also be able to receive an additional tax credit available on the 2011 tax return equal to the lesser of $1,000 or 6.2% of the wages paid to an employee for those 52 weeks.

These tax incentives are meant to spur job creation, especially for small businesses who are undecided about whether to begin to ramp up expansion efforts in light of recent economic challenges.

Here is the press release from the Ways & Means Committee Chair describing this bill.

As many of you know, when an employee is terminated the employee may be eligible to continue their participation in the company sponsored health plan through what is often referred to as COBRA.  COBRA is a federal law that allows workers who leave their jobs to continue their former employer’s health insurance coverage for up to 18 months. Ordinarily, though, individuals must pay the entire premium, plus an administrative fee, making COBRA unaffordable for many unemployed workers. The economic stimulus package enacted in February 2009 subsidized 65% of COBRA premiums for workers laid off between September 1, 2008, and December 31, 2009. This legislation required employers to pay the 65% subsidy and then reclaim those dollars through a quarterly tax credit.

Recently, however, the government signed the Defense Department’s 2010 appropriations bill (“2010 DOD Act”) that will allow laid-off workers to receive subsidized COBRA premiums for up to 15 months, which previously expired after 9 months.

The Department of Labor’s Employee Benefits Security Administration (EBSA) has released a fact sheet explaining how the 2010 DOD Act extends the COBRA subsidy enacted during the earlier economic stimulus package. In general, the 2010 DOD Act extended the COBRA premium reduction eligibility period for two months, through February 28, 2010 and increased the maximum period for receiving the subsidy from 9 to 15 months.

Also, the fact sheet reviews the eligibility requirements for the subsidy, the new period of coverage, and notice requirements that plan administrators must provide. The fact sheet explains that plan administrators are now required to provide notice about the changes made to the COBRA premium subsidy provisions to individuals who have already been provided a COBRA election notice, unless the election notice included the updated premium reduction information. The notices must be given to eligible individuals by February 17, 2010. Individuals who have been terminated on or after October 31, 2009 and will lose health coverage must be provided this notice “within the normal timeframes for providing continuation coverage notices.” Those who had reached the end of the reduced premium period before the legislation extended it to 15 months must be provided this notice within 60 days of the last day they were eligible to receive COBRA premium assistance under the old rules.

This post provides an update for an earlier post on the use of incentives in wellness programs. The EEOC’s final rules interpreting Title II of the Genetic Information Nondiscrimination Act (GINA) had been anticipated in November, but the EEOC now intends to issue a final rule on  this month, according to its Semiannual Regulatory Agenda (pdf) released online yesterday.

Title II of GINA, which prohibits genetic information discrimination in employment, took effect on November 21, 2009. The regulation applies to employers with more than 15 employees. Under Title II it is illegal to discriminate against employees or applicants because of genetic information. Title II of GINA prohibits the use of genetic information in making employment decisions, restricts acquisition of genetic information by employers and other entities covered by Title II, and strictly limits the disclosure of genetic information.

The EEOC enforces Title II of GINA (dealing with genetic discrimination in employment). The Departments of Labor, Health and Human Services and the Treasury have responsibility for issuing regulations for Title I of GINA, which addresses the use of genetic information in health insurance.

As many of you may know, businesses are getting more creative in finding ways to save money on health care costs as those costs continue to rise.  One of the methods that employers have turned to more recently is workplace wellness programs [article discussing Safeway's plan]. The idea is that these wellness plans help the employer get ahead of the cost curve by enticing employees (usually though voluntary incentives) to participate in health risk assessments and preventive medical treatment before unattended health issues turn into large hospital claims, which usually make up the largest portion of employer’s health care costs.

This article is not an exhaustive review of the legal technicalities implicated by the adoption of a wellness programs; rather, it is designed to put employers on notice of some of the issues that are out there and some pending rule changes that may impact these plans. We will revisit these issues again later this year when the expected rule changes take effect.

HIPAA and Wellness Programs, A Simple Overview:

Existing regulations under HIPAA (Health Insurance Portability and Accountability Act) place certain restrictions on wellness plans.  Many wellness programs feature financial incentives for employees to use them, such as reduced premiums or deductibles. Other programs charge higher premiums if people do not enroll in the wellness program. HIPAA’s goal is to be sure that these incentives do not unduly impact any particular class of employees, resulting in unfair discrimination.

