Affordable Care Act and Wellness Program Exception

The United States Department of Labor, Health and Human Services and Treasury issued two Frequently Asked Questions (FAQs) on implementation of the Affordable Care Act. These FAQs address how wellness programs can comply with health care reform. 

Group health plans cannot discriminate against participants based on a health status factor. There is an exception that allows discounts or cost-sharing adjustments for an employee’s participation in a wellness program. 

Wellness program regulations under the Affordable Care Act require that the maximum reward under a health-contingent wellness program that is part of a group health plan cannot exceed 30% of the cost of coverage, or 50% of the cost of coverage when the program is designed to prevent or reduce tobacco use. The regulations also state that the design of the wellness program must be reasonably designed to avoid discrimination. 

The first newly issued FAQ addresses what it means for a health-contingent wellness program to be “reasonably designed.” To meet this requirement, the program must (1) have a reasonable chance of improving the health of, or preventing disease in, participating individuals; (2) not be overly burdensome; (3) not be a subterfuge for discrimination based on a health factor; and (4) not be highly suspect in the method chosen to promote health or prevent disease.  

Determination of a reasonable design is based on all of the relevant facts and circumstances. A program that discourages sick employees to enroll in the health plan is not reasonably designed. Programs that require unreasonable time commitments or travel may also not be reasonable. For an outcome-based wellness program that requires certain results for the reward, there must be a reasonable alternative standard offered. 

The second FAQ clarifies that compliance with the ACA wellness program regulations does not necessarily mean that the program complies with other laws, such as the Americans with Disabilities Act. See our today’s HR and Benefits Compliance article for more information.


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