Adjunct Law Prof Blog

Justices Will Not Review Ruling Shielding Retirees' Health Care Benefits

Denying a packaging firm's petition for review, the U.S. Supreme Court recently denied cert to a case which held that retirees of a Michigan plant are vested with lifetime, employer-paid health care insurance for themselves and their spouses ( Menasha Corp. v. Moore, U.S., No. 12-942, cert. denied 3/25/13 ).

Menasha Corp., sought review of a U.S. Court of Appeals for the Sixth Circuit decision that outside evidence clarifying collective bargaining agreements signed in 1994 and 1997 indicated Menasha and the union intended to provide retirees and their spouses with vested, lifetime health care benefits (660 F.3d 444, 193 LRRM 3249 (6th Cir. 2012).

This is a huge issue under ERISA and under collective bargaining agreements and I expect the Supremes will visit it one day. Law review commentary on this important topic would be welcome.

Mitchell H. Rubinstein

10% of Workers Have Defined Benefit Plans

The last private industry pension plans: a visual essay is an interesting December 2012 article from the Monthly Labor Review, here. The article concludes, among other things, 

In 2011, only 10 percent of all private sector establishments provided defined benefit plans, covering 18 percent of private industry employees. Decades ago, broad coverage of these plans allowed the Bureau of Labor Statistics (BLS) to analyze and tabulate considerable detail about how they worked. . .

Mitchell H. Rubinstein

A public employee’s retirement allowance paid by a public retirement system of this State ruled subject to the provisions of the Son of Sam Law

 

New York State Off. of Victim Servs. v Raucci, 2012 NY Slip Op 04440, Appellate Division, Third Department

The issue in this action: Does Retirement and Social Security Law §110* insulate the retirement benefits from a public retirement system of this State from “the broad reach of the Son of Sam Law, which does not expressly exempt pension funds?”**

The Appellate Division held that such retirement benefits are not exempt from the Son of Sam Law.

Steven C. Raucci, a former employee of the Schenectady City School District, was sentenced to a lengthy prison term upon his conviction of numerous crimes arising out of his alleged detonation and attempted detonation of explosive devices at two of his victims' homes. Raucci began receiving a retirement allowance from the New York State and Local Employees' Retirement System of approximately $5,800 per month.

The New York State Office of Victim Services sought a preliminary injunction prohibiting the withdrawal or transfer of those funds from Raucci’s inmate account. Raucci, and his spouse as “an interested person,” argued that RSSL §110 exempts the pension funds from garnishment or any other legal process.

Noting that prior to its amendment in 2001, the Son of Sam Law permitted victims to recover only "profits from a crime," i.e., property or income generated from the crime itself, the Legislature "expand[ed] the [Son of Sam] [L]aw to cover money and property that a convicted criminal receives from any source."

Accordingly, said the Court,  “The current version of the statute thus permits crime victims to commence an action ‘within three years of the discovery of any profits from a crime or funds of a convicted person’ broadly defined as "all funds and property received from any source by a person convicted of a specified crime (Executive Law § 632-a [1] [c]” [emphasis added by the court].

The Appellate Division said that only two categories of a convicted person's funds are not recoverable by crime victims: the first $1,000 in the convicted person's account and the first 10% of compensatory damages obtained by the convicted person in a civil judgment, less counsel fees.

* The decision summaries the provisions of §110 as follows: Retirement and Social Security Law §110 protects public employee pensions, providing that "[t]he right of a person to a pension . . . or a retirement allowance . . . to the return of . . . the pension . . . or retirement allowance itself . . . and the monies in [those] funds . . . [s]hall not be subject to execution, garnishment, attachment, or any other process whatsoever, and . . . [s]hall be unassignable."

** The decision refers to both a “pension” and a “retirement allowance.” A retirement allowance consists of a “pension portion” determined by the employee’s final average salary and his or her “years of member service,” which is funded by employer contributions plus an “annuity portion” based on the actuarial value of the employee’s contributions, or contributions made on his or her behalf as of the date of his or her retirement.

NYPPL comments: This decision raises a number of questions that may have to be addressed by the courts or the legislature such as [1] Is a retirement allowance being received by a surviving beneficiary or beneficiaries of a retired public employee of this State subject to the Son of Sam Law? and [2] Is a retirement benefit being received by an individual or his or her beneficiary or beneficiaries from a retirement program or plan other than a public retirement system of this State subject to the Son of Sam Law?

