Guidance on Wellness Programs in Group Health Plans

The government recently released new guidance in the form of proposed regulations addressing when a wellness program will be considered discriminatory. Wellness programs included in an employer health plan cannot discriminate on the basis of an adverse health factor. The new rules will apply to plan years beginning on or after January 1, 2014.

Employers implement wellness programs to promote a healthy workforce. Employers have seen return on investment as healthier workers are more productive workers. However, wellness programs are subject to scrutiny. Rules exist presently under the Health Insurance Portability and Accountability Act ("HIPAA") governing the operation of wellness programs. The Affordable Care Act places further restrictions on such programs.

The new guidance require wellness programs to adhere to certain specific standards.

There is now a distinction between "health contingent programs" and "participatory programs." A health contingent program rewards individuals who reach certain health standards (such as getting BMI below a certain level, or reducing cholesterol to a certain level). A participatory program awards mere participation without tying the reward to reaching any particular result. A participatory program just has to be available to all similarly situated individuals to be considered nondiscriminatory.

A health contingent program must meet five criteria to be nondiscriminatory:

  • Individuals must be able to qualify for the reward at least one time per year.
  • The program must be reasonably designed to promote health and prevent disease.
  • The reward may be a maximum of 30 percent of the total cost of coverage. It may be 50 percent of the total cost of coverage if it is for a reduction in the use of tobacco. Total cost of coverage includes both employee and employer contributions to the cost of single employee coverage (for a single employee) or family coverage (for an employee covering family members).
  • An alternative means of qualifying for the reward has to be offered to people who cannot meet the health standard for medical reasons. The guidance expands on what is considered an alternative means.
  • Materials describing the wellness program must provide notice of the availability of the alternative means of qualifying for the reward.

This new guidance effectively brings the existing HIPAA rules on wellness programs in line with the new requirements under the Affordable Care Act. Employers now have clearer direction to follow when implementing or administering a wellness program as part of their health plan.

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