On November 20, 2012, the federal government released a number of important proposed rules implementing the Affordable Care Act (ACA). An earlier update from Akerman's Healthcare Practice Group focused on the proposed regulations regarding market reform/rate review and on essential benefits. This article discusses a third set of proposed rules regarding employee wellness programs, jointly released by the Departments of Health and Human Services, Treasury, and Labor.
Wellness programs are authorized under the ACA as an exception to the general prohibition on health status underwriting by plans, which takes effect on January 1, 2014. Wellness programs may grant rewards or impose surcharges based on an enrollee’s medical condition, if certain requirements are met. The proposed rules set out these prerequisites in detail. Overall, the proposed regulations attempt to strike a balance between employer goals of lowering health insurance costs and consumer advocate fears of health status discrimination toward employees.
The ACA exempts wellness programs from the prohibition on health status discrimination by group health plans and, effective January 1, 2014, will allow rewards or surcharges of up to 30 percent of the total cost of plan coverage (or 50 percent with approval of the HHS Secretary) for approved wellness programs.
The proposed rules distinguish between two types of wellness programs. "Participatory wellness programs" are programs made available to all similarly situated individuals and either do not offer a reward or do not condition a reward on an individual satisfying a health status requirement. Examples might be: reimbursement for the cost of a gym membership; or a reward to employees who complete a health risk assessment without the requirement of any further action. Such programs are not limited by the ACA or the proposed regulations.
By contrast, "health-contingent wellness programs" condition the receipt of a reward on meeting a health status standard, such as a specific cholesterol level or body mass index or not smoking. These programs may also grant a reward for those who fail to meet the biometric target, but take certain additional required actions.
Under the proposed regulations, rewards may include premium discounts or rebates, reductions or waivers of cost-sharing, or the absence of a surcharge. Health-contingent wellness programs that offer rewards or impose surcharges must meet five requirements to fall within the exception to the health status underwriting prohibition. First, the plan must be designed to be available to all similarly situated individuals, who must be given a chance at least once a year to qualify.
Second, the size of the reward cannot exceed 30 percent of the total cost of coverage, including both the employer and employee’s contribution. If dependents may participate in the wellness program, the reward cannot exceed 30 percent of the cost of family coverage. The proposed rule would also allow a 20 percent additional reward (for a maximum 50 percent of cost of coverage total) for smoking cessation or reduction.
Third, wellness programs must provide a “reasonable alternative standard” or waiver of the health-contingent standard for individuals who find it unreasonably difficult to meet the otherwise applicable standard because of their medical condition, or for whom it is medically inadvisable to attempt to satisfy the standard.
Such an alternative must be provided on request and cannot be refused simply because the individual has not been successful in prior attempts to address an issue. A reasonable alternative standard cannot be one that requires the participant to pay for the cost of the program or for a membership or participation fee.
If an alternative is proposed by a medical professional who is an employee or agent of the plan, but the individual’s personal physician states that the proposal is not medically appropriate, the treating physician’s judgment must prevail. A plan or insurer can require verification of a claim that it is unreasonably difficult for an individual to comply with a health standard, but only if such a request is reasonable under the circumstances. A request would be unreasonable if the plan or insurer is already aware of the individual’s medical condition.
Fourth, health-contingent wellness programs must be reasonably designed to promote health or prevent disease, not be overly burdensome, and not be a subterfuge for health status discrimination. A program would have to offer a different, reasonable means of qualifying for the reward to any individual who does not meet the standard based on the measurement, test, or screening. Finally, the program must notify employees of the opportunity to seek alternative qualification standards for an incentive reward or the possibility of waiver of a standard. This notice is not required if plan materials merely mention the availability of a wellness program without describing it. New, simplified language for employee notices is provided in the proposed regulations.
Wellness programs are a good idea for employers seeking to control health insurance costs and are being encouraged in the implementation of the ACA. Employers may wish to discuss such programs and the aforementioned requirements with their legal counsel and insurance representatives.