The Legal and Regulatory Landscape for Wellness Plans: The Affordable Care Act and Beyond

The Patient Protection and Affordable Care Act (the ‘‘Act’’) generally encourages employers to adopt wellness plans and programs in conjunction with their group health plans. Wellness plan vendors tout these arrangements with promises of reduced health care costs and a happier, healthier, more productive workforce. What gets left out of the promotional literature, however, is any sense of the legal and regulatory environment in which these plans operate. Employers seeking to adopt wellness plans encounter a number of roadblocks and speed traps on the way to destination wellness. In this article, we highlight these legal obstacles and offer some best practices to help employers traveling on the road to compliance.

THE AFFORDABLE CARE ACT’S WELLNESS LANDSCAPE - Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits health plans from, among other things, charging different premiums to different individuals based on a ‘‘health status-related factor’’ such as health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability. An exception to the general rule is provided for certain wellness programs that vary benefits and/or premiums based on a health factor. In 2006, the Departments of Health and Human Services, Labor and Treasury (the ‘‘Departments’’) published final regulations implementing the HIPAA nondiscrimination and wellness provisions. These regulations generally divide wellness programs into two types: ‘‘Participatory Wellness Programs,’’ which do not require an individual to meet a standard related to a health factor in order to obtain a reward and are not considered discriminatory under HIPAA; and ‘‘Health Contingent Wellness Programs,’’ which do require individuals to satisfy a standard related to a health factor in order to obtain a reward and are considered discriminatory under HIPAA unless certain criteria are met, including a cap on the maximum award at 20% of the cost of coverage. These two types of wellness programs are discussed in more detail below.

Originally published in the Tax Management Compensation Planning Journal, 41 CPJ 115 on 05/03/2013.

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