As previously reported, the federal agencies responsible for drafting the rules implementing the Affordable Care Act (ACA) (the U.S. Labor Department, the U.S. Department of Health and Human Services and the U.S. Treasury Department (together, the “Departments”)) on January 9, 2014 issued FAQ Part XVIII, regarding implementation of the market reform provisions of the ACA.
These FAQs are part of the government’s efforts to provide so-called “subregulatory guidance” – that is, guidance providing relatively quick helpful answers to respond to issues and trends affecting group health plans and insurers. FAQ Part XVIII includes guidance for employers sponsoring wellness programs that contain tobacco cessation components, and on the “reasonable alternatives” required to be made available under health-contingent wellness programs.
By way of background, on June 3, 2013, the Departments issued final regulations, effective for plan years beginning on or after January 1, 2014, regarding nondiscriminatory wellness programs that are part of group health coverage (the “Final Regulations”). The Final Regulations explain the new ACA rules that increase the maximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of group health plan coverage, and further increase the maximum reward to 50 percent for programs designed to prevent or reduce tobacco use. The FAQs address several issues that have been raised since the publication of the Final Regulations.
Premium Surcharges for Tobacco Use
The FAQs clarify that if a group health plan provides a reasonable opportunity to avoid a tobacco use surcharge at the beginning of a plan year (e.g., a tobacco cessation educational program), the plan is not required to provide another opportunity to avoid the surcharge that year to a participant who declined the initial opportunity. The FAQs note that nothing prevents the plan from providing another opportunity that year for a participant to avoid the surcharge, or for prorating rewards for those who complete the reasonable alternative later that plan year after having declined it initially.
As a reminder, group health plans that impose a surcharge on tobacco users may do so only as part of a wellness program that complies with the Final Regulations. One requirement of a compliant wellness program is that it must be reasonably designed to promote health or prevent disease (i.e., the wellness program cannot consist solely of a premium surcharge for tobacco users). Given this requirement, and that the program must provide a reasonable alternative to all tobacco users, many employers require completion of an educational program as the alternative to being tobacco-free. The Final Regulations contain an example of a compliant tobacco cessation program that offers an educational program as its reasonable alternative standard. In the example, the plan makes an educational program available or assists individuals in finding such a program (instead of requiring an individual to find a program unassisted), and does not require individuals to pay for the cost of the program.
Involvement of a Participant’s Physician
Certain wellness programs require individuals to attain a particular outcome with respect to a health factor to earn a reward (or avoid a surcharge). For example, a group health plan might require participants to have a body mass index (BMI) of less than 30 to earn a reward (or avoid a surcharge). This type of wellness program is an outcome-based wellness program (as is a program that imposes a surcharge on tobacco users). A participant who cannot attain the desired outcome must be allowed to satisfy a reasonable alternative standard. The participant may also involve his or her doctor, who might recommend an alternative, such as a weight reduction program (an activity-only program).
The FAQs clarify that the plan must provide a reasonable alternative standard that accommodates the recommendations of the participant’s doctor with regard to medical appropriateness; however, the plan is not required to accept the specific alternative offered by the participant’s doctor. For example, assume that a participant’s doctor advises that an outcome-based wellness program’s standard for obtaining a reward is medically inappropriate for the participant. The doctor suggests a weight reduction program (an activity-only program) instead. The FAQs provide the plan some discretion with regard to selecting the program, indicating that “many different weight reduction programs may be reasonable for this purpose, and a participant should discuss different options with the plan.”
On the other hand, assume that a group health plan pays a reward for participants with cholesterol below a specified level and specifies that the wellness program’s physician designates the required alternative for participants with cholesterol in excess of the specified level. This program would fail the requirements for wellness programs because it does not provide the participant with an opportunity to comply with a different alternative standard recommended by the participant’s doctor.
Note that in general, an activity-only program is required to provide a reasonable alternative only if it is unreasonably difficult or medically inadvisable for the participant to attempt to satisfy the program’s requirements. In other words, a participant generally cannot involve a personal physician in an activity-only program unless the initial standard or the reasonable alternative is unreasonably difficult or medically inadvisable.
Reasonable Alternative Standard Language
The Final Regulations included model language that would notify participants of the availability of reasonable alternatives. The FAQs clarify that employers are permitted to modify the regulatory sample language if they wish. In particular, plan sponsors should consider modifying the language to reflect the details of their wellness programs, such as contact information for obtaining a reasonable alternative standard and a statement that recommendations of an individual’s personal physician will be accommodated. If plan materials merely mention that an alternative program is available, without describing its terms, this statement is not required. Also, in all cases, the notice must include the other required regulatory content, even if the language is modified.