In late November, the Departments of Health and Human Services, Labor, and Treasury issued a proposed regulation that makes important changes in the HIPAA nondiscrimination rules governing wellness programs in group health coverage. The proposed regulation is expected to be issued in final form next year and is expected to apply to plan years beginning on and after January 1, 2014. In this article, we summarize some of the important new proposed changes.
Participatory Wellness Programs. Under the proposed regulation, a “participatory wellness program” is a program that either does not require an individual to meet a standard related to a health factor in order to obtain a reward or that does not offer a reward at all. Participatory wellness programs include fitness center reimbursement programs; diagnostic testing programs that reward participation (i.e., programs that do not base rewards on test outcomes); programs that waive co-pays or deductibles for prenatal or well-baby visits; programs that reimburse employees for the costs of smoking cessation programs, regardless of whether the employee quits smoking; and programs that reward employees for attending a free education seminar. The proposed rule does not change current law; as long as a participatory wellness program is made available to all similarly situated individuals, the program will comply with HIPAA’s nondiscrimination rules without having to satisfy any additional standards. For example, under existing law, there is no limit on the financial incentives for participatory wellness programs. The proposed rule would not change this.
Health-Contingent Wellness Programs. A health-contingent wellness program is a wellness program that conditions the receipt of a reward on the satisfaction of a standard that is related to a health factor. The following are examples of health contingent wellness programs: Diagnostic screening programs that base rewards on outcomes (e.g., a testing program that provides a premium subsidy for employees who reduce their cholesterol levels); smoking surcharges for employees who use tobacco products; and programs that waive cost-sharing requirements (i.e., co-pays and deductibles) for employees who run or walk at least 10 miles per week.
Under the current rules, health-contingent wellness programs must meet five requirements:
- Individuals must be given the opportunity to qualify at least once per year.
- The maximum reward cannot exceed 20 percent of the annual cost of employee-only coverage (20 percent of the cost of family coverage if, in addition to the employee, any class of dependents may participate in the wellness program).
- The program must allow for a reasonable alternative standard (or waive the otherwise applicable standard) for obtaining a reward for any individual for whom it is either unreasonably difficult due to a medical condition or medically inadvisable to attempt to meet the otherwise-applicable standard.
- The program must be reasonably designed to promote health or prevent disease.
- All plan materials that describe the terms of the program must disclose the availability of other means of qualifying for the reward or the possibility of a waiver of the otherwise applicable standard.
The proposed regulation would maintain these requirements and make the following changes:
- The proposed regulation reflects the increase in the maximum reward from 20 percent to 30 percent of the applicable cost of coverage, effective 2014, as mandated by the Affordable Care Act.
- The maximum percentage (30 percent) would be increased an additional 20 percentage points to the extent that the additional percentage is in connection with a program designed to prevent or reduce tobacco use.
- With respect to the requirement that a program allow for a reasonable alternative standard, the proposed regulation provides as follows:
- If the reasonable alternative standard is completion of an educational program, the plan must specify the program or programs that are available, may not require an individual to find a program, and may not require the individual to pay for the program.
- If the reasonable alternative standard is a diet program, the plan must pay any membership or participation fee but is not required to pay for the cost of food.
- If the reasonable alternative standard is compliance with the recommendation of a medical professional engaged by the plan, and an individual’s personal physician states that the plan’s recommendation is not medically appropriate for that individual, the plan must provide a reasonable alternative standard that accommodates the recommendation of the individual’s personal physician.
- Under the proposed regulations, an employer would be permitted to require an individual to obtain a statement from his or her physician that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for an individual to attempt to satisfy, the otherwise applicable standard only if reasonable under the circumstances. The proposed regulation provides that it would not be reasonable for an employer to seek verification of a claim that is “obviously valid based on the nature of the individual’s medical condition that is known to the plan.” Employers may seek verification in the case of claims for which it is reasonable to determine that medical judgment is required to evaluate the validity of the claim.
Employers should review their wellness programs and vendor contracts in light of the proposed regulation to determine whether any changes would be required and to ensure, to the extent possible, that the vendor is aware of the upcoming changes. Employers should be on the watch for the final wellness regulations, which are expected in 2013, effective for plan years beginning on and after January 1, 2014.