Health Care Reform - Wellness Programs - Final Regulations

Last week, HHS, DOL and the IRS jointly issued final rules on "Incentives for Nondiscriminatory Wellness Programs in Group Health Plans."  The final rules update existing HIPAA wellness rules, and are effective for plan years beginning after January 1, 2014.  They apply to both grandfathered and non-grandfathered health plans.  Note that compliance with these rules does not guarantee compliance with other laws, including the American’s with Disabilities Act ("ADA") and the Genetic Information Nondiscrimination Act ("GINA").
 

I.    Is the wellness program "Participatory" or "Health-Contingent?"

a.    Participatory if none of the conditions to obtain a reward are conditioned on satisfying a health standard.

Examples:

•    employer payment or reimbursement of health club membership
•    reward for participating in diagnostic screening regardless of outcome
•    reward or reimbursement for smoking cessation program, regardless of whether the employee quits

b.    Health-Contingent if the individual is required to satisfy a standard related to a health factor in order to obtain a reward.  Health-Contingent programs must meet the requirements of the HIPAA wellness rules.

II.    If Health-Contingent, is the program "Activity-Based" or "Outcome-Based?"  (New distinction in final regs.)

a.    Activity-Based programs require the performance of an activity related to a health factor to obtain a reward, but do not required attainment of a specific outcome.

Examples:  Walking, diet or exercise programs where some individuals may have be unable to participate or complete (or have difficulty doing so) due to a health factor such as asthma, pregnancy or recent surgery

b.    Outcome-Based programs require an individual to attain or maintain a specific health outcome in order to obtain a reward.

Examples:  

•    reward for not smoking
•    reward for attaining certain results in biometric screening
•    also includes biometric screening programs that provide a reward for those within a healthy range while requiring those who don’t attain that standard to take additional steps (such as participating in a health education program) to obtain the reward

III.    HIPAA/ACA Requirements for Health-Contingent Programs

a.    Annual qualification

•    Opportunity to qualify for the reward must be available at least once/year
•    Same whether Activity-Based or Outcome-Based

b.    Limit on Amount of Reward

•    May not exceed "the  applicable percentage" of the cost of coverage under the plan

o    30% limit for non-tobacco wellness program
o    additional 20% for tobacco based wellness (not to exceed 50% total)

•    "Reward" may be either a premium discount or avoiding a penalty such as a premium surcharge
•    Cost of coverage is based on the total amount of employer plus employee contribution for the applicable benefit package
•    Cost of coverage is based on employee-only coverage unless dependents may participate in the wellness program
•    Same whether Activity-Based or Outcome-Based

c.    Reasonable Design

•    Wellness program must be "reasonably designed to promote health or prevent disease."

o    Reasonable chance of improving health or preventing disease
o    Not overly burdensome
o    Not a subterfuge for discrimination based on a health factor
o    Not "highly suspect" in the method chosen

•    Same whether Activity-Based or Outcome-Based

d.    Reasonable Alternative

1.    Activity-Based Programs

•    Alternative required only if it is unreasonably difficult or medically inadvisable for individual to meet standard
•    May require verification from physician if requiring is reasonable under the circumstances
•    Guidelines for alternative

o    Must provide alternative for individuals for whom it is unreasonably difficult or medically inadvisable to attempt to satisfy the standard
o    May determine alternative on an "ad hoc" basis, upon request by individual
o    May simply waive medical standard rather than providing alternative
o    If alternative is an education program, plan must make available or assist employee in finding program.  Employee cannot be required to pay
o    Any time commitment must be reasonable
o    If alternative is a diet program, plan must pay any fees, etc., but is not required to pay for food
o    If employee’s physician states plan standard is not medically appropriate, plan must provide alternative that accommodates physician’s recommendations.  Plan may impose cost sharing for any related medical items or services.

2.    Outcome-Based Programs

•    Reasonable alternative required for all

o    Applies to any individual who does not meet the initial standard that is related to a health factor
o    Alternative required regardless of medical condition

•    No physician verification allowed, since alternative required for anyone who fails standard, regardless of health reason
•    Guidelines for alternative are the same as above for Activity-Based

3.    NOTE:  Special rules for testing alternatives

•    If the alternative chosen is also health-contingent, must determine if it is Activity-Based or Outcome-Based and run through the analysis again.  Another alternative may be necessary.

e.    Notice of Reasonable Alternative

•    Plan materials must disclose the availability of a reasonable alternative to qualify for reward, or the possibility of a waiver of the standard.
•    Disclosure must include contact information and a statement that the individual’s physician will be accommodated.
•    Sample language:

"Your health plan is committed to helping you achieve your best health.  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 (and, if you wish, your doctor) to find a wellness program with the same reward that is right for you in light of your health status."

•    Same whether Activity-Based or Outcome-Based

f.    Timing of Reward

•    Individuals given an alternative standard must be able to earn the same full reward as those you met the initial standard
•    May require retroactive payment of reward, depending on the circumstances

Example:    Employer has a calendar year wellness program, but employee is unable to satisfy its requirements until April.  Employee must be given the reward of premium credits for January through March also.  Plan has flexibility in determining how to provide the reward, e.g. retroactive payments or pro rata for remainder of year, as long as method is reasonable and the employee receives the full reward.

•    Same whether Activity-Based or Outcome-Based

•    Excise tax of $100/day/employee

•    Injunctive relief also available to employees through the courts