Many health and wellness professionals and companies see the advantage of providing direct care to employees at the worksite. However, before jumping into this exciting and growing area of health and wellness service delivery, it is imperative that you have a solid understanding of the legal landscape of offering services directly at or near the worksite.
The legal considerations generally fall into two buckets: 1) Health Plan Issues; and 2) Provider Licensing Issues. We will tackle both of these buckets in this blog post.
Health Plan Issues
Onsite or near-site clinics present a number of legal issues in relation to their “group health plan” status. If the onsite or near-site clinic qualifies as a health plan benefit offered by the employer, the employer will be on the hook for compliance with a number of federal laws. Whether these federal laws will apply depends on which health and wellness services are provided, and how those services are structured. As a health or wellness professional or company, you will want to be knowledgeable about the legal risks involved with your service offerings so you can competently explain when and how the employer must comply with their legal obligations.
The Employee Retirement and Income Security Act (ERISA) requires a number of legal obligations on employers who sponsor “employee welfare benefit plans.” Generally these plans provide medical care to employees or their dependents. Employer legal responsibilities for such health plans include, but may not be limited to:
However, ERISA exempts from these legal requirements onsite clinics that treat only minor injuries or illnesses, or rendering first aid in case of accidents occurring during working hours. See 29 CFR s. 2510.3-1(c). This exemption does not seem to apply to near-site clinics, though practically speaking, it is unclear why. But more importantly for this blog post, it is unlikely that the services that most health and wellness providers and companies want to provide at onsite or near-site clinics would fall into this “minor injury or illness” category. As a result, it is likely that ERISA obligations will apply to many onsite and near-site clinics.
Employers can meet these ERISA obligations by either creating separate plan documents for the onsite/near-site clinic, or by adding language to the employer’s other group health plan documents (such as its major medical plan) through a “wrap document.” In the latter case, the employer may limit use of the onsite/near-site clinic to health plan enrollees, whereas in the former case, the employer may allow all employees, regardless of group health plan enrollment status, to use the onsite/near-site clinic. A final alternative to reduce ERISA obligations would be to make the clinics more comprehensive in the way of health and wellness services for health plan enrollees, but limit the services to minor injury and illness care for the general employee population.
One final note about ERISA compliance: for employers that wish to collaborate with other employers in sponsoring an onsite/near-site clinic, such collaboration may result in state insurance regulation. ERISA calls these employer collaborations “Multiple Employer Welfare Arrangements” or “MEWAS,” and MEWAS are given special treatment under the law. Specifically, MEWAS are subject to state insurance regulation, whereas an onsite/near-site clinic sponsored only by a single employer is not.
If the onsite/near-site clinic is subject to ERISA, it is also likely subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA). An onsite clinic will not be subject to COBRA requirements if all of the following criteria are met:
See 26 CFR s. 54.4980B-2, Q&A 1(d).
Employers who offer a wide range of health and wellness services through the clinic, offer services outside of working hours, or charge employees a fee (which may be the case to maintain Health Savings Account status, as discussed below) will likely be subject to COBRA requirements.
Generally speaking, COBRA requires employers to provide notice and access to health benefits after an employee leaves employment. This could be problematic for employers with onsite clinics in particular, as they may not want ex-employees coming onto an employer-owned premises for health or wellness care. Moreover, employers who allow all employees to use the onsite/near-site clinic would have to distribute COBRA notices to all employees, even those that were not enrolled in the employer’s major medical plan. The employer would also need to determine a “premium cost” of the onsite clinic for those employees who choose to continue their care with the clinic during their COBRA eligibility period. This could create an administrative burden on the employer. To avoid these headaches, employers may choose to limit onsite/near-site clinic eligibility to employees who enroll in the major medical plan, so that notice distribution and premium calculation is easier. Moreover, if the employer does not charge a separate premium for the onsite/near-site clinic, the employer is exempt from having to report that cost on the employee’s Form W-2 under the Affordable Care Act (ACA). See IRS Notice 2012-9.
Health Savings Account (HSA) Eligibility
Many employers give their employees an opportunity to contribute to a tax-friendly Health Savings Account. Employees can use this money to pay for medical services, but only if they are also enrolled in a “High Deductible Health Plan” (HDHP). A person who is not enrolled in a qualifying HDHP or has access to non-HDHP coverage will lose their tax-friendly HSA status, and therefore no longer be able to make tax deductible contributions to their account.
Onsite/near-site clinics that provide “significant benefits in the nature of medical care” at free or reduced-cost would jeopardize an employee’s HSA eligibility. See IRS Notice 2008-59, Q&A -10. Onsite/near-site clinics that provide comprehensive health services with no cost-sharing or at no charge for employees without health insurance would be providing “significant benefits” that would undermine HSA eligibility. Benefits such as physicals and immunizations, allergy injections, distribution of over the counter pain relievers, or treatment of worksite accident injuries are not classified as “significant benefits” and therefore would not jeopardize HSA eligibility. So, just like ERISA and COBRA, an onsite/near-site clinic that provided only first aid for minor injuries or illnesses would not affect HSA eligibility. But, as stated before, most health and wellness professionals and companies want to provide more than just minor injury/illness services. So what how can an employer avoid this risk?
