Feds Propose New Guidance on Wellness Programs. Feel Better Now?

“Wellness programs take many forms; however, the common feature of all wellness programs is that they are designed to encourage healthier lifestyles, often by rewarding participants for attaining or improving certain health factors. Most wellness programs are subject to HIPAA’s nondiscrimination rules … [h]owever, the HIPAA nondiscrimination rules contain an exception whereby group health plans or issuers may offer employee premium/contribution discounts or rebates, or modify copayments, coinsurances, or deductibles based on participation in certain programs that promote health or disease prevention (wellness programs).” (Proskauer)

Earlier this month, the Departments of Health and Human Services, Labor, and Treasury issued guidance on a number of key provisions of Patient Protection and Affordable Care Act, including regulations intended to prevent discrimination in employee-sponsored wellness programs.

The guidance reinforces the key distinction already made between “participatory” and “health-contingent” programs, write Jean Hemphill and Edward Leeds from Ballard Spahr:

“The new regulations continue to distinguish ‘health-contingent’ programs from ‘participatory’ programs. A health-contingent program rewards participants who achieve certain health standards, such as maintaining a particular cholesterol or blood pressure level. A participatory program does not do so. It may base a reward on activities, such as completing a health risk assessment or submitting to certain screening examinations, without regard to outcome, or it may not provide for any reward at all.”

For participatory programs, the rules (generally) stay the same. From law firm Proskauer:

“A participatory wellness program is exempt from the nondiscrimination requirements provided it is available to all similarly situated individuals. Examples of participatory wellness programs include employer-paid gym memberships or smoking cessation programs with no requirement of program success.”

The rules for health-contingent programs have been clarified and amended, however. For your reference, five takeaways:

1. The programs must be available to all:

“Programs must be reasonably designed to be available to all similarly situated individuals. A reasonable alternative means of qualifying for the reward would have to be offered to individuals whose medical conditions make it difficult, or for whom it is medically inadvisable, to meet the specified health-related standard.” (XpertHR)

2. An alternative for obtaining the reward must be available:

“All materials that describe the wellness program must continue to provide notice of the availability of an alternative means of qualifying for the reward. The notice does not need to include details of the alternative. The regulations set forth a new, ‘less complicated and confusing’ model notice. Employers may continue to design their own notices, however, and various examples in the new regulations make it clear that variations in the notice are expected.” (Ballard Spahr)

3. The rules apply to both “grandfathered” and “non-grandfathered” health plans:

“The Proposed Rules apply beginning January 1, 2014 and they would apply to grandfathered as well as non-grandfathered group health plans. A ‘grandfathered health plan’ is any group health plan or individual coverage that was in effect on March 23, 2010 and that is not changed in ways specified in the implementing regulations… [T]he Proposed Rules would apply the same set of wellness program standards to both grandfathered and non-grandfathered health plans to ‘avoid inconsistency across group health coverage and to provide grandfathered plans the same flexibility to promote health and prevent disease as non-grandfathered plans.’” (Proskauer)

4. You can offer greater incentives:

“The Wellness Program Rule also increases the maximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of health coverage. Employers may increase the maximum reward further to as much as 50 percent for wellness programs designed to prevent or reduce tobacco use.” (Duane Morris)

5. Annual qualification is required:

“The program must give eligible individuals the opportunity to qualify for the reward at least once a year.” (McDermott Will & Emery)

The updates:

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