Veronique Urban

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This blog post is the last in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the previous post in the series, Medical Marijuana 105: Marijuana in the Workplace, click here.

Despite its potential, New York’s Medical Marijuana Program is off to a slow start. The Program’s struggle is mostly due to the fact that it is one of the most restrictive medical marijuana programs in the country. For example, medical marijuana offerings are limited to mostly liquids, oils and capsules and only state-certified marijuana patients are allowed to enter the limited number of dispensaries. In September 2017, the NYS Department of Health (“DOH”) announced that it would be issuing new regulations in an effort to bolster the Program. Under the new regulations, patients certified for medical marijuana use will have access to more types of products including lotions, tablets, lozenges, patches and more. In addition, prospective patients and practitioners interested in the medical marijuana program will be able to enter a dispensing facility to speak directly with representatives of registered organizations, learn about products, and get information about the medical marijuana program. The regulations will also allow doctors to take a shorter, two-hour program to become eligible to certify patients for medical marijuana use as opposed to the four-hour program that was originally required.

Since the Program’s inception the DOH has also attempted to expand the reach of the Program by adding new qualifying conditions for medical marijuana use. The addition of chronic pain as a qualifying condition, for example, led to a surge of patients seeking to become certified for medical marijuana use. The DOH announced in August 2017 that the number of certified patients increased by 10,744 (72%) since the addition of chronic pain in late March of this year.

Most recently efforts have been made to allow medical marijuana to be used to treat post-traumatic stress disorder (“PTSD”). Veterans groups in particular have urged Governor Cuomo to allow those with PTSD to use medical marijuana. According to the Department of Veterans Affairs, about eight million adults suffer from PTSD in any given year, including tens of thousands of Afghanistan and Iraq veterans. Somewhere between 11% and 20% of those vets will suffer from it each year. Over 23 states allow medical marijuana use to treat PTSD, including Connecticut, New Jersey and Pennsylvania. It seems likely, especially given New York’s penchant for growing the Program, that Governor Cuomo will pass the bill adding PTSD as a qualifying condition for medical marijuana use.

The DOH is hoping that all of these changes will bolster the Program. That would be welcome news to New York’s registered organizations which are authorized to manufacture and dispense of medical marijuana in New York State. You may recall from our previous article in this series that on August 1, 2017, the DOH announced the licensure of five new companies to act as registered organizations. In April 2017, however, knowing that the DOH was planning to take such action, the New York Medical Cannabis Industry Association sued New York State on behalf of New York’s original registered organizations. The lawsuit aims to stop the DOH from issuing the new licenses and alleges that increasing the number of registered organizations from five to ten will harm the industry because there is not enough demand to meet supply. “The program is still in its infancy, and patient demand is currently too low to support an expansion of the supply market for medical marijuana,” the lawsuit states. “As it is, all five of [the original registered organizations] are sustaining tremendous operating losses, after having made millions of dollars in initial investments.” The five newly-awarded registered organizations filed a motion to dismiss the lawsuit but the Court denied the motion last week. We will continue to monitor the litigation and post updates to the New York Health Law Blog as developments occur.

Thank you for being a part of this series discussing the current state of the law in New York regarding medical marijuana. The medical marijuana field is constantly changing as the program in New York grows and evolves. To stay up to date on all of the developments we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

This blog post is the fifth in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the latest post in the series, Medical Marijuana 104: Responsibilities of Health Insurers, click here.

As you may recall from our first post in this series, medical marijuana in New York was legalized through the passage of the New York Compassionate Care Act (“CCA”) in 2014. The CCA also created new anti-discrimination protections for medical marijuana users. Namely, the CCA provides that patients who are certified for medical marijuana use shall not be subject to “disciplinary action by a business” for exercising their rights to use medical marijuana. The CCA further provides that being a certified patient is the equivalent of having a disability for purposes of the New York State Human Rights Law (“NYSHRL”).

Together the CCA and NYSHRL provide that New York employers with four or more employees are prohibited from terminating or refusing to employ an individual on the basis of his/her status as a certified medical marijuana patient. In addition, employers must provide reasonable accommodations to certified patients as a result of his or her disability. Accordingly, an employer may be subject to a discrimination claim if it fires or disciplines an employee for lawfully consuming marijuana under the CCA.