One of the easiest and most equitable ways to avoid affecting HSA eligibility is to charge fair market value for the significant medical benefits provided at the onsite/near-site clinic. Of course, using this option means that the employer will either need to charge everyone fair market value for the onsite clinic services, or identify HDHP employees and only charge them fair market value. Employees should be able to use their Flexible Spending Account (FSA), Health Reimbursement Account (HRA) or HSA dollars to pay for those clinic expenses. There may be different ways to determine fair market value, such as based on general market data or actual cost to the employer, but whatever method an employer uses, it should be documented to show anyone who asks how the onsite/near-site clinic fees were derived.
Whatever an employer chooses with regard to maintaining HAS eligibility, it is essential for the employer to be transparent with employees so that employees do not face adverse tax consequences and blame the employer for it.
Health Insurance Portability and Accountability Act (HIPAA)
When it comes to HIPAA, there are two parts that need consideration. The first is HIPAA’s nondiscrimination rules, which prohibit employer health plans from discriminating against employees based on health status. HIPAA’s wellness incentive rules allow for an exception to such discrimination, so to the extent an employer offers its onsite/near-site clinic services as part of its wellness program, employers should abide by HIPAA wellness incentive rules. You can read more about complying with HIPAA wellness incentive rules here. HIPAA also includes portability, special enrollment, and mandated benefit requirements. Onsite clinics are usually exempt from these rules under IRC s. 9832(c)(1)(G) as an “excepted benefit.” However, if an employer includes the onsite clinic as part of its major medical plan, one could argue that the onsite clinic is now wrapped up in a group health plan that is subject to HIPAA nondiscrimination, portability, special enrollment and mandated benefit rules.
The second part of HIPAA concerns health information privacy and security. The onsite/near-site clinic may be subject to HIPAA as a “covered entity” if it is either a covered healthcare provider or a group health plan.
Covered Healthcare Provider
An onsite/near-site clinic may be a covered healthcare provider subject to HIPAA privacy and security rules if it conducts “HIPAA transactions,” which includes transactions involving:
For example, if an onsite/near-site clinic electronically bills the employer health plan for the cost of a treatment, it is conducting an electronic transaction and is therefore subject to HIPAA privacy and security standards as a healthcare provider. Certainly if the employer decides to charge employees fair market value for services at the clinic, there will likely be some electronic transactions occurring that cause the clinic to become a covered healthcare provider under HIPAA.
However, because of the Corporate Practice of Medicine (described below), it is unlikely that the employer sponsor of the clinic will be the HIPAA covered healthcare provider. In most cases, the employer will not and should not be delivering the health and wellness services but rather should be contracting out those services. Thus, the contracted services provider would become the HIPAA covered healthcare provider and would be responsible for HIPAA privacy and security rule compliance. Before sharing protected health information with an employer sponsor of the onsite/near-site clinic, the covered healthcare provider would need an employee’s HIPAA-compliant authorization.
Covered Group Health Plan
A second way the onsite/near-site clinic would be subject to HIPAA privacy and security standards would be through group health plan status. However, HIPAA exempts from privacy and security compliance “onsite clinics.” See 45 CFR s. 160.103(2) (definition of “health plan exclusions”) and 42 USC s. 300gg-91(a)(2). This means that “near-site” clinics may not be exempt from the definition of a HIPAA-covered health plan. What does that mean exactly? It means a near-site clinic may need to comply with HIPAA privacy and security standards as a HIPAA covered entity. But the guidance is not clear.
For onsite clinics, who are technically exempt from HIPAA privacy and security rules (especially if they are separate from the employer’s major medical plan), the clinic still has to contend with state licensing rules (see below) and the expectation from employees that their information will be kept private. The Americans with Disabilities Act (ADA) also requires employers to keep employee health information confidential. See 29 CFR s. 1630.14(d)(4). Moreover, if the onsite clinic is part of an employer’s major medical plan, then it could be deemed part of the employer’s group health plan, in which case it would likely be subject to HIPAA privacy and security standards. You can read more about what it means to be subject to HIPAA privacy and security standards here and here.
Federal Income Tax
The IRS generally excludes from employee income tax expenses relating to “medical services.” See IRC s. 213(d) and IRC ss. 105 and 106. What constitutes “medical services” can get muddy, especially when an onsite/near-site clinic is part of an employer’s wellness program. Many wellness services may not constitute “medical services” and therefore may not qualify as a tax deductible expense for employees.
Employers can also deduct from their taxes onsite/near-site clinic costs as business expenses. However, to preserve that favorable tax treatment, employers should avoid discriminating against highly compensated employees.
Provider Licensing Issues
Another broad category of compliance that most employee benefits attorneys ignore are considerations involving who is providing the health or wellness services at the onsite/near-site clinic. This matters because states regulate who can deliver what services and requirements will vary by state. Generally speaking, these legal considerations include licensing requirements, scope of practice issues, supervision requirements, fee splitting and corporate practice of medicine concerns.
