Does Your Wellness Program Make the Grade?

Authored by: Kate Bongiovanni
On June 3, 2013, the Departments of Health and Human Services, Treasury, and Labor released final regulations implementing the changes to employer-sponsored wellness programs under the Patient Protection and Affordable Care Act (“PPACA”).  The final regulations adopt the distinction between the following types of wellness programs:

  • Participatory Wellness Programs – wellness programs that do not condition a reward on an individual satisfying a health standard (or do not provide a reward at all) (e.g., reimbursements for fitness center membership costs); and
  • Health-Contingent Wellness Programs – wellness programs that require an individual to satisfy a standard related to a health factor to obtain a reward (e.g., rewards for quitting smoking).  The final regulations further divide Health-Contingent Wellness Programs into Activity-Only Wellness Programs and Outcome-Based Wellness Programs.

Health-Contingent Wellness Programs must satisfy the following five (5) requirements to be permissible under the final regulations:

  • Individuals must have the opportunity to qualify for the reward at least once per year;
  • The reward cannot exceed 30% of the total cost of employee-only coverage under the plan (or up to 50% for Health-Contingent Wellness Programs designed to prevent or reduce tobacco use);
  • The reward must be available to all similarly-situated individuals, and a “reasonable alternative standard” for obtaining the reward must be provided for any individual for whom it is either unreasonably difficult due to a medical condition to meet the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard;
  • Health-Contingent Wellness Programs must be reasonably designed to promote health or prevent disease, not be overly burdensome, not be a subterfuge for discrimination based on a health factor, and not be highly suspect in the method chosen to promote health or prevent disease; and
  • Plans must disclose the availability of other means of qualifying for the reward, or the possibility of waiver of the otherwise applicable standard, in all plan materials describing the terms of a Health-Contingent Wellness Program.

The final regulations become effective for wellness programs beginning on or after on January 1, 2014.

Stay tuned.  In the near future, we will be releasing an SGR Client Alert with additional details regarding the final regulations implementing the changes to wellness programs under PPACA.

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