The CCA does contain two exceptions to the above general rules. First, the CCA does “not bar the enforcement of [an employer’s] policy prohibiting an employee from performing his or her employment duties while impaired by a controlled substance.” Second, the Act does “not require any person or entity to do any act that would put the person or entity in violation of federal law or cause it to lose a federal contract or funding.”

The Americans with Disabilities Act (“ADA”), which became law in 1990, is a civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. The purpose of the law is to make sure that people with disabilities have the same rights and opportunities as everyone else.

Marijuana in any form and for any use is illegal at the federal level under the Controlled Substances Act (“CSA”). The ADA provides that a person’s illegal use of drugs is grounds for denying employment or firing from employment. The ADA defines “illegal use of drugs” as follows: “the use of drugs, the possession or distribution of which is unlawful under the Controlled Substances Act. Such term does not include the use of a drug taken under supervision by a licensed health care professional, or other uses authorized by the Controlled Substances Act or other provisions of Federal law.”

For the most parts court have, to date, agreed that, because the CSA does not allow medicinal use of marijuana, a medical professional cannot legally, as a matter of federal law, supervise medical marijuana use so as to bring an employee under the ADA’s protection. See, e.g., James v. City of Costa Mesa, 2010 U.S. Dist. LEXIS 53009, at *8-11 (C.D. Cal. Apr. 30, 2010); Barber v. Gonzales, 2005 U.S. Dist. LEXIS 37411, at *2-5 (E.D. Wash. July 1, 2005); Johnson v. Columbia Falls Aluminum Co., 2009 WL 865308, at *4 (Mont. Mar. 31, 2009).

Case law in this area is developing and uncertainty remains as state laws clash with federal requirements.

In 2015, for example, the Colorado Supreme Court unanimously held that employers may still terminate employees who use medical marijuana – even though medical marijuana use is specifically authorized by the Colorado Constitution and Colorado law protects employees’ lawful off-duty conduct.  The Court held that marijuana use (whether for medicinal or recreational use) remains unlawful under federal law and therefore medical marijuana use cannot be deemed “lawful” under the state’s off-duty conduct law.

On the other hand, the Massachusetts Supreme Judicial Court provided that the plaintiff, a patient who qualified for the medical use of marijuana and had been terminated from her employment because she tested positive for marijuana, could seek a civil remedy against her employer through claims of handicap discrimination in violation of Massachusetts laws.

Similarly, the Superior Court of Rhode Island in 2017 held that an employer’s enforcement of its neutral drug testing policy to deny employment to an applicant because she held a medical marijuana card violated the anti-discrimination provisions of the state medical marijuana law.

In New York, the Taxi & Limousine Commission (“TLC”) filed a petition seeking the revocation of the respondent taxi driver’s TLC Driver License because the driver tested positive for marijuana. New York City’s Office of Administrative Trials & Hearings (“OATH”) disagreed and recommended that the petition be dismissed, finding that revocation solely because of the driver’s status as a certified medical marijuana patient would violate New York City and State laws.  The TLC adopted the OATH decision.

In our next post we’re going to continue our review of important parties that play a role in the medical marijuana industry. To be sure not to miss the article when it comes out we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

This blog post is the fourth in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the latest post in the series, Medical Marijuana 103: Patient and Practitioner Regulations in New York State, click here.

It will come as no surprise that patients who are thinking about getting certified for medical marijuana use have a number of questions relating to the cost of obtaining medical marijuana products.

Prices for medical marijuana products vary amongst the various registered organizations. In order to determine how much to charge for its products registered organizations must first submit to the NYS Department of Health (“DOH”) their costs to manufacture, market and distribute the products. The DOH then determines the reasonableness of the registered organization’s proposed prices and, if appropriate, approves them as the maximum price per dose each registered organization may charge.

The prices approved by the DOH remain in effect for the entire period of the registered organization’s registration, however registered organizations may charge less than the approved prices if they wish. Registered organizations may also request a price modification from the DOH either at the conclusion of the first year of their registration period or beforehand based on documented exceptional circumstances.

Health insurers doing business in New York State do not provide coverage on account of an insured’s purchase of medical marijuana products. The main reason for this restriction is that medical marijuana is still a banned substance at the federal level and therefore medical marijuana is not an FDA-approved prescription medication. The Compassionate Care Act does not provide for a discounted medical marijuana pricing program for certified patients who are unable to afford medical marijuana products. As stated above, however, registered organizations may price their products for amounts less than those approved by the DOH so in some cases registered organizations may offer reduced prices to qualifying certified patients.

