On April 16, the United States Departments of Labor, Health and Human Services (“HHS”) and the Treasury (collectively, the “Departments”) released their Frequently Asked Questions ("FAQs”) about wellness programs and addressed what constitutes “reasonable design” for a health-contingent wellness program and wellness program required compliance with laws beyond the Departments’ final wellness regulations.
The Departments confirmed that group health plans and health insurance issuers cannot determine eligibility or cost sharing for health benefits on the basis of an individual’s “health factors.” 42 U.S.C. s. 300gg-4; 29 C.F.R. s. 2590 702. Thus, group health plans and health insurance issuers cannot render it more difficult for employees to qualify for benefits or more expensive for the employee to secure those benefits just because the group health plan or health insurance issuer determines, based on a health assessment or other factors, that the employee is more likely to require expensive medical care. Wellness programs, however, are an exception to the general rule and can utilize health factors as a basis for determining whether an employee is entitled to any rebate in premium, a reduced cost-sharing or other incentives. While there are regulatory requirements that must be satisfied (see 29 C.F.R. s. 2590.702), such as the program must be “reasonably designed to promote health or prevent disease,” 29 C.F.R. s. 2590.702, wellness programs nonetheless represent an exception.
A health-contingent wellness program “must be reasonably designed to promote health or prevent disease.” Whether a health-contingent wellness program is reasonably designed is based on all of the relevant facts and circumstances. The Departments indicated that wellness program sponsors should have some flexibility in designating their program, because the Departments’ June 3, 2013 final regulations (establishing 30% of the cost of coverage as the maximum permissible award under a non-tobacco health-contingent wellness program, and 50% for tobacco-related wellness program, along with the requirement that a health-contingent wellness program offer a reasonable alternative standard in lieu of the targeted activity or health outcome in order to qualify for the incentive) were “intended to allow experimentation in diverse and innovative ways for promoting wellness.” While this does not require that programs be accredited or based on particular evidence-based clinical standards, the Departments encouraged wellness program sponsors to consider following approaches like those found at the “Guide to Community Preventative Services” or the “U.S. Preventative Task Force’s Guide to Clinical Preventative Services,” that “may increase the likelihood of wellness programs’ success.”
The Departments’ release expressly identifies practices that would raise its regulatory suspicion and be subject to increased scrutiny, such as the collection of a substantial level of sensitive personal information without assisting employees in making behavioral changes, unreasonable time commitments and unreasonable travel. The Departments also emphasized the importance of a reasonable alternative standard to ensure that the program is more than mere rewards for results on biometric screenings or responses to a health risk assessment. To the contrary, the programs should be part of larger wellness program designed to promote health and prevent disease and not a subterfuge for discrimination or underwriting based on a health factor. In addition to the guidelines referenced in the FAQs, the Departments stated that the fact of compliance with the Departments’ wellness program regulations does not necessarily mean compliance with other applicable laws, including the Americans With Disabilities Act.
Finally, the Departments indicated that satisfying wellness program rules does not determine the tax treatment of rewards provided under the wellness program. As an example, while a wellness program could provide for reimbursement of gym membership fees as a part of its good health promotion goals, the employer’s payment of those fees does not exclude them from income as to reimbursement of a medical expense. To view the April 16th release, click here.