The Departments of Labor, Treasury and Health & Human Services have issued final regulations regarding wellness programs in group health plans effective for plan years beginning on or after January 1, 2014 (the "Wellness Regulations").3 The Health Insurance Portability and Accountability Act ("HIPAA") generally prohibits group health plans and insurers from discriminating within a group of similarly-situated individuals on the basis of health factors. Wellness programs are an exception to this nondiscrimination rule, provided that such programs meet certain requirements. The Wellness Regulations expand and clarify these requirements, requiring group health plan providers and insurers to re-evaluate their existing wellness programs to ensure compliance. 

Consistent with the prior regulations, the Wellness Regulations divide wellness programs into two categories: participatory and health-contingent. Participatory wellness programs are those that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. Health-contingent wellness programs are those that require an individual to satisfy a standard related to a health factor in order to obtain a reward. The Wellness Regulations subdivide health-contingent wellness programs into two categories (activity-only and outcome-based), both of which are required to comply with five re-designed statutory requirements. Among other changes, employers with outcome-based wellness programs are required to offer a reasonable alternative standard if an employee cannot satisfy the criteria to receive the reward regardless of the reason. In addition, an employer may not require a doctor's verification of the employee's inability to satisfy the criteria. Furthermore, the Wellness Regulations increase the limits for rewards under health-contingent wellness programs to 30% of the total cost of employee-only coverage (50% for certain tobacco-related programs). 

We recommend that employers review their wellness program materials, as some of the expansions and clarifications made by the Wellness Regulations (particularly the reasonable alternative rules for outcome-based wellness programs) were commonly overlooked by employers. Please note that the Wellness Regulations provide new safe harbor language for disclosure of the reasonable alternative standard.