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How Health Incentives Can Leave Employers Open to Legal Issues

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Most large companies offer some health-improvement programs, especially in our pandemic-driven era. Whether it’s education, weight loss, biometric screening or walking programs, there are wide varieties of wellness programs that are very easy for businesses to administer. However, these types of plans may seem beneficial to companies, but employers need to avoid health incentive compliance issues.

Potential Health Incentive Compliance Issues

Human resources departments are aware that wellness plans are subject to laws, such as HIPAA and ACA. What most companies do not know is that there are nine different federal statutes that wellness plans can be subject to accommodating, which can make health incentive compliance issues a diaster. This includes the following:

  1. ACA (Affordable Care Act)
  2. HIPAA (Health Insurance Portability and Accountability Act of 1996)
  3. ERISA (Employee Retirement Income Security Act of 1974)
  4. COBRA (Consolidated Omnibus Budget Reconciliation Act)
  5. ADA (Americans with Disabilities Act)
  6. GINA (Genetic Information Nondiscrimination Act of 2008)
  7. FLSA (Fair Labor Standards Act)
  8. IRC (Internal Revenue Code)
  9. NLRA (National Labor Relations Act)

Additionally, some states have even stricter laws, federal regulations create confusion, and acts even contradict one another.

For example, both ACA and ADA have financial incentives for wellness initiatives, up to 30 percent of the employee-only costs for coverage. After that, each regulation differs in how they calculate the 30 percent incentive. This means that ironically both ACA and ADA can be in violation of each other. Ultimately, employers will need to look at each incentive separately under both plans to make sure they are in compliance. If you are not sure, it may be best to contact your company’s legal department for an assessment and advice.

Another important IRC change from year’s past is that all non-group health plan incentives, whether it’s gift cards, cash or even a gym membership are subject to taxable W2 wages and subject to income tax withholding, FICA and FUTA. This is also true if a health insurer and not the company provide the incentives.

If companies offer a health-contingent wellness program and it requires staffers to comply with the standard for a health factor, it is required to meet five conditions under HIPAA. One condition that may prove difficult for employers is that plans are required to provide notice of a reasonable alternative for the reward in plan materials that discuss the terms of the program. This notice must be included in every brochure or booklet about the wellness program. Failure to do so could result in a HIPAA violation.

If companies have any questions about these rules and want to make sure to avoid unnecessary health incentive compliance issues, it is best to contact government offices or an attorney for legal advice.

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