Final Wellness Program Regulations Issued

On May 29, 2013, the Departments of Health and Human Services, Labor and Treasury (the “Departments”) issued final regulations on implementing and expanding employment-based wellness programs. The rules set forth in the final regulations remain largely unchanged from the proposed rules issued on November 20, 2012. For example, as provided for in the proposed rules, the final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20 percent to 30 percent of the cost of coverage. The final regulations also increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use. http://www.proskauer.com/publications/client-alert/new-guidance-on-wellness-programs-issued/.  However, a few points and clarifications are particularly noteworthy:

1. The Departments reiterated that compliance with the final rules is not determinative of compliance with any other applicable Federal or State law, including the Americans with Disabilities Act. Therefore, uncertainty remains for employers designing wellness programs given that the Equal Employment Opportunity Commission still has not provided more definitive guidance on permissible incentives in the wellness program context. http://www.erisapracticecenter.com/2013/03/22/still-no-eeoc-guidance-on-permissible-wellness-program-incentives/
2. The intention of the Departments is that every individual participating in a wellness program should be able to receive the full amount of any reward or incentive, regardless of any health factor.
3. The Departments clarified that the final regulations do not establish requirements for all types of programs or platforms that could be labeled a wellness program. Rather, the final rules establish criteria for an affirmative defense that can be used by a plan in response to a claim that the plan impermissible discriminated against an individual based on health status in violation of HIPAA.
4. The final rules give employers a fair amount of flexibility. For example, the final rules permit plans to determine apportionment of the reward under a health-contingent wellness program among family members, as long as the method is reasonable.
5. The final rules indicate that the permissibility of rescinding an individual’s health coverage in connection with his or her statement regarding tobacco may be addressed by the Departments in future regulations or subregulatory guidance under Public Health Service Act section 2712.
6. The Departments anticipate issuing future subregulatory guidance to provide additional clarity on wellness programs and potentially proposing modifications to this final rule as necessary.

In designing and administering wellness programs, employers typically try to fit within the HIPAA standards. Now that the regulations are finalized, it will be easier to implement these programs. At the same time, employers need to be mindful of any future guidance from the EEOC on wellness programs as well as any additional guidance from the Departments as they establish wellness incentives.