After the Medical Marijuana Program launched there was much debate as to whether health insurers are required to provide coverage on account of office visits that result in a patient becoming certified for medical marijuana use. On April 12, 2017, the New York State Department of Financial Services issued a statement to clarify the situations in which health insurers must provide coverage for office visits that result in medical marijuana certification.

The guidance starts with a reminder that under New York Public Health Law Section 3362(1) “[t]he possession, acquisition, use, delivery, transfer, transportation, or administration of medical marijuana by a certified patient or designated caregiver possessing a valid registry identification card, for certified medical use” is lawful subject to certain restrictions and conditions.

The Department’s statement then provides that if office visits are covered under the insurance policy or contract, and the insured receives services during an office visit that are covered under the insurance policy or contract, the issuer may not deny coverage for the office visit solely on the basis that the visit also resulted in the insured receiving a medical marijuana certification. In other words, insurers must provide coverage for office visits, even if they result in medical marijuana certification for the patient. There is an exception to this general rule, however, Coverage is not required for office visits undertaken solely to obtain a medical marijuana certification.

In our next post we’re going to continue our review of important parties that play a role in the medical marijuana industry by focusing on the workplace and the rights that employers and employees have when it comes to medical marijuana use. To be sure not to miss the article when it comes out we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

This blog post is the third in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the latest post in the series, Medical Marijuana 102: NYS Registered Organizations and Dispensaries, click here.

In today’s post we’re going to be reviewing the requirements imposed by New York’s Medical Marijuana Program upon patients and certifying practitioners. As of August 22, 2017, 1,184 practitioners have registered with the NYS Department of Health (“DOH”) for the purpose of certifying patients for medical marijuana use and 28,077 patients have been certified for such use.

The DOH authorizes physicians, nurse practitioners and physician assistants to certify patients for medical marijuana use. As we mentioned in Medical Marijuana 101, New York’s Medical Marijuana Program is available only to patients who suffer from one of the following severe, debilitating or life-threatening conditions: cancer, positive status for HIV or AIDS, amyotrophic lateral sclerosis (ALS), Parkinson’s disease, multiple sclerosis, damage to the nervous tissue of the spinal cord with objective neurological indication of intractable spasticity, epilepsy, inflammatory bowel disease, neuropathy, chronic pain, or Huntington’s disease. Patients must also have one of the following associated or complicating conditions: cachexia or wasting syndrome, severe or chronic pain, severe nausea, seizures, or severe or persistent muscle spasms.

Practitioners who wish to certify patients to use medical marijuana must meet four general criteria. First, the practitioner must be qualified to treat patients who suffer from one or more of the serious conditions listed above.

Second, the practitioner must be either (1) a licensed physician who is in good standing as a physician and practicing medicine in New York State, (2) a certified nurse practitioner who is in good standing as a nurse practitioner and practicing in New York State, or (3) a licensed physician assistant who is in good standing as a physician assistant and practicing in New York State under the supervision of a physician registered with the New York State Medical Marijuana Program.

Third, the practitioner must have completed a four-hour course approved by the NYS Health Commissioner. The course must include the following course content: the pharmacology of marihuana; contraindications; side effects; adverse reactions; overdose prevention; drug interactions; dosing; routes of administration; risks and benefits; warnings and precautions; abuse and dependence; and such other components as determined by the commissioner. Currently the Commissioner has only approved two providers, TheAnswerPage and The Medical Cannabis Institute, to offer the course. The course is available to all interested parties, meaning that you can take the course even if you are not in the medical field and/or not looking to certify patients for medical marijuana use.

Lastly, the practitioner must have registered with the DOH. Practitioners can only register with the DOH if they’ve taken the four-hour course. Once a practitioner has completed the registration process they will then have access to the Medical Marijuana Data Management System which will allow them to issue certifications to qualifying patients.

Qualifying patients suffering from the severe illnesses listed above can learn more about whether medical marijuana may help them by speaking with a practitioner that is registered with the program. To help patients locate a registered practitioner, the DOH keeps an updated list of registered practitioners on its website.

