Workplace Wellness Program Nondiscrimination Rules
Posted on: March 10, 2015Categories: HR & ComplianceWorkplace wellness programs often incorporate incentives or rewards to promote healthy lifestyle choices and discourage behaviors that are detrimental to employees’ good health. A workplace wellness program that relates to a group health plan or is linked to a health factor must comply with nondiscrimination rules under the Health Insurance Portability and Accountability Act (HIPAA). These rules allow employers to provide incentives or rewards as part of a health-contingent wellness program, provided the program follows certain guidelines.
In addition, the Affordable Care Act (ACA) includes provisions to encourage the use of wellness programs. Effective for plan years beginning on or after Jan. 1, 2014, the ACA adopts the existing HIPAA nondiscrimination requirements for health-contingent wellness programs with some modifications. The ACA also increased the maximum reward that can be offered under these programs.
On May 29, 2013, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) released final rules that implement the ACA’s nondiscrimination requirements for wellness programs. The final rules, which clarify and reorganize previous proposed rules, are intended to ensure that every individual participating in a wellness program can receive the full amount of any reward or incentive, regardless of any health factor.
The final rules apply to both grandfathered and non-grandfathered group health plans and group health insurance coverage for plan years beginning on or after Jan. 1, 2014.
In addition, on Jan. 9, 2014, the Departments issued frequently asked questions (FAQs) that address several issues related to wellness programs that have been raised since the final rules were published.
CATEGORIES OF WELLNESS PROGRAMS
Under the ACA, workplace wellness programs are divided into two general categories: participatory wellness programs and health-contingent wellness programs. This distinction is important because participatory wellness programs are not required to meet the same nondiscrimination standards that apply to health-contingent wellness programs.
Participatory Wellness Programs
Participatory wellness programs either do not require an individual to meet a health-related standard to obtain a reward or do not offer a reward at all. Participatory wellness programs comply with the nondiscrimination requirements without having to satisfy any additional standards, as long as participation in the program is made available to all similarly-situated individuals, regardless of health status. There is no limit on financial incentives for participatory wellness programs.
Health-contingent Wellness Programs
Health-contingent wellness programs require individuals to satisfy a standard related to a health factor in order to obtain a reward. There are two types of health-contingent wellness programs: activity-only wellness programs and outcome-based wellness programs.
NONDISCRIMINATION STANDARDS FOR HEALTH-CONTINGENT WELLNESS PROGRAMS
Under HIPAA, group health plans and group health insurance issuers are prohibited from discriminating against individual participants and beneficiaries in eligibility, premiums or benefits based on a health factor. An exception to this rule allows benefits (including cost sharing), premiums or contributions to vary based on participation in a wellness program, if the program complies with certain nondiscrimination standards.
In 2006, the Departments released final regulations regarding HIPAA’s nondiscrimination and wellness provisions. The regulations prescribed five nondiscrimination standards for health-contingent wellness programs. The ACA codified the existing HIPAA regulations for wellness programs, while also increasing the maximum permissible reward that can be offered under health-contingent wellness programs.
The ACA final rules generally retain the proposed five requirements for health-contingent wellness programs. However, the final rules have reorganized these requirements, subdividing health-contingent wellness programs into activity-only wellness programs and outcome-based wellness programs. This change is intended to clarify the individuals to whom a reasonable alternative standard must be offered.
Frequency of Opportunity to Qualify
Health-contingent wellness programs must provide eligible individuals with an opportunity to qualify for the reward at least once per year. This requirement applies to both activity-only and outcome-based wellness programs.
Size of Reward
The final rules limit the total amount of the reward for health-contingent wellness programs (both activity-only and outcome-based) with respect to a plan, whether offered alone or coupled with the reward for other health-contingent wellness programs. The total reward offered to an individual under an employer’s health-contingent wellness programs cannot exceed a specified percentage of the total cost of employee-only coverage under the plan.
The total cost includes both employer and employee contributions towards the cost of coverage. If, in addition to employees, any class of dependents (such as spouses and dependent children) may participate in the health contingent wellness program, the reward cannot exceed the specified percentage of the total cost of the coverage in which the employee and any dependents are enrolled (such as family coverage or employee-plus-one coverage).