The decision is posted on the Internet at:

 

http://www.courts.state.ny.us/reporter/3dseries/2012/2012_04440.htm

Reprinted with permission New York Public Personnel Law

Mitchell H. Rubinstein

Sandusky To Likely Keep Pension In Jail

All the major news outlets are reporting that Sandusky will keep his $59,000 per year state pension. See, ABC News Report, here. A Bill has been introduced in the Pennslvania legislature to stop this, however.

If Sandusky worked for a private university, it is likely that he would be entitled to keep his pension under ERISA's antialienation rule. I believe that OJ Simpson is sitting in jail collecting his pension for that reason.

ERISA does not apply in the public sector.

Mitchell H. Rubinstein

Health insurance benefit enjoyed by retired individuals not subject to collective bargaining between the employer and the employee organization absent the consent of all the parties

 

DiBattista v County of Westchester, 35 Misc3d 1205

The action involved some 1,600 individuals who retired from Westchester County as their employer between 1993 and 2004.

Between 1993 and 2001, two collective bargaining agreements were executed between CSEA and Westchester County. These agreements, among other things, provided for certain medical health insurance benefits. Those provisions remained in effect until May 2004 when a new agreement was made.

The 2004 agreement changed the health benefits available to active employees and Westchester County decided that such changes should also be imposed on its then retired employees. The County indicated that it had been its policy to treat retirees the same as active employees whenever a new collective bargaining agreement negotiated.

The retired employees sued, contending the County could not modify their health insurance benefits to reflect the benefits it and CSEA had negotiated on behalf of active employees in the collective bargaining unit when such modification resulted in an increase in their medical and health insurance costs.

Justice Lefkowitz agreed, ruling:

1. “Absent consent of all parties, a union does not represent retirees when it negotiates with an employer in collective bargaining;

2. “Vested retirement rights may not be altered without the pensioner's consent;

3. “Where, as here, there is no durational limit in the immediate prior collective bargaining agreements as to retiree health insurance benefits 'it is unlikely that such benefits, which are typically understood as a form of delayed compensation for past services, would be left to the contingencies of future negotiations';

4. “Retiree benefits 'carry with them an inference that they continue so long as the prerequisite status is maintained'; and

5. “This inference trumps any general duration clause as to the life or termination of the agreement.”

Deciding in favor of the retirees, Justice Lefkowitz held that the retirees’ health insurance benefits set out in the prior collective bargaining agreements survived the 2004 negotiated agreement and could not be modified without their consent, citing Hudock v. Village of Endicott, 28 AD3rd 923 and other decisions.

N.B. The County appealed Justice Lefkowitz's decision but subsequently decided to withdraw its appeals. The Appellate Division granted the County’s application to withdraw the appeals [DiBattista v County of Westchester, Slip Opinion No: 2010 NY Slip Op 60446(U), Appellate Division, Second Department, Motion Decision].

The decision is posted on the Internet at:

 

http://www.courts.state.ny.us/reporter/3dseries/2008/2008_52731.htm

Reprinted by permission New York Public Personnel Law

Mitchell H. Rubinstein

Supremes Grant Cert In Obama Care Case

Details here. 

Mitchell H. Rubinstein

Defined Benefit Plans Becoming A Thing of The Past

Early Retirement A Scary Health Care Option is an interesting June 28, 2011 article carried by CNN. It is about how less and less employers are offerring retirement insurance. The article is not well written and it is unclear to me whether the article is referring to retiree health insurance or to defined benefit plans. As the article states:

 Employers are getting out of the retirement insurance business. This could be worrisome for American workers who want to retire, before hitting the Medicare-eligible age of 65.

A majority of large employers today offer some form of retiree insurance -- both to early retirees and to retired workers who are Medicare eligible.

But a new survey of 250 large companies by Towers Watson shows that many of them have pared back on their retiree insurance plans and others are planning to discontinue them permanently.

Stuart Alden, Towers Watson's senior health care consultant, said these changes are "significant"

47% of employers polled for the Towers Watson's annual retiree benefits survey said they've already made changes to retiree insurance plan designs.

In any event, it is hoped that this story will be a wakeup call to the general public that we are going to have a crisis with respect to  many retirees who can no longer count on retirement plans and retirement health insurance.