Licensing/Scope of Practice
Normally, just as with in-person visits, practicing a health or wellness profession may require a state-issued license. Traditional health care professions, such as medicine, nursing, physical therapy, pharmacy, and psychology, require licensure from the state in which the practitioner delivers the services. To the extent an onsite/near-site clinic hires licensed providers to deliver services via telehealth employees out of state, the licensed provider may not be able to deliver those services legally. Many states require licensed providers to not only have a license in their “home” state, but also the state in which the patient resides (the “remote state”). Failure to be licensed in either state could result in the practitioner being accused of the unlicensed practice of a profession.
But what about health and wellness practitioners who don’t need a license to deliver their services, such as health and wellness coaches? No state currently issues health or wellness coaching licenses, so coaches are free to practice across state lines, and telehealth makes that type of practice a lot easier. A legal risk arises, however, when health and wellness coaches services cross the line into a licensed practice, such as medicine or psychology.
The definitions of what constitutes the practice of medicine or psychology will vary by state. However, the practice of medicine usually involves activities such as diagnosing, treating, prescribing, or operating, for any human disease or condition. One example of the definition of psychology is:
“[The] rendering to any person for a fee a psychological service involving the application of principles, methods and procedures of understanding, predicting and influencing behavior, such as the principles pertaining to learning, perception, motivation, thinking, emotions and interpersonal relationships; the methods and procedures of interviewing, counseling, psychotherapy, psychoanalysis and biofeedback; and the methods and procedures of constructing, administering and interpreting tests of mental abilities, aptitudes, interests, attitudes, personality characteristics, emotion and motivation.”
Wis. Stat. s. 455.01(5). Practicing medicine or psychology without a license is a crime in most states. Therefore, unlicensed practitioners want to be aware of each state’s licensure requirements and definitions of practice to ensure that their practice complies with the law.
As noted earlier, COVID19 has relaxed rules in many states. The Federation of State Medical Boards has produced a current summary of each state’s actions on licensure rules. For example, through a series of executive and legislative actions, Florida currently allows health professionals not licensed in Florida to provide telehealth services to patients located in Florida under certain conditions. Health and wellness professionals should work with their telemedicine lawyer to determine what they can do and where with the least amount of compliance risk.
Many health professionals who staff onsite/near-site clinics require supervision by another licensed professional. The level of supervision, and who can supervise, depends on state law. In Wisconsin, for example, nurse practitioners must have a collaborative relationship with a licensed physician, but physician assistants must have a direct supervision relationship with a physician. See e.g., Wis. Stat. s. 448.01(6); Wis. Admin. Code N 8.10(7).
Thus, it is important for onsite/near-site clinics to be familiar with supervision requirements for each state in which they operate.
Corporate Practice of Medicine/Fee Splitting
It is not just licensed or unlicensed professionals who can get into trouble with licensing boards. Companies can get into trouble too. Employers or wellness companies that hire licensed professionals to perform licensed health services in the workplace through onsite/near-site clinics must pay attention to the Corporate Practice of Medicine doctrine (“CPOM”). CPOM is violated when a company or corporation practices medicine (or some other licensed profession) by directly hiring or supervising the licensed professional. The purpose of CPOM laws are to prevent clinical decisions from being influenced by corporate interests, which are usually driven by profit and not necessarily the best interest of the patient. A related compliance risk when hiring licensed professionals is violating state fee splitting laws. Fee splitting laws have a similar purpose to CPOM: the state does not want an unlicensed person or entity sharing a fee for patient services with a licensed individual because the unlicensed person or entity may be unduly influencing the licensed person’s clinical judgment.
One state that has some specific guidance on complying with CPOM is California. In fact, the Medical Board of California has a webpage on CPOM and does enforce compliance with the doctrine. Examples of activities that violate the CPOM include:
I have witnessed wellness companies in violation of CPOM, so the risk is very real. Wellness companies that want to include the provision of onsite/near-site health services by licensed professionals must be very diligent in structuring their business to avoid compliance issues with CPOM in the various states. Many times this means making its onsite/near-site clinic a separate legal entity that is owned and operated by the licensed professionals. That way, it is the licensed professionals who are in charge, both in appearance and practice, of the clinical decision-making and not the employer sponsor of the clinic.
Putting it All Together
In sum, offering onsite/near-site clinics in the workplace raises a host of legal compliance issues. Generally speaking, these compliance issues are either related to the clinic’s status as a group health plan, and the clinic’s status as a health care provider. Because the clinic is offered by an employer, such clinics can often fall into both categories. It is imperative that employers seeking to offer these clinics seek competent legal counsel who is familiar not only with the employee benefit legal issues, but the healthcare delivery legal requirements as well. Please contact the Center for Health and Wellness Law, LLC for your free 15 minute legal consult today to see if we can be your legal partner on these, and many other legal issues that impact the health and wellness industries.