Government Issues New Wellness Program Regulations: Five Requirements for Health-Contingent Programs
The U.S. Departments of the Treasury, Labor, and Health and Human Services issued final regulations this week amending the 2006 HIPAA nondiscrimination regulations to implement the employer wellness program provisions of the Affordable Care Act. Wellness programs come in two types: "participatory wellness programs" and "health-contingent wellness programs." Under the final rules, participatory wellness programs comply with the HIPAA nondiscrimination requirements as long as the participant does not have to satisfy any additional standards and participation in the program is made available to all similarly situated individuals, regardless of health status. By contrast, health-contingent wellness programs, which condition a reward on a participant's satisfaction of a standard related to a health factor, face new requirements. The final rules apply to both grandfathered and non-grandfathered group health plans in both the insured and self-insured markets, and are effective for plan years beginning on or after January 1, 2014.
The final rules distinguish between two types of health-contingent wellness programs: "activity-only" programs and "outcome-based" programs. An activity-based wellness program provides a reward if an individual performs or completes an activity related to a health factor, but it does not require the individual to satisfy any specific health outcome. Examples include waking or exercise programs in which a reward is provided just for participation, or rewards for taking a health risk assessment without requiring any further action. An outcome-based wellness program requires an individual to either attain or maintain a specific health outcome in order to obtain a reward. Examples are not smoking or achieving certain results in biometric screenings.
All health-contingent programs must meet five requirements under the final rules:
(1) Eligible employees must be given an opportunity to qualify for the reward at least once per year.
(2) Generally, the reward may not exceed 30% of the total cost of employee-only coverage (including both the employee and employer portion of the cost of coverage). If dependents are permitted to participate, the reward can be calculated on the basis of 30% of the cost of coverage in which the employee and any dependents are enrolled. In the case of a program designed to reduce or prevent tobacco use, the maximum reward amount is 50% of the total cost of coverage. The reward limit is cumulative for all health-contingent wellness programs.
(3) The program must be reasonably designed to promote health or prevent disease.
(4) For an activity based wellness program, the full reward must be available to all similarly situated individuals by offering a reasonable alternative standard for obtaining a reward if it is either unreasonably difficult due to a medical condition to satisfy or medically inadvisable to attempt to satisfy the otherwise applicable standard. A wellness program can require verification from a physician that an individual's health factor makes it unreasonably difficult or medically inadvisable to attempt to satisfy the regular standard.
For an outcome-based wellness program, the full reward must be available to anyone who does not meet the standard based on the initial measurement, test, or screening. The alternative standard cannot be a requirement to meet a different level of the same standard without additional time to comply, and the time commitment to comply with the alternative standard must be reasonable.
(5) The availability of a reasonable alternative standard to qualify for the reward must be disclosed in all materials describing the terms of the wellness program. For an outcome-based wellness program, a similar statement must be included in a notice that the individual did not satisfy the initial outcome-based standard. Sample language is included in the final rule.