Final Regulations Issued On Incentives For Nondiscriminatory Wellness Programs In Group Health Plans

by Stinson Leonard Street - Employee Benefits & Compensation

HIPAA nondiscrimination provisions prohibit group health plans and health insurance issuers from discriminating against individual participants and beneficiaries in eligibility, benefits, or premiums based on a health factor.  Wellness programs offered in conjunction with group health plans must also be nondiscriminatory.

Final regulations issued on June 3, 2013, describe nondiscriminatory wellness programs.  The regulations amend wellness program regulations issued in 2006 and adopt many of the provisions of the proposed rule published last fall. These regulations are applicable to grandfathered group health plans, non-grandfathered group health plans and group health insurance coverage for plan years beginning on or after January 1, 2014. 

The final regulations divide wellness programs into two categories – participatory wellness programs and health-contingent wellness programs:

Participatory wellness programs either do not provide a reward or do not include any conditions for obtaining a reward that are based on individuals’ satisfying a standard that is related to a health factor (e.g., a program that reimburses employees for the cost of all or a part of membership in a fitness center or for attending a monthly, no-cost health education seminar).   Participatory wellness programs must be made available to all similarly situated individuals, regardless of health status. These wellness programs are not required to meet the requirements applicable to health-contingent wellness programs discussed below.

Health-contingent wellness programs require individuals to satisfy a standard related to a health factor to obtain a reward (e.g., having a certain cholesterol level or completing a fitness program). This category is further divided into activity-only wellness programs and outcome-based wellness programs.

•     Activity-only wellness programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, but don’t require individuals to attain or maintain a specific health outcome (e.g., walking, diet, or exercise program).

•     Outcome-based wellness programs require individuals to attain or maintain a specific health outcome in order to obtain a reward (e.g., completing a smoking cessation program, maintaining a cholesterol level <200).

The final regulations contain five requirements for health-contingent wellness programs (including activity-only and outcome-based wellness programs):

1.   Individuals must be given the opportunity to qualify for the reward at least once per year.

2.   The maximum reward cannot exceed 30 percent of the total cost of employee-only coverage under the plan (50% for health-contingent wellness programs designed to prevent or reduce tobacco use).

3.   The program must be reasonably designed to promote health or prevent disease.

4. The full reward must be available to all similarly situated individuals and offer reasonable alternative standards.

5. The availability of a reasonable alternative standard must be disclosed in plan materials, including contact information for obtaining the alternative and a statement that recommendations of an individual’s personal physician will be accommodated.

For activity-only wellness programs, a reasonable alternative standard for obtaining the reward must be provided for any individual for whom it is either unreasonably difficult due to a medical condition to meet the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard. Outcome-based wellness programs must offer a reasonable alternative standard or a waiver of the otherwise applicable standard to a broader group of individuals than is required for activity-only wellness programs.  A reasonable alternative standard must be provided to all individuals who do not meet the initial standard, to insure the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status. This means every individual, no matter what health factors they have and what outcomes they obtain, must have a