Mitchell H. Rubinstein

 

Health insurance coverage for domestic partners

Matter of Putnam/Northern Westchester Bd. of Coop. Educ. Servs. v Westchester County Human Rights Commn, 2011 NY Slip Op 01030, Appellate Division, Second Department

A woman employed by a school district that provides its employees with health insurance coverage through a BOCES "Health Benefits Consortium" had lived with a male partner in a romantic relationship for more than 30 years. Never married, she and her partner registered their domestic partnership with Westchester County in 2006

When the Consortium’s Board voted to extend dependent health care benefits to same-sex domestic partners of “member employees,” the employee asked for "Domestic Partner health coverage" for her opposite-sex domestic partner pursuant to the Plan's "Domestic Partner Policy." The Consortium, however, advised the employee that it had denied her request because its “Domestic Partner Policy” only applied to those in a same-sex domestic partner relationship.

The employee filed a complaint with the Westchester County Human Rights Commission alleging that she had been unlawfully discriminated against on the basis of her sexual orientation and her marital status in violation of the Westchester County Human Rights Law §700.03.

Ultimately the Westchester County Human Rights Commission agreed with the employee, finding that the Consortium had violated §700.03 by unlawfully discriminating against the employee on the basis of her sexual orientation and marital status.

The Commission ruled that the employee was entitled to domestic partner health care benefits for her opposite-sex domestic partner to the same extent "as if he were her same-sex domestic partner." It enjoined the Consortium from maintaining its policy of extending health care benefits to same-sex domestic partners and not to opposite-sex domestic partners and awarded the employee $24,178 in “damages.”

The Appellate Division annulled the Commission’s determination.

As to the employee's claim of discrimination on the basis of marital status, the court held that the employee had “failed to meet her burden of demonstrating a prima facie case of discrimination based upon marital status because eligibility for the domestic partner health care benefits for which she applied ‘[does] not turn on the marital status’ of the employee.”

Turning to the employee's allegation that she had been the victim of unlawful discrimination based on her sexual orientation, the court said that the employee had established a prima facie case by demonstrating that “the provision of health care benefits to same-sex domestic partners and denial of such benefits to her and her opposite-sex domestic partner” sets out an inference of discrimination.

Accordingly, the Appellate Division said that the burden shifted to the Consortium to set forth a legitimate, nondiscriminatory reason for its decision to extend domestic partner benefits only to same-sex couples.

The court decided that the Consortium had, in fact, met its burden by demonstrating that the reason for its offering health care benefits only to same-sex domestic partners is that same-sex domestic partners cannot obtain benefits offered by the Board to an employee's spouse because those in a same-sex domestic partner relationship cannot lawfully marry in this State at this time. The decision notes that the Consortium’s “Domestic Partner Policy” stated that it may be rescinded in the event that same-sex marriage becomes legal in the participant's "state of residence."

This, the Appellate Division concluded, set out a legitimate, nondiscriminatory basis for the Consortium's decision to offer dependent health insurance coverage only in situations involving same-sex couples in consideration of the current impediment to same-sex couples marrying in New York State.

In contrast, participating employers in the New York State Health Insurance Plan [NYSHIP], if the participating employer has elected to offer “domestic partner” health insurance coverage to its employees and their dependants, dependent coverage is available to both an employee’s same-sex domestic partner or an employee's opposite-sex domestic partner.

A domestic partnership, for the purposes of eligibility for coverage in NYSHIP, is one in which the participant and the participant’s partner are 18 years of age or older, unmarried and not related in a way that would otherwise bar marriage, living together, involved in a lifetime relationship and financially interdependent. To enroll a domestic partner in NYSHIP the participant must have been in the partnership for at least six months and be able to provide "proof of residency and financial interdependence."

In addition, persons who are party to a same sex marriage, validly entered into in a jurisdiction where same sex marriage is permitted, are eligible for spousal benefits.

NYSHIP also advises that "Under the Internal Revenue Service (IRS) rules, the fair market value of the health insurance benefits is treated as income for tax purposes when a person who is not a qualified dependent under federal IRS rules is covered in NYSHIP."

NYSHIP also notes that the employee’s extra cost for domestic partner coverage "cannot be paid with pre-tax dollars" and suggests that participants consult with his or her tax advisor concerning how enrolling his or her domestic partner will affect his or her personal income tax liability.

