Five federal agencies have collectively proposed regulations to implement elements of the Affordable Care Act ("ACA") healthcare reform legislation designed to encourage employers to sponsor employee wellness programs. The proposed regulations were issued on November 26, 2012, by the Treasury Department, the IRS, the Department of Health and Human Services, the Labor Department, and the Employee Benefits Security Administration. The comment period ends January 25, 2013.
The proposed regulations, if adopted, would apply to "health-contingent wellness programs" that are part of group health coverage. A health-contingent wellness program is one that requires participants to meet standards related to identified health factors in order to receive the benefit provided for in the program, usually some type of financial incentive. The proposed regulations would specifically address the requirements of the Health Insurance Portability and Accountability Act ("HIPAA").
HIPAA generally prohibits health plans from discriminating against individuals on the basis of health factors. However, the statute provides an exception for wellness programs, allowing plans to offer financial incentives to employees who participate and meet the health goals identified in the program.
Before passage of the Affordable Care Act, HIPAA limited financial incentives to 20 percent of the cost of the health coverage. The ACA increased that limit to 30 percent of the cost of coverage. For programs that encourage employees to stop using tobacco, plans can offer employees even higher incentives, up to 50 percent of the cost of coverage.
The proposed regulations would clarify what plans must do to comply with HIPAA's "reasonable alternative standard" requirement. Under HIPAA, a health-contingent wellness program must allow a participant to qualify for an incentive or reward under the program by meeting an "alternative health standard" if it is unreasonably difficult or medically inadvisable for the participant to try to meet the standards set forth in the program. Under the proposed regulations, plans would not need to identify reasonable alternative standards until a participant requests one. However, once a participant requests an alternative standard, "all the facts and circumstances" would need to be taken into account to determine if the plan provided a reasonable alternative standard in response to the request. For example, if the reasonable alternative standard is an educational program, the plan must find and pay for the cost of the alternative program.
Important Caveat: The proposed regulations do not apply to wellness programs that are not part of group health coverage or to "participatory" wellness programs that do not offer rewards or incentives based on meeting standards based on health factors. Also, the regulations do not address wellness program requirements under the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA), which differ from the requirements in HIPAA. Wellness program sponsors should consider seeking legal advice with respect to the design and implementation of any wellness program to ensure it complies with all requirements applicable to such a program.