On June 3, 2013, the Departments of Treasury, Labor, and Health & Human Services (the “Agencies”) issued final regulations (the “Regulations”) addressing nondiscrimination in employer wellness plans under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). The Regulations redesign the rules applicable to health-contingent wellness plans, adding a new layer of complexity to already complex rules. As discussed in this alert, employers should re-evaluate their wellness plans in light of these Regulations, and we expect that many will need to modify their wellness programs in response.
Background on Wellness Rules. HIPAA prohibits group health plans from discriminating against an individual on the basis of a health factor. However, HIPAA generally allows an employer to establish a “wellness plan” to promote the health of employees and family members. Wellness plans are currently subject to federal regulations known as the “HIPAA wellness rules,” which require that a wellness plan meet certain requirements based on whether it is “participatory” or “health-contingent.” A participatory wellness plan complies with the HIPAA wellness rules if it is offered to all similarly situated individuals, regardless of health status. A health-contingent wellness plan requires an individual to satisfy a standard related to a health factor in order to obtain a reward, and must meet additional requirements to comply with the HIPAA wellness rules, including requirements to provide a reasonable alternative standard (or waiver of the applicable standard) under certain circumstances, and to disclose the availability of that reasonable alternative standard.
The Agencies issued proposed regulations on November 26, 2012, regarding the HIPAA wellness rules. The proposed and final regulations implement certain changes to the HIPAA wellness rules that were required by the Patient Protection and Affordable Care Act (the “ACA”). This alert will focus on the differences between those proposed regulations and the new Regulations. For more information regarding the content of the proposed regulations, please see our alert from December 2012 found here.
Final Regulations Define New Subcategories of Health-Contingent Wellness Plans. The Regulations create two new subcategories of health-contingent wellness plans: activity-only wellness plans and outcome-based wellness plans.
- Activity-Only Wellness Plans. An “activity-only wellness plan” provides an individual with a reward if he or she performs or completes an activity related to a health factor, but does not require the individual to attain a specific health outcome. Examples include walking, diet or exercise programs. Note that activity-only wellness plans include many activities that were previously thought to be “participatory wellness plans.” An employer should consider redesigning its wellness plan if the plan is an activity-only wellness plan and does not currently comply with the requirements applicable to health-contingent wellness plans (e.g., the requirement to provide a reasonable alternative standard, as discussed in more detail below).
- Outcome-Based Wellness Plans. An “outcome-based wellness plan” provides an individual with a reward for attaining or maintaining a specific health outcome, such as not smoking or having a certain BMI.
Reasonable Alternative Standards. The Regulations are restructured to separately apply the HIPAA wellness rules to activity-only wellness plans and outcome-based wellness plans. These rules are applied in the same manner for each type of plan, except with respect to the requirement that a health-contingent wellness plan provide a reasonable alternative standard (“RAS”) (or waiver of the otherwise applicable standard) in certain circumstances.
- Outcome-Based Wellness Plan Must Provide RAS to Broader Group. An activity-based wellness plan must provide a RAS (or a waiver of the otherwise applicable standard) to each individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable to attempt, to complete the otherwise applicable standard. However, an outcome-based wellness plan must provide a RAS (or a waiver of the otherwise applicable standard) to each individual who does not meet the initial standard, regardless of unreasonable difficulty or medical inadvisability.
- Wellness Plans Can No Longer Request Physician Verification As Matter of Course. The existing HIPAA wellness rules allow a plan to request that an individual submit a physician statement verifying that the individual has a health factor that makes it unreasonably difficult for the individual to satisfy, or medically inadvisable to attempt to satisfy, a standard under a wellness plan. The ACA revised the HIPAA wellness rules to provide that a plan can only require a physician verification if it is reasonable under the circumstances. The Regulations clarify that it is never reasonable for an outcome-based wellness plan to request a physician verification as a condition for providing a RAS. In addition, the Regulations clarify that an activity-based wellness plan may request a physician verification as a condition for providing a RAS only if it is reasonable to determine that the plan requires medical judgment to evaluate the validity of the request for a RAS.
- Wellness Plans May Need to Offer Multiple RASs. If the RAS under a wellness plan is itself health-contingent, the RAS must comply with the HIPAA wellness rules as if it were the initial wellness plan standard. Accordingly, the plan may need to offer a second RAS. For example, Client Co.’s wellness plan rewards individuals who meets a target BMI on a biometric screening, and requires any individual who does not meet that BMI to complete a walking program in order to receive the reward. The walking program must separately comply with the requirements for activity-only wellness plans, including the requirement that the plan offer a RAS for an individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable to attempt, to complete the walking program.
If the RAS for an outcome-based wellness plan is itself an outcome-based wellness plan, the following additional rules apply:
- The plan cannot require an individual to meet a different level of the same initial standard unless the plan allows the individual additional time to meet the RAS; and
- The plan must give the individual the opportunity to comply with the recommendations of his or her personal physician as the RAS, but only if the physician joins in the request (which can be made at any time).
A plan must continue to offer a RAS for as long as the RAS is itself a health-contingent wellness plan. An employer could end this cycle of RAS by eventually providing a RAS that is a participatory wellness plan.
Final Regulations Provide Some Additional Clarifications. The Regulations provide additional guidance under the HIPAA nondiscrimination rules. Under the Regulations:
- A plan must offer the same, full reward to an individual who satisfies a RAS as to an individual who satisfied the original standard, even if the individual does not satisfy the RAS until months after he or she failed to meet the original standard.
- A plan cannot impose an unreasonable time commitment upon an individual in order to satisfy a RAS (e.g., a one-hour class per night would be unreasonable).
- A plan must allow an individual’s personal physician to make recommendations regarding medical appropriateness for an individual, and the plan must accommodate those recommendations with respect to any plan standard.
- A plan must continue to offer a RAS (or a waiver of the otherwise applicable standard), even if an individual has not previously been able to meet the initial standard. However, the plan can require an individual to complete different types of RASs (e.g., educational program, tobacco cessation program, etc.) from year to year.
Final Regulations Provide Clarification Regarding Health Risk Assessments. The Regulations clarify that a wellness plan that provides a reward to employees who complete a health risk assessment without any further action required by the employee is a “participatory wellness plan.” Accordingly, if an employer maintains this type of participatory wellness plan, the employer will not need to comply with the additional requirements that apply to health-contingent wellness plans. However, employers should carefully design such plans to comply with other legal requirements, such as the Americans with Disabilities Act.
Sample Language Revised. The proposed regulations included sample language to be used to inform individuals of the RAS available under a wellness plan. The Regulations revise that language to include contact information for obtaining the RAS and a statement that recommendations of an individual’s personal physician will be accommodated by the wellness plan.
Effective Date of Final Regulations. The Regulations are applicable to plan years beginning on or after January 1, 2014.
Links to Guidance: The Regulations regarding HIPAA nondiscriminatory wellness plans, including the sample language mentioned above, can be found here.