The decision is posted on the Internet at:http://www.courts.state.ny.us/reporter/3dseries/2011/2011_01030.htm

Reprinted with permission New York Public Personnel Law

Mitchell H. Rubinstein

Public Employee Pensions Under Attack

Public Pensions, Once Off Limits, Face Budget Cuts is an interesting April 25, 2011 article from the New York Times. It outlines how public employee pensions are under attack in many states. As the article states:

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California toIllinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit — made possible, lawyers said, because Michigan’s constitutional protections are weaker — could spur other places to try to follow suit.

“These things do tend to be herd-oriented,” said Sylvester J. Schieber, an economist and consultant who studies pensions.

The mayors of some hard-hit cities have said that the high costs of pensions have forced them to lay off workers: Oakland, Calif., laid off one-tenth of its police force last year after failing to win concessions on pension costs.

Mitchell H. Rubinstein

Termination pay and other compensation paid in anticipation of an employee’s retirement excluded in determining the individual’s final average salary

Matter of Thompson v New York State Teachers' Retirement Sys., 2010 NY Slip Op 08670, November 24, 2010, Appellate Division, Third Department

James R. Thompson was employed as a principal in the LeRoy Central School District. In accordance with the relevant collective bargaining agreement between the school district and the LeRoy Administrators' Association, Thompson was to receive 3.5% annual pay increases through the 2005-2006 school year.

The CBA also offered a retirement incentive wherein an administrator who retired immediately after becoming eligible to do so without penalty would receive a lump-sum payment of $20,750.

Although Thompson would have qualified for the incentive had he retired during the 2004-2005 school year, continued in his position. However, the school district and association executed a memorandum of understanding in 2005 that granted large annual raises to Thompson and another administrator nearing retirement age in the 2005-2006 and 2006-2007 school years.

When Thompson retired in 2007 retirement, the New York State Teachers’ Retirement System excluded his 2005-2006 and 2006-2007 salary increases when calculating his retirement benefit. Thompson sued but Supreme Court dismissed his petition.

The Appellate Division affirmed Supreme Court’s ruling, holding that NYSTRS had “appropriately calculated his final average salary using ‘the average regular compensation earned . . . during the three years of actual service immediately preceding his date of retirement.’”

The court explained that in order to prevent the artificial inflation of a member’s final average salary in determining the individual’s retirement allowance, Education Law §501 [11] [b], (see also 21 NYCRR 5001.1 [d]; 5003.1 [a]) requires NYSTRS to exclude any form of termination pay or compensation otherwise paid in anticipation of retirement.

As the 2005 memorandum of understanding stated that it was intended to "provide administrators with an incentive to continue [working] beyond retirement eligibility," and granted exceptional salary increases to Thompson [and other school administrators], the Appellate Division held that NYSTRS “rationally concluded from the above evidence that the disproportionate increases in his salary were made in anticipation of retirement.”

The decision is posted on the Internet at:http://www.courts.state.ny.us/reporter/3dseries/2010/2010_08670.htm

Reprinted with permission New York Public Personnel Law

Mitchell H. Rubinstein

Retirement and Special Needs Planning

Retirement Accounts and Special Needs Planning is a lengthly, but important May 2010 article from the NYS Bar Journal. It is primarily about how a beneficiary, who may have special needs, should handle a distribution of retirement or other income. As the article points out, if the benefits are not structured appropriately, the beneficiary may loose important benefits. The article summarizes tax and trust options that may be available to such individuals and is certainly worth a read.

Mitchell H. Rubinstein

Employer health care costs expected to rise 9 percent in 2011

Behind the Numbers report published by the PricewaterhouseCoopers LLP (PwC) Health Research Institute recently published an important study which scholars and readers may find of interest. The nation's employers can expect medical costs to increase by 9 percent in 2011, a decrease of 0.5 percent from the 2010 growth rate. Additionally, for the first time, the majority of the American workforce is expected to have a health insurance deductible of $400 or more, as more employers return to "indemnity style" cost-sharing by raising out-of-pocket limits, replacing co-pays with co-insurance and adding high-deductible health plans.

