On November 20, the Department of Labor’s Employee Benefits Security Administration (EBSA), U.S. Department of Health and Human Services (HHS), and the Treasury Department issued proposed rules titled “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans.” On the same day, the EBSA also issued a fact sheet on wellness programs as they relate to Health Care Reform. The proposed rules would be effective for “grandfathered” and “non-grandfathered” group health plans in plan years beginning on or after January 1, 2014.
Prior to Health Care Reform, rules regarding wellness programs for group health plans were included in regulations promulgated under HIPAA. These rules set for the distinction between “participatory wellness programs” (those that provide an award for mere participation in a wellness program regardless of outcome) and “health-contingent wellness programs” (programs that require individuals to meet a specific health-related standard in order to receive an incentive). Under the prior rules, health-contingent wellness program incentives were limited to 20 percent of the cost of coverage and additional requirements regarding eligibility, purpose, and alternatives under such programs needed to be satisfied in order for such programs not to be considered discriminatory under HIPAA.
The proposed rules retain most of the prior rules governing both participatory and health-contingent wellness programs, but: (i) codify certain key changes under Health Care Reform; and (ii) offer clarifications with respect to the design of health-contingent wellness programs and the reasonable alternatives such programs must offer under the law. These changes and clarifications include:
- Incentives offered under health-contingent wellness programs may be increased from 20 percent to 30 percent of the total cost of employee-only coverage under the plan (or the total cost of coverage in which the participant is enrolled if dependents are eligible to participate). In the case of programs designed to prevent or reduce tobacco use, the maximum award may further increase to 50 percent.
Health-contingent wellness programs have always been required to provide a reasonable alternative to obtaining incentives if the proposed standard was unreasonably difficult or medically inadvisable to attempt to achieve. The proposed rules build upon this rule through:
- Providing that if a reasonable alternative standard is an educational program, the plan cannot require individuals to find such a program on their own, nor may the plan require individuals to pay for the program. Similarly, the plan must pay for the cost of any weight loss program offered as a reasonable alternative.
- Continuing to permit group health plan sponsors to obtain physician verification that an individual’s health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard. However, under the proposed rules it would not be reasonable for a plan to seek verification of a claim that is obviously valid based on the nature of the individual’s known medical condition.
- Issuing new language to communicate to health-contingent wellness program participants the opportunity for a reasonable alternative to obtaining an incentive as follows: Your health plan is committed to helping you achieve your best health status. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at ______________________ and we will work with you to find a wellness program with the same reward that is right for you in light of your health status.
- Further confirming that adverse benefit determinations regarding the availability of a reasonable alternative standard under a health-contingent wellness program qualify for Federal external review under Health Care Reforms claims and appeals procedures.
- Health-contingent wellness programs must be reasonably designed to promote health or prevent disease. The proposed rules clarify that where the initial standard for the reward is based on a measurement, test or screening, health plans will be required 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. For example, a health plan that ties an incentive to a target body mass index (“BMI”) will meet this requirement if it offers the same incentive to a participant who does not meet the BMI target but who complies with a reasonable exercise program.
The Departments seek comments regarding the proposed regulations and other wellness program related issues, which must be submitted by January 25, 2013.
During the past several years, wellness programs have increased in popularity among employers as a means to control costs and to encourage healthy behavior in their workforce. The proposed rules offer important developments impacting wellness programs, particularly though permitting more meaningful incentives and through clarifying several unanswered questions left from the prior rules. Employers should act now to consider how the proposed rules will impact their wellness programs beginning in 2014 and to plan any changes or enhancements to their programs. In addition to the proposed rules, employers must also continue to be mindful of other laws that impact upon wellness programs such as the Americans with Disability Act, the Genetic Information Nondiscrimination Act, and federal and state tax and privacy laws.