Once patients are certified by a registered practitioner for medical marijuana use, patients must register with the DOH by, among other things, providing documentation to prove their identity and NYS residency. When patients register with the DOH they can also designate up to two caregivers. Those caregivers must also register with the DOH using the same online system as the one used by patients. Pursuant to the Compassionate Care Act there is a $50 application fee but the DOH is currently waiving the $50 fee for all patients and their designated caregivers.

Once a patient or caregiver’s registration is processed, the DOH mails a registry ID card directly to the patient or caregiver. Registrations expire when the certification that was issued by the practitioner expires. At this time, New York State does not accept certifications or registry ID cards from other states. This is not unusual as there are currently only three states (Nevada, Hawaii and Maine) that practice full reciprocity and will legally allow, under certain circumstances, out-of-state patients to make purchases at licensed dispensaries.

Now that we’ve learned about the basic regulations covering patients and practitioners we’re going to turn our attention to other important parties that play a role in the medical marijuana industry. Check back soon for Medical Marijuana 104: Responsibilities of Health Insurers. To be sure not to miss the article when it comes out, we invite you to subscribe to the Farrell Fritz New York Health Law Blog.

This blog post is the second in a series of articles discussing the current state of the law in New York regarding medical marijuana. To read the first post in the series, Medical Marijuana 101: The State of the Law in NY, click here.

One of the biggest questions that people have when discussing medical marijuana in New York is where can patients obtain medical marijuana products.

Before a patient can obtain medical marijuana products, he or she must first be issued a certification for medical marijuana by a practitioner, who is registered with the NYS Department of Health’s Medical Marijuana Program, and obtain a Registry Identification Card. Patients can then use that Registry Identification Card to visit a dispensing facility to obtain medical marijuana products. We’ll dive into the requirements imposed upon patients and certifying physicians in our next post and concentrate today on registered organizations and dispensaries.

Registered organizations are responsible for the manufacturing and dispensing of medical marijuana in New York State. At the time that the medical marijuana program was launched in 2016, New York approved five registered organizations: Columbia Care NY LLC, Etain, LLC, MedMen, Inc. (formerly known as Bloomfield Industries Inc.), PharmaCann LLC and Vireo Health of New York LLC (formerly known as Empire State Health Solutions).

On August 1, 2017, the NYS Department of Health announced that it has licensed five new companies to join the original five: Valley Agriceuticals, LLC, Citiva Medical LLC, PalliaTech NY, LLC, NYCanna LLC and Fiorello Pharmaceutics, Inc.

Valley Agriceuticals and Citiva are authorized to bring dispensaries to Brooklyn, Pallia and NYCanna are expected to open somewhere in Queens, and Fiorello Pharmaceutics is authorized to open a dispensary in Manhattan. Each of the new registered organizations received authority to open dispensing facilities in other delineated areas of New York as well. Under the Compassionate Care Act, each registered organization is authorized to have up to four dispensing facilities, meaning that there could be up to forty dispensing facilities statewide if each registered organization is fully developed.

Registered organizations must manufacture medical marijuana products in an indoor, enclosed, secure facility located in New York State and may only manufacture medical marijuana products in forms approved by the Commissioner of Health. These forms include liquid or oil preparations for metered oromucosal or sublingual administration or administration per tube; metered liquid or oil preparations for vaporization; and capsules for oral administration. Smoking, as of now, is not an approved route of administration. On August 10, 2017, the NYS Department of Health proposed broadening the acceptable forms to include ointments, patches, lozenges and chewable tablets.

A certified patient can go to any dispensing facility of a registered organization in New York. This provides greater options to patients as not every dispensing facility sells the same types of medical marijuana. There are currently two New York State-mandated products for medical marijuana which require set ratios of Delta-9-tetrahydrocannabinol (THC) and cannabidiol (CBD), the two main chemicals used in manufacturing medical marijuana. Those two products must be offered by each registered organization, but a registered organization may also offer other products at the dispensing facility that have varying ratios of THC to CBD. It is expected that other products will be offered over time.

In addition, certified patients who are unable to go to a dispensing facility may designate a caregiver who can go for them. Registered organizations are also permitted to offer delivery services to patients and designated caregivers to help expand access to those who are unable to travel to a dispensing facility.

