December 6, 2012
The Departments of Health and Human Services, Labor and Treasury jointly proposed regulations on wellness programs to reflect changes made by the Health Care Reform Act. These proposed regulations would increase the maximum rewards allowed under results-based wellness programs.
Affected Plans. The proposed regulations apply to both fully insured and self-funded group health plans and are effective for plan years beginning on or after January 1, 2014. Although the wellness program changes in the Health Care Reform Act apply only to non-grandfathered plans, the proposed regulations would apply to both grandfathered and non-grandfathered plans.
Current Law. Under existing rules, results-based wellness programs (i.e., programs that condition an employee’s receipt of a reward on satisfying a health-related standard, such as quitting smoking or meeting certain biometric targets) must generally satisfy the following requirements:
- The program must be reasonably designed to promote health or prevent disease;
- Participants must be given the opportunity to qualify for the reward at least once a year;
- If, due to a health factor, it would be unreasonably difficult for a participant to meet the standard for the reward, the program must offer and disclose a reasonable alternative standard for achieving the reward; and
- The reward associated with the program must not exceed 20% of the total cost of coverage (both employer and employee cost) under the employer’s group health plan.
The Proposed Rules. The new rules propose increasing the maximum permissible reward from 20% of the total cost of plan coverage to 30%. Additionally, the maximum permissible reward for wellness programs focusing on smoking cessation would be increased to 50% of the total cost of coverage.
Further Clarification. In addition to increasing the maximum permissible reward, the proposed regulations offer clarification regarding the following:
- Reasonable Alternative Standards. Under the proposed regulations, plans do not have to establish a specific alternative standard until an individual who suffers from a medical condition requests one, but plans must disclose in general terms the availability of alternative standards, even if a specific alternative standard has not yet been established.
- Verification of Medical Condition. Under the current regulations, a plan is permitted to seek verification (for example, from an individual’s personal physician) that an individual has a medical condition which makes him unable to satisfy the applicable standard. The Health Care Reform Act provides that verification may only be sought “if reasonable under the circumstances.” The proposed regulations clarify that it is unreasonable to request medical verification if the medical condition is apparent (e.g., in the situation in whichan employee who uses a wheel chair).
- Reasonable Design. The proposed regulations provide that if a plan’s initial standard for obtaining a reward is based on the results of a measurement, test or screening relating to a health factor, the plan must make available to any individual who does not meet that standard a different, reasonable means of qualifying for the reward.
- Notice of Availability of Other Means of Qualifying for the Reward. The availability of an alternative standard (or waiver) must be disclosed in any plan materials that describe the terms of the program. The proposed regulations offer simplified sample language to increase the likelihood that individuals who qualify for an alternate standard will request one.
Next Steps. Group health plans that have a results-based wellness program or for which such a program is contemplated should consider how the proposed regulations may affect their wellness program’s design.
Contact Information. For more information from Mazursky Constantine, please contact Amy Heppner (404.888.8825), Kelly Myers (404.888.8838). For more information from VCG Consultants, please contact Leslie Schneider (770.863.3617).
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