Last week, the IRS, DOL and HHS (the “Departments”) published proposed rules amending the regulations regarding nondiscriminatory wellness programs in group health plan coverage proposed regulations. Consistent with the Affordable Care Act, the proposed regulations increase the maximum allowable reward for a health-contingent wellness program under a group health plan from 20% to 30% of the cost of coverage – and up to 50% for anti-tobacco wellness programs. While there was a lack of clarity in the ACA over whether the higher limits would apply to grandfathered plans, the new rules are written to apply to both grandfathered and non-grandfathered group health plans, effective January 1, 2014.
Consistent with existing rules, the new rules provide that the cost of coverage includes the total cost of employee coverage under the plan and may also include the cost of employee plus dependent coverage if dependents may participate in the health-contingent wellness program. The Departments acknowledged that questions have been raised about how to apportion the cost among participating dependents and invited comments on the issue – for example, whether the reward should be prorated if only one family member fails to qualify for it.
The proposed regulations generally reiterate the requirements that currently apply to health-contingent wellness programs, but with several clarifications:
- In lieu of providing a reasonable alternative standard, a plan or issuer may always waive the otherwise applicable standard and provide the reward.
- Plans or issuers need not establish a particular alternative standard in advance of an individual’s request, but must do so once requested.
- Plans or issuers cannot cease to provide a reasonable alternative merely because it was not successful before.
Whether a particular alternative standard is reasonable will depend on the facts and circumstances, including the following:
- If the reasonable alternative is completion of an education program, the plan or issuer must make it available free of charge instead of requiring an individual to find his own program.
- If the reasonable alternative is a diet program, the plan or issuer must pay any membership or participation fee, but need not pay the cost of food.
- If the reasonable alternative is compliance with the guidelines of a medical professional associated with the plan, and an individual’s own doctor states that such guidelines are not medically appropriate, then the plan must provide a reasonable alternative that follows the individual’s physician’s recommendations.
The Departments asked for comment on whether any additional rules or clarifications are needed.
- While a plan may generally seek verification, such as a doctor’s note, if a health factor makes it unreasonably difficult or medically inadvisable for an individual to satisfy a health standard, a plan may not seek verification when a claim would be “obviously valid” based on the nature of an individual’s known medical condition.
- The proposed regulations provide new sample language designed to meet the requirement that plans disclose the availability of other means of qualifying for the reward or possibility of waiver in all plan materials describing a health contingent wellness program. The new sample language is designed to be simpler, based on feedback that earlier sample language was complicated and confusing.