As you might imagine, dispensing facilities are subject to a number of regulations in order to ensure that patient health is properly protected. Among other requirements, dispensing facilities must (1) have a licensed NYS pharmacist on site to directly supervise the facility when open, (2) not sell items other than medical marijuana products approved by the NYS Department of Health, (3) not allow the consumption of the medical marijuana by the patient at the facility, (4) not allow certified patients or their caregivers to consume any food or beverages at the facility unless necessary for medical reasons, (5) maintain a visitor log, and (6) firmly affix a patient-specific dispensing label approved by the Department of Health that is easily readable and includes a delineated list of items. The regulations allow dispensaries to provide up to a 30-day supply of medical marijuana to a certified patient.

Dispensing facilities, as well as the manufacturing facilities operated by registered organizations, must also meet a number of security regulations. Registered organizations must also provide an electronic report to the NYS Department of Health of all approved medical marijuana products that are dispensed within 24 hours after the medical marijuana was dispensed to the certified patient or designated caregiver.

Now that we have a basic understanding of registered organizations and dispensing facilities, check back soon for Medical Marijuana 103: Patient and Physician Regulations in New York State.

This blog post will be the first in a series of articles discussing the current state of the law in New York regarding medical marijuana.

There’s no denying that one of the hottest topics in health care law these days is the constant evolution of the state of the law as it relates to the use of marijuana. As of the date of this article, 29 states and the District of Columbia authorize the use of medical marijuana and 12 additional states have legislation pending that would likewise authorize the use of medical marijuana. In addition, 10 states and the District of Columbia have adopted more expansive laws legalizing marijuana for recreational use.

In 2014, Governor Andrew Cuomo signed the Compassionate Care Act authorizing the use of medical marijuana in the state of New York. The Medical Marijuana Program created under the Compassionate Care Act officially launched on January 7, 2016. Since its launch the New York State Department of Health (the “DOH”), tasked with regulating the program, has continued to expand the program.

Medical marijuana in New York is currently available to those suffering symptoms caused by eleven severe debilitating or life-threatening condition(s), including, but not limited to, cancer, HIV/AIDs, epilepsy, Parkinson’s disease, Huntington’s disease, chronic pain and multiple sclerosis.

The Commissioner of the DOH has authority to expand the list of conditions that qualify for medical marijuana and has done so in the past, adding chronic pain as a qualifying condition in December 2016. Most recently, in June 2017, a bill to expand New York State’s medical marijuana program to cover sufferers of post-traumatic stress disorder (PTSD) passed both houses of the New York State Legislature. It is expected that Governor Cuomo will receive the bill for consideration later this summer, although he has not yet indicated whether or not he will approve the bill.

Senators in New York have also introduced New York Senate Bill S01747, also known as the “marijuana regulation and taxation act.” The bill seeks to regulate the growth, taxation, and distribution of recreational marijuana in an attempt to generate a new source of revenue for the state.

The bill, among other items, allows for the growing and use of marijuana by persons eighteen years of age or older, the licensure of persons authorized to produce, process and sell marijuana, the levy of an excise tax on certain sales of marijuana and the repeal of certain provisions of the penal law relating to the criminal sale of marijuana. The bill proposes that regulatory oversight would be maintained by the New York State Liquor Authority. On January 6, 2016 the Bill was referred to the Senate Finance Committee and as of the date of the writing of this article remains pending there.

Check back soon for Medical Marijuana 102: Dispensaries where we’ll dive in a little deeper to explain the regulations surrounding how patients in New York can become certified for medical marijuana use and the dispensaries that make that use possible.

On October 2, 2013, New York City Mayor Michael Bloomberg signed into law the Pregnant Workers Fairness Act (the “Act”). The Act, which amends New York City’s Human Rights Law, prohibits employers from discriminating against workers who are pregnant or have a medical condition related to pregnancy or childbirth, and requires employers to provide a reasonable accommodation to such workers if such accommodation is requested. Under New York City law, a reasonable accommodation is any accommodation that can be made that does not cause an employer an undue hardship.

New Protections for Women

The Act supplements existing laws preventing discrimination against pregnant women in the workplace.  The Federal Pregnancy Discrimination Act, passed by Congress in 1978, prohibits employers with 15 or more employees from discriminating against persons on the basis of pregnancy, child-birth or related medical conditions, but does not speak to the provision of reasonable accommodations to such workers. In addition, although some parties have tried to use the Americans with Disabilities Act (“ADA”) to require employers to provide such accommodations, such attempts have been largely unsuccessful because in general the ADA does not apply to pregnant women unless they have a pregnancy-related disability.

