|June 21, 2013|
The Departments of Treasury, Labor and Health and Human Services have issued final regulations on “wellness programs” under the Affordable Care Act. A wellness program offers employees (and, in some cases, their dependents) a reward (such as cash, premium discounts or a reduction in cost sharing) if they participate in a program designed to promote good health and disease prevention.
Under HIPAA, insurers and health plans may not discriminate against individuals based on their health status. However, there is an exception for incentives offered as part of a wellness program. For example, an insurer or a health plan may not charge a higher premium to an individual who has poor health history or is currently in poor health. However, an insurer, plan or employer could offer a reward to an employee who participates in an activity (such as joining a gym) or reaches a specific health standard (such as a body mass index (“BMI”) or a total cholesterol level below a specified level) that is designed to promote good health.
The final rules do not establish inflexible rules that all wellness programs must meet but they do establish rules that, if followed, will provide an affirmative defense against a claim that a plan discriminated against an employee based on health status. The rules are designed to prevent the wellness program from being a subterfuge for discrimination based on health factors. These rules are effective for plan years commencing in 2014 and apply to both grandfathered and non-grandfathered plans.
Types of Wellness Programs
There are two types of wellness programs described in the final rules:
- (a) Participatory Wellness Programs - Most wellness programs are “participatory” which means that a reward is provided if an individual participates in an activity without regard to satisfying any health-related standard. Examples include attending monthly no-cost health-oriented seminars, reimbursement of all or part of a gym membership, completion of a health-risk assessment or participation in a smoking cessation program without regard to whether the individual quits smoking. If these programs are available to all similarly situated individuals, they will be considered non-discriminatory and are not required to satisfy the criteria for the wellness program exception.
- (b) Health Contingent Wellness Programs - There are two types of “health/contingent” programs:
- (i) Activity-Only - A health-related activity must be completed (such as a walking, diet or exercise program) although no specific outcome is required.
- (ii) Outcome-Based - An individual must obtain a specific health outcome (such as a specified result on biometric screenings or not smoking). Generally, these types of programs would have an initial screening and those who meet the health-related standard would receive the reward. Those who do not, would have to take additional steps (such as enrolling in a fitness or diet program) to reach the goal (or a “reasonable alternative standard”) and achieve the reward.
Reasonable Alternative Standard
It is intended that every individual should be able to receive the full amount of any offered reward regardless of the individual’s health status. Thus, a “reasonable alternative standard” must be offered under a Health Contingent Wellness Program (i) in the case of an “activity only” program, if it is unreasonably difficult due to a medical condition, or medically inadvisable, to attempt to reach the stated goal or (ii) in the case of an “outcome-based” program, the individual failed to meet the initial health standard, regardless of whether there was a medical reason. This alternative standard does not have to be offered in advance but must be provided upon an individual’s request. A plan may require verification from the individual’s doctor that the individual’s condition warrants a reasonable alternative standard for an “activity-only” program. The reasonable alternative standard may not be a different level of the same standard. For example, if the initial standard was to achieve a BMI of less than 30, the reasonable alternative standard may not be to achieve a BMI of less than 31 on the same date. However, the standard could be that the individual must reduce his BMI by a specified percentage or a specified amount over a realistic period of time. The individual’s personal doctor may be involved in setting the reasonable alternative standard.
If the reasonable alternative standard involves completion of an educational program, the plan or insurer must make the program available or assist the employee in finding such a program and it must be provided at no cost to the employee. If a diet program is required, the plan or insurer must pay any participation fee but is not required to pay for food.
The availability of a reasonable alternative standard must be disclosed in all materials describing the Health Contingent Wellness Program, including contact information, and that, if applicable, the recommendations of an individual’s doctor may be accommodated.
The maximum reward for all Health Contingent Wellness Programs under a plan is 30% (50% if the program is designed to curb tobacco use) of the cost of employee-only coverage, considering both the employee’s and employer’s share of the premium under the benefit package in which the employee is enrolled. The reward under Participatory Wellness Programs is not subject to this limit.
Employers should note that compliance with the final rules does not guarantee compliance with other laws, such as the Americans with Disabilities Act. More guidance from the Equal Employment Opportunity Commission is needed.
Employers should review their current wellness programs to see if they are in compliance with these rules. If you do not have a wellness program, you should consider if you would like to implement such a program, perhaps a Participatory Wellness Program, such as offering to pay all or part of the cost of a gym membership or smoking cessation program.