Federal agencies charged with implementing provisions of the Affordable Care Act (ACA) have released their final rule governing nondiscriminatory wellness programs in group health coverage. The rule addresses the parameters and design criteria for both health-contingent wellness programs – those that reward individuals who meet a specific standard or goal related to their health –and participatory wellness programs, which generally are available without regard to an individual’s health status, such as reimbursement for the cost of fitness club memberships or rewards for attending health seminars. In addition, the final rule addresses the reasonable alternatives that must be provided to avoid discrimination. Notably, the agencies recognize that “each wellness program is unique and questions may remain regarding the application of these requirements.” Therefore, employers can expect the issuance of future subregulatory guidance clarifying and possibly modifying this final rule.

The ACA amended and extended certain Health Insurance Portability and Accountability Act of 1996 (HIPAA) nondiscrimination and wellness provisions of the Public Health Service (PHS) Act. In general, the final rule increases the maximum permissible financial reward under a health-contingent wellness program offered in connection with health insurance coverage from 20% to 30% of the cost of health coverage. The rule further stipulates that the maximum reward offered for participation in a wellness program designed to reduce or prevent tobacco use is 50% of the cost of coverage.

The final rule generally adopts the proposed requirements that health-contingent wellness programs, as opposed to participatory wellness programs, must meet.

  1. The program must give eligible individuals an opportunity to qualify for the reward at least once per year.
  2. The reward for a health-contingent wellness program, together with the reward for other health-contingent wellness programs with respect to the plan, must not exceed 30% of the total cost of employee-only coverage under the plan or 50% to the extent the program is designed to prevent or reduce tobacco use.
  3. The reward must be available to all similarly situated individuals. For this purpose, a reasonable alternative standard (or waiver of the otherwise applicable standard) must be made available to any individual for whom, during that period, it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard (or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard).
  4. The program must be reasonably designed to promote health or prevent disease. The proposed regulations also stated that, to the extent a plan’s initial standard for obtaining a reward (or a portion of a reward) is based on results of a measurement, test, or screening that is related to a health factor (such as a biometric examination or a health risk assessment), the plan is not reasonably designed unless it makes available to all individuals who do not meet the standard based on the measurement, test, or screening, a different, reasonable means of qualifying for the reward.
  5. The plan must disclose in all plan materials describing the terms of the program the availability of other means of qualifying for the reward or the possibility of waiver of the otherwise applicable standard.

The final rule subdivides health contingent wellness programs into activity-only wellness programs and outcome-based wellness programs, “to make it clearer to whom a plan or issuer is required to provide a reasonable alternative standard.” The final rule also clarifies the scope of the existing HIPAA and ACA rules governing wellness programs and sets forth “criteria for an affirmative defense that can be used by plans and issuers in response to a claim that the plan or issuer discriminated under the HIPAA nondiscrimination provisions.” The final rule does not set standards for every type of program or information technology platform that could be labeled a wellness program.

In addition, the final rule clarifies how the five statutory requirements listed above apply to different types of wellness programs. Specifically, the final rule:

reorganizes the presentation of the steps a plan or issuer must take to ensure a wellness program: is reasonably designed to promote health or prevent disease; has a reasonable chance of improving the health of, or preventing disease in, participating individuals; is not overly burdensome; is not a subterfuge for discriminating based on a health factor; and is not highly suspect in the method chosen to promote health or prevent disease.

According to the agencies, the purpose of the final rule is:

regardless of the type of wellness program, every individual participating in the program should be able to receive the full amount of any reward or incentive, regardless of any health factor. The reorganized requirements of the final regulations explain how a plan or issuer is required to provide such an opportunity for each category of wellness program.

These final rule – which takes effect 60 days after its June 3, 2013 publication in the Federal Register – generally applies to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2014, and to individual health issuers for policy years beginning on or after January 1, 2014.

In addition, the Department of Labor has posted on its website the Workplace Wellness Programs Study: Final Report, which discusses wellness programs in greater detail.