The Act is scheduled to take effect 120 days after its enactment. The Act will apply to all employers with four or more employees, which is consistent with other anti-discrimination provisions found in the Human Rights Law.  An individual who believes that he or she has been unlawfully discriminated against on the basis of pregnancy, childbirth, or a related medical condition may bring an action in court for damages, injunctive relief and other appropriate remedies, or make a complaint to the NYC Commission on Human Rights. Remedies that can be instituted upon a finding that an employer has engaged in an unlawful discriminatory practice, include, among others (i) the issuance of an order to the employer to “cease and desist” the unlawful discriminatory practice; (ii) awarding back pay and front pay, or paying compensatory damages; and (iii) the imposition of civil penalties up to $250,000.

Employers are advised to review and update their policies and procedures to comply with the new requirements.  This would also be a good time to review existing policies related to the ADA and reasonable accommodations.

patient entering MRI machineA bill proposed in the US House of Representatives may cause physicians to significantly restructure their practices as they relate to in-office ancillary services (IOAS).

Promoting Integrity in Medicare Act of 2013

The Stark Law is a federal statute which prohibits physicians from making referrals for Medicare-covered designated health services (DHS) to an entity with which the physician or an immediate family member of the physician has a financial relationship with that entity. Several exceptions apply, including one for in-office ancillary services. This exception generally allows a physician to make referrals for DHS within his or her own practice if the physician meets requirements relating to (i) the supervision of services, (ii) the location of services, (iii) the billing of services, (iv) the structure of group practices, and (v) patient disclosures.

On August 1, 2013, Congresswoman Jackie Speier (D-CA), along with Rep. Jim McDermott (D-WA), and Dina Titus (D-NV), introduced HR 2914, the “Promoting Integrity in Medicare Act of 2013” (PIMA), in the House of Representatives. The bill seeks to eliminate the IOAS exception for advanced diagnostic imaging (which includes MRI, PET and CT scans), anatomic pathology, radiation therapy and physical therapy.  The bill also proposes to create new compliance review procedures and increase the penalties under the Stark Law for such prohibited self-referrals.

According to Congresswoman Speier, “[o]ver the years, use of the in-office ancillary services exception has dramatically increased, resulting in increased costs to the Medicare program…Patient convenience and streamlined services are important, but improper use of the exception creates unnecessary costs.”  In support of her bill, Congresswoman Speier cites recent studies performed by the Government Accountability Office (GAO) which found an increase in the use of certain DHS where providers self-refer.  For example, the GAO found that, “for advanced diagnostic imaging, providers who self-referred made 400,000 more referrals for advanced imaging services than they would have if they were not self-referring, at a cost of more than $100 million in 2010.”

Opinions are Divided

As can be expected, the introduction of PIMA has created a divide between those groups who support the bill, such as the American Clinical Laboratory Association and the American College of Radiology, and those that feel that the IOAS exception as it is currently drafted offers the best care to patients.  On August 12, 2013, over thirty national medical groups – including the American Medical Association and the American College of Surgeons – wrote a letter to all members of the U.S. House of Representatives opposing the legislation.  The letter states that “[i]f enacted, [H.R. 2914] would limit access to life-saving services for many patients and stifle new innovative reforms already underway to improve care delivery and quality improvement.  It would raise the costs to Medicare beneficiaries and the Medicare program by driving patients to more costly facilities thereby requiring additional expenditures.” 

New York Health Law Blog will be monitoring the movement of the bill and will post periodic updates.  Farrell Fritz, P.C. attorneys know the intricacies of the Stark Law, and can advise providers on how to structure their practices to comply with the many laws and regulations governing medical practices. 

On May 29, 2013, the US Departments of Health and Human Services, Labor, and Treasury issued final regulations regarding wellness programs under the Patient Protection and Affordable Care Act (the “ACA”).  Wellness programs are programs offered by employers, or directly by insurance companies to their enrollees, to improve health and promote fitness. The ACA, in conjunction with the Health Insurance Portability and Accountability Act of 1996, prohibits discrimination against individuals regarding plan eligibility, benefits or premiums, but makes an exception for wellness programs. Wellness programs such as weight loss programs or smoking cessation programs allow employers to offer certain rewards in return for the employee’s adherence to health promotion and disease prevention.