Mitchell H. Rubinstein

Constitutionality of the Mandate of Individual Insurance

Requiring Individuals to Obtain Health Insurance: A Constitutional Analysis  analyzes arguments against the mandate brought under the Fifth and Tenth Amendments and explores the sufficiency under the First Amendment of exceptions for certain religious groups. This 29 page document is a must read for anyone involved in possible litigation. The report summary provides:

As part of the Patient Protection and Affordable Care Act, P.L. 111-148, Congress enacted a
provision that requires certain individuals to have a minimum level of health insurance. Covered
individuals who fail to maintain sufficient coverage will be subject to a financial penalty
beginning in 2014. Although the federal government provides health coverage for many
individuals through federal programs such as Medicare, it had never before required individuals
to purchase health insurance. There are various constitutional considerations relevant to the
enactment of this provision. This report provides an analysis of constitutional issues raised by
compelling individuals to purchase health insurance.
This report first analyzes the authority of Congress to pass a law of this nature, as well as how a court could analyze this provision in light of a constitutional challenge based on various
provisions of the Fifth and Tenth Amendments. Finally, this report discusses whether the
exceptions to the individual responsibility requirement to purchase health insurance satisfy First
Amendment freedom of religion protections.

Mitchell H. Rubinstein

Hat Tip: Workplace Prof Blog

Benefit Plans - Trustees failed to follow plan's procedures for amendment changing definition of surviving spouse.

Overby v. National Ass'n of Letter Carriers, (C.A.D.C.) March 3, 2010:

The failure of the trustees of a retirement plan to submit an amendment changing the definition of surviving spouse to the fund's actuaries for evaluation and estimate of its cost, as required by the plan, invalidated that amendment. Prior to the purported amendment, the plan followed a "one-year-at- death" rule, under which the surviving spouse was "one to whom the Annuitant was married for at least one year immediately preceding the Annuitant's death, or is the parent of issue by such marriage." The amendment, requiring marriage at the annuity's commencement, would have rendered plaintiff spouse ineligible.

Mitchell H. Rubinstein

Obama Health Bill Includes Whistleblower Protection For Health Care Workers

Today's Workplace has an interesting and important article about a little noticed part of Obama Care. It includes Whistleblower protection for health care workers. As the article states:

Section 1558:  Health care worker whistleblower protections added to the Fair Labor Standards Act.  Section 1558 prohibits retaliation against an employee who provides or is about to provide to an employer, Federal Government, or a state Attorney General, information that the employee reasonably believes to be a violation of Title I of the Bill.  The provision also protects individuals who participate in investigations or object to or refuse to participate in any activity that the employee reasonably believes to be a violation of Title I of the bill.   Title I contains a wide range of rules governing health insurance, including a prohibition against denying coverage based upon preexisting conditions, policy and financial reporting requirements and prohibitions against discrimination based upon an individual’s receipt of health insurance subsidies.  Accordingly, Section 1558 will likely protect a broad range of disclosures.

The procedures, burden of proof, and remedies applicable to this new retaliation claim are set forth in the Consumer Product Safety Improvement Act of 2008, 15 U.S.C. 2087(b), including (1) a 180-day statute of limitations; (2) a requirement to initially file the complaint with OSHA, which will investigate the complaint and can order preliminary reinstatement; (3) the option to litigate the claim before the Department of Labor Office of Administrative Law Judges or to remove the claim to federal court 210 days after filing the complaint; (4) the right to try the claim in federal court before a jury;  and (5) a broad range of remedies, including reinstatement, back pay, special damages, and attorney’s fees.  Similar to Section 806 of the Sarbanes-Oxley Act, the causation standard and the burden-shifting framework are very favorable to employees.

A complainant can prevail merely by showing by a preponderance of the evidence that her  protected activity was a contributing factor in the unfavorable action.  A contributing factor is “any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision.”  Once a complainant meets her burden by a preponderance of the evidence, the employer can avoid liability only if it proves by clear and convincing evidence that it would have taken the same action in the absence of the employee engaging in protected conduct, an onerous burden.

Mitchell H. Rubinstein

Obama Health Bill Mandates Unpaid Employee Lactation Breaks For One Year

Professor Marcia McMormick over at Workplace Prof Blog wrote an important article on March 30, 2010 which explains that the Obama Health Bill (Act) requires most employers to give female employees unpaid breaks to lactate for one year after the child's birth. This portion of the Bill is actually an amendment to the FLSA and provides in Section 4207:

SEC. 4207. REASONABLE BREAK TIME FOR NURSING MOTHERS.
      Section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) is amended by adding at the end the following:
      `(r)(1) An employer shall provide--
            `(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk; and
            `(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.
      `(2) An employer shall not be required to compensate an employee receiving reasonable break time under paragraph (1) for any work time spent for such purpose.
      `(3) An employer that employs less than 50 employees shall not be subject to the requirements of this subsection, if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.
      `(4) Nothing in this subsection shall preempt a State law that provides greater protections to employees than the protections provided for under this subsection.'.

Mitchell H. Rubinstein

Obama Care-Check The Fine Print

Coverage For Sick Children? is an important March 29, 2010 New York Times article. Some insurance companies are already arguing that they do not have to provide one of the benefits that the president calls a centerpiece of the law: coverage for certain children with pre-existing conditions. As the article states:

Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the “availability of coverage” for all until 2014.

William G. Schiffbauer, a lawyer whose clients include employers and insurance companies, said: “The fine print differs from the larger political message. If a company sells insurance, it will have to cover pre-existing conditions for children covered by the policy. But it does not have to sell to somebody with a pre-existing condition. And the insurer could increase premiums to cover the additional cost.”

Congressional Democrats were furious when they learned that some insurers disagreed with their interpretation of the law.

“The concept that insurance companies would even seek to deny children coverage exemplifies why we fought for this reform,” said Representative Henry A. Waxman, Democrat of California and chairman of the Energy and Commerce Committee.

Mitchell H. Rubinstein

Supremes hear arguments on deference due ERISA plan administrators

One of the most difficult issues in ERISA concerns the degree to deference that must be paid to plan administrators. The Supremes recently heard arguments in Conkright v Frommert (Dkt No 08-810), an ERISA case, regarding the degree of deference courts should give plan administrators in interpreting an employer's ERISA-covered benefits plan. The Second Circuit below held the district court had no obligation to defer to the ERISA plan administrator's reasonable interpretation of the plan terms if the plan administrator arrived at its interpretation outside the context of an administrative claim for benefits.

Mitchell H. Rubinstein

No Fundamental Right To Pension Benefits Contained In A CBA

Walker v. Burns, ___F.3d___(2d Cir. Jan. 13, 2010), is an interesting public sector case. The legal issue in this case was whether pension benefits contained in a CBA were fundamental rights. If they were, due process rights would attach. The court held that there was no fundamental right, reasoning:

This Court has made clear that “simple, state-law contractual rights, without more,” are
not protected by substantive due process. Local 342, 31 F.3d at 1196. This view finds support in the caselaw of several other Circuits. See, e.g., Taake v. County of Monroe, 530 F.3d 538, 542 (7th Cir. 2008); Nicholas v. Pa. State Univ., 227 F.3d 133, 143 (3d Cir. 2000); Charles v. Baesler, 910 F.2d 1349, 1353 (6th Cir. 1990). While we recognize the important public service that the plaintiffs provide, we cannot conclude that they enjoyed a fundamental right to the pension benefits they received pursuant to an ordinary employment contract.

Mitchell H. Rubinstein

Employee Wellness Programs

Legal Implications of Employee Wellness Programs is an excellent December 7, 2009 article from the New York Law Journal (registration required). It outlines the legal issues which may arise under GINA, ERISA, HIPPA and the ADA. With respect to HIPPA, the article states:

HIPAA prohibits ERISA group health plans from using a health factor as a basis for discrimination with regard to either eligibility to enroll or premium contributions. See ERISA §702(a) and (b); 29 U.S.C. §1182(a) and (b). The enumerated list of "health factors" includes health status, medical conditions, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability. See 29 C.F.R. §2590.702.

If a wellness program does not condition a reward on an individual satisfying a standard that is related to a health factor, the wellness program does not violate HIPAA, so long as participation in the program is made available to all similarly situated individuals. Id. For example, a reward based on participation in a program, without regard to the health outcomes resulting from that program, would not violate HIPAA, if all similarly situated employees may participate in the program. However, if an employer wishes to condition rewards based on individuals satisfying standards related to a health factor, the HIPAA regulations provide an exception to the nondiscrimination provisions for wellness programs that satisfy the following requirements:

• The reward for the wellness program must not exceed 20 percent of the cost of employee-only coverage under the plan;

• The program must be reasonably designed to promote good health or prevent disease;

• The program must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year;

• The reward under the program must be available to all similarly situated individuals, and the program must allow a reasonable alternative standard or waiver for any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable to satisfy the condition; and

• All plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard or the possibility of waiver of the otherwise applicable standard.

However, there is an exception for benign discrimination for wellness plans that discriminate in favor of an individual based on a health factor. For example, a program that waives a deductible for diabetic patients who enroll in a disease management program does not violate HIPAA's nondiscrimination provision.

Mitchell H. Rubinstein