On June 3, 2013, the Departments of Treasury, Labor and Health and Human Services (Agencies) issued final regulations regarding nondiscriminatory wellness programs in group health coverage under the Affordable Care Act and applicable provisions of ERISA and the Code. The final regulations specifically addressed the reasonable design of health-contingent wellness programs and the reasonable alternatives that must be offered in order to avoid prohibited discrimination. On January 9, 2014, the Agencies issued subregulatory guidance that addressed three (3) points discussed in the final regulations.
In order to satisfy the reasonable design standard for any wellness program, the employer is required to provide an opportunity to obtain the award (or avoid the surcharge) at least once annually. The agencies have confirmed that, with respect to a tobacco cessation wellness program, the requirement to provide an annual opportunity to receive the award does not mean that the plan is required to provide the award to a participant who is a tobacco user and who initially refused to participate in the tobacco cessation program (e.g. during the annual enrollment period). Under such circumstances, the plan may, but is not required to, allow such individual to earn the reward in the event that he enrolls in the tobacco cessation program in the middle of the year.
In order to satisfy the reasonable alternative standard for an outcomes based wellness program, the employer is required to accommodate the recommendations of the participant’s physician in providing an alternative standard to obtain the reward (or avoid the surcharge), where the initial standard is determined by the physician to be medically inappropriate for the participant. However, the Agencies have indicated that this mandate does not mean that the plan is required to utilize the exact program suggested by the physician. For example, if the physician recommends a weight loss program as an alternative to the initial standard(s) otherwise specified under the wellness program, the wellness program can approve that weight loss program or offer a different weight loss program to satisfy the alternative.
The employer is required to provide notice of the availability of a reasonable alternative standard to the participants in the wellness program. Sample language was included in the final regulations. The Agencies confirmed that plans are permitted to modify this language to better fit the design of their programs, provided that the revised notice includes all of the required content described in the final regulations.