Wellness Plans Face Significant New Scrutiny from the Department of Labor

 From EBN:

Employers who sponsor a wellness plan and service providers that offer wellness plans to their customers should be aware of recent enforcement activity by the U.S. Department of Labor, as well as a recent court ruling regarding Equal Employment Opportunity Commission regulations applicable to wellness plans. 

The DOL recently brought suit for various violations under the Employment Retirement Income Security Act of 1974, as amended against Macy’s Inc., along with the third-party administrators of the retailer’s health plan. 

The suit alleges that the Macy’s wellness plan does not meet the applicable wellness plan non-discrimination requirements because the plan failed to provide a reasonable alternative standard for participants to avoid the tobacco surcharge levied by the wellness plan. It also alleges the plan continued to charge participants a tobacco surcharge even when they participated in the tobacco cessation program offered under the plan. 

The non-discrimination rules under the Health Insurance Portability and Accountability Act, as amended by the Affordable Care Act, require participatory wellness programs to offer a reasonable alternative standard to participants who cannot meet the initial standard. 

According to the complaint, the Macy’s plan did not offer an alternative to the tobacco cessation program for those individuals for whom it was unreasonably difficult to complete the offered tobacco cessation program due to a medical condition, or for whom it was medically inadvisable to attempt to achieve the standards of the tobacco cessation program. 

In addition, the complaint alleges that the plan continued to charge the tobacco surcharge to participants who entered a tobacco cessation program. The only way for a participant to avoid the surcharge was to remain tobacco free for six consecutive months during the plan year. 

The DOL claims that amounts collected by the plan in the form of tobacco surcharges were used by Macy’s to pay claims and administrative expenses associated with its self-insured medical plan. 

The complaint asserts that these actions resulted in Macy’s violating several of ERISA’s fiduciary and prohibited transaction requirements, including failing to act solely in the interest of the participants and beneficiaries of the medical plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of plan administration, and engaging in transactions that constituted a direct or indirect transfer to, or use by or for the benefit of a party in interest, of plan assets. 

The DOL also alleged HIPAA non-discrimination violations in Macy’s requiring participants to pay a premium or contribution that was greater than the premium or contribution for a similarly situated participant enrolled in the medical plan on the basis of a health status-related factor. 

The suit also alleges that Macy’s and the third-party administrators of its health plan breached their fiduciary duties under ERISA based on changes made to the plan’s methodology for calculating reimbursement of out-of-network claims. 

In the complaint’s prayer for relief, the DOL requests that Macy’s be ordered to reimburse all participants who paid a tobacco surcharge during the time period at issue, with interest, and be enjoined from collecting any tobacco surcharge until it revises its wellness plan to comply with the nondiscrimination requirements for wellness plans, including the requirement to offer a reasonable alternative standard. 

In addition, the DOL requests that Macy’s be required to disgorge all unjust enrichment or profits received as a result of the alleged fiduciary breaches it committed or for which it is liable.
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