While there are many points to be aware of in designing a wellness program, a couple points stand out. The first of which is the limits on incentives that can be used to entice participation in the program. Generally, a program cannot exceed 20% of the cost of the health coverage in setting the amount of the incentive or reward.  Whether this 20% limit is a percentage of the total health coverage cost or just the employee’s share of the cost of coverage depends on how the plan is structured as it relates to dependents, spouses, etc..  Just know there are limits on the incentives.  Rewards or incentives for the employee to participate in the wellness program may take the form of rebates, or contributions toward the employee share of the premium, waivers of co-pays or deductibles, or other variations.

HIPAA also requires that there be waivers from the wellness program for certain individuals. For example, an employer might offer a 20% premium discount for employees who have an annual cholesterol test and achieve results below a certain cholesterol count. The employer would also have to offer reasonable alternatives or waivers to those who are medically unable to achieve those cholesterol levels.

In addition to the requirements under HIPAA, it is important to keep in mind that the Americans with Disabilities Act (ADA) and California Fair Employment and Housing Act (FEHA) also impose requirements on wellness programs. Complying with HIPAA’s nondiscrimination rules and wellness program requirements does not ensure compliance with the ADA or FEHA regulations.

Wellness Programs to be Effected by New Regulations?

New regulations and rule making on the horizon may impact workplace wellness programs. The employment provisions contained in Title II of the Genetic Information Nondiscrimination Act (“GINA”), prohibit employers from discharging, refusing to hire or otherwise discriminating on the basis of genetic information.  Although, this new law becomes effective November 21, 2009, final GINA regulations have yet to be passed.  The Equal Employment Opportunity Commission (EEOC) has recently approved a proposed final rule to implement Title II.  The proposed regulations are being reviewed and are expected to be published by the EEOC just prior to the law’s effective date.

In essence, GINA prohibits employers from discharging, refusing to hire, or otherwise discriminating on the basis of genetic information, and from intentionally acquiring genetic information about applicants and employees. There are also requirements on how the employer should handle the confidential information. GINA defines “Genetic information” broadly, but does permit employers to acquire genetic information when it is requested as part of an employer’s “health or genetic services, including such services offered as part of a voluntary wellness program.” It is expected that the EEOC will clarify the nature and scope of this exception in the final regulations before November 21, 2009.

In requesting comments on its proposed regulations, the EEOC acknowledged that under the Americans with Disabilities Act, the Commission has said that a wellness program is voluntary if it neither requires employees to participate nor penalizes employees for non-participation.  The issue then becomes at what point do incentives, rebates, or other employer tools turn the wellness program into something less than voluntary.

Out of about 40 comments received by the EEOC during its information gathering process, approximately 16 of those addressed the issue of whether and when a wellness program should be considered “voluntary” under GINA.  Of these 16 comments, 4 requested that the EEOC’s final regulations clarify that a wellness program would not be “voluntary” if the program provided individuals any financial inducement to provide “genetic information.”  The remaining comments requested the EEOC issue a final rule clarifying that a wellness program would be “voluntary” if the inducement provided to employees fell within the HIPAA 20% cap governing financial rewards (discussed above) for participating in wellness programs covered by HIPAA.

As many employers inquire about family medical history in the course of administering wellness programs, usually through “health risk appraisals” aimed at identifying health risks, and many wellness programs also are made available to family members who participate in group health programs, the final GINA regulations will affect the design and implementation of wellness programs. Because the EEOC also enforces the ADA, whatever position it takes on the GINA regulations, will likely become its enforcement position for determining whether wellness programs violate the ADA.

While the ADA normally requires that employee medical inquiries and examinations be “job-related and consistent with business necessity,” it permits employers to conduct “voluntary” medical examinations, including “voluntary” medical histories, which are part of an employee wellness program.  As with GINA, the unanswered question is whether a program remains “voluntary” under the ADA if it provides a financial incentive to answer medical inquiries or participate in medical examinations.

In previous comments by the EEOC, the agency has stated that providing a monetary incentive may render the program involuntary, depending on factors like the size of the incentive, and whether the incentive results in significantly higher premiums for employees not participating in the wellness program. The EEOC, as recent as March 2009, stated in an informal opinion that requiring a health risk assessment as a prerequisite for obtaining health insurance coverage would violate the ADA.

Employers will need to keep an eye on these developments and evaluate whether their wellness programs need any modification due to changing regulations.  Employers should not be scared away from implementing a wellness program.  This kind of creative problem solving is what is necessary today for those businesses looking to minimize costs and remain competitive.