Participatory Programs

There are two types of wellness programs under the ACA: participatory wellness programs and health-contingent programs.  Participatory wellness programs, which constitute the majority of wellness programs, are those that either do not provide a reward or do not include any conditions for obtaining a reward other than participation in the program. Participatory wellness programs include programs that reimburse employees for all or part of their gym memberships, offer rewards for participating in diagnostic testing programs, and provide a reward to employees for attending monthly, free health education seminars. Participatory wellness programs must be offered to all similar situated individuals, regardless of health status.

Health-contingent Programs

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Health-contingent wellness programs are divided into two sub-types: activity-only and outcome-based.

Under activity-only wellness programs, an individual is required to perform or complete an activity related to a health factor in order to obtain a reward but isn’t required to attain or maintain a specific health outcome. Examples of activity-only wellness programs include walking, diet or exercise programs. The final regulations implement safeguards so that individuals that are unable to participate in or complete the program’s prescribed activity due to a health factor such as recent surgery or pregnancy are given a reasonable opportunity to qualify for the reward.

In contrast, outcome-based wellness programs require an individual to attain or maintain a specific health outcome in order to obtain a reward. For example, an outcome-based wellness program may offer a reward to an employee that stops smoking or that attains certain results on cholesterol or blood pressure readings. Outcome-based wellness programs generally have a measurement test or screening as part of an initial standard, and individuals who do not meet the initial standard may be offered an educational program or other activity to achieve the same reward.

Program Compliance

To comply with the final regulations, health-contingent wellness programs must: (1) give individuals eligible for the programs the opportunity to qualify for the reward at least once per year; (2) provide rewards that do not exceed, together with the reward for other health-contingent wellness programs with respect to the plan, 30% of the total cost of employee-only coverage under the plan, or 50% to the extent the program is designed to prevent or reduce tobacco use; (3) be reasonably designed to promote health or prevent disease; (4) be uniformly available to all similarly situated individuals and provide a different, reasonable means of qualifying for the reward to those individuals who are unable to participate due to a medical condition; and (5) disclose the availability of a reasonable alternative standard to qualify for the reward in all plan materials describing the terms of a health-contingent wellness program.

The final regulations apply to group health plans with plan years beginning on and after January 1, 2014.  The three Departments anticipate issuing guidance in the future, and may propose modifications to the final regulations as necessary.

The Patient Protection and Affordable Care Act of 2010 (“PPACA” or “Obama Care”) requires, beginning in 2014, that employers with 50 or more full-time employees (“large employers”) offer “affordable” health insurance to its employees. Failure to do so will subject the employer to penalties.

Future blog postings will address the coverage requirements and penalties under PPACA, but to start, what should you be doing in 2013 to determine if the mandate applies to your business?

Defining a “Large Employer”

Whether a business has achieved “large” status under PPACA is measured by calculating the sum of all full-time employees and all FTEs during the prior year (this is why an analysis in 2013 is critical). The number of FTEs is determined by calculating for each month of the prior calendar year (1) the aggregate number of hours worked (excluding any employee exceeding 120 hours) by non-full-time employees (those working less than 30 hours per week) in that month, (2) dividing by 120, (3) adding together the results of (2) for each month and (4) dividing by 12.  Hours worked means hours when an employee is entitled to pay taking into account vacation, sick time etc. Special rules apply to businesses that have irregular vacation periods, such as educational employers, that make determining a monthly calculation more difficult.

More Points to Consider

The mandate applies to for-profit entities, government entities, and tax exempt entities. Affiliated entities under common control will be viewed as one entity in determining whether large employer status applies. Successor employers are considered the same as the predecessor. New employers will be viewed as to whether they reasonably expect to employ at least 50 employees or FTEs during a calendar year.

Note that the common law interpretation of “employer” and “employee” will apply, and an employer’s  classification of independent contractor, consultant or otherwise as opposed to employee will likely receive very close scrutiny . Thus, care should be taken when deciding you are NOT a large employer and therefore exempt from the mandate based on your designation of workers as independent contractors as opposed to employees.

As is evident from the above, there are fairly complicated questions to be answered in determining “large” employer status. If in doubt, seek guidance from your legal expert on the PPACA mandates and/or Labor and Employment Law counsel.