For health-contingent wellness programs that allow a class of dependents to participate, there are no special rules regarding apportionment of the reward among family members. Plans and issuers have flexibility to determine whether, and how, the maximum allowed reward or incentive would be prorated based on the portion of the premium or contribution attributable to that family member, as long as the method is reasonable.
The ACA increased the amount of the maximum permissible reward from 20 percent to 30 percent of the cost of health coverage, effective for plan years beginning on or after Jan. 1, 2014. In addition, the maximum permissible reward is increased to 50 percent of the cost of health coverage for health-contingent wellness programs designed to prevent or reduce tobacco use.
Reasonable Design
Health-contingent wellness programs must be reasonably designed to promote health or prevent disease, whether activity-only or outcome-based. A wellness program is reasonably designed if it has a reasonable chance of improving the health of, or preventing disease in, participating individuals.
While programs are not required to be accredited or based on particular evidence-based clinical standards (such as the CDC’s Guide to Community Preventive Services), these practices may increase the likelihood of wellness program success and are encouraged as a best practice.
Plans and issuers have flexibility to consider innovative programs for encouraging wellness. However, to be considered reasonably designed to promote health or prevent disease, outcome-based wellness programs are required to provide a reasonable alternative standard to qualify for the reward for all individuals who do not meet the initial standard that is related to a health factor. This is intended to ensure that outcome-based programs are reasonably designed to improve health and do not act as a subterfuge for underwriting or reducing benefits based on a health factor.
Plans and issuers may establish more favorable rules for eligibility or premium rates (including rewards for adherence to certain wellness programs) for individuals with an adverse health factor than for individuals without the adverse health factor.
Uniform Availability and Reasonable Alternative Standards
The full reward under a health-contingent wellness program (whether activity-only or outcome-based) must be available to all similarly situated individuals. To meet this requirement, all health-contingent wellness programs must provide a reasonable alternative standard (or waiver of the otherwise applicable standard) in certain circumstances.
Plans and issuers have flexibility in designing reasonable alternative standards and determining whether to provide the same alternative standard for an entire class of individuals or on an individual-by-individual basis. In addition, Plans and issuers are not required to establish an alternative standard before an individual requests one, as long as a reasonable alternative standard is provided (or the condition for obtaining the reward is waived) upon request.
Although an individual may take some time to request, establish and satisfy a reasonable alternative standard, the same, full reward must be available to that individual as is provided to individuals who satisfy the initial standard. Also, plans and issuers cannot stop providing a reasonable alternative standard under any health-contingent wellness program (whether activity-only or outcome-based) merely because one was not successful before. They must continue to offer a reasonable alternative standard, whether it is the same standard or a new one (such as a new weight loss class or a new nicotine replacement therapy).
Plans and issuers also have flexibility to determine how to provide the portion of the reward for the period before an alternative was satisfied (for example, payment for the retroactive period or pro rata over the remainder of the year), as long as the method is reasonable and the individual receives the full amount of the reward. If an individual does not satisfy the alternative standard until the end of the year, the plan or issuer may provide a retroactive payment within a reasonable time after the end of the year, but may not provide pro rata payments over the following year.
All facts and circumstances are taken into account in determining whether a plan or issuer has provided a reasonable alternative standard.
Notice of Other Means of Qualifying for the Reward
Plans and issuers are required to disclose the availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of waiver of the otherwise applicable standard) in all plan materials describing the terms of a health-contingent wellness program (both activity-only and outcome-based). The disclosure must include contact information for obtaining the alternative standard and a statement that recommendations of an individual’s personal physician will be accommodated.
If plan materials merely mention that a wellness program is available, without describing its terms, this disclosure is not required. For example, a summary of benefits and coverage that notes that cost-sharing may vary based on participation in a diabetes wellness program, without describing the standards of the program, would not trigger the disclosure.
Plans and issuers may modify the sample language to reflect the details of their wellness programs, provided that the notice includes all of the required content described in the final regulations. Additional sample language is available in the final rules in examples illustrating the requirements for outcome-based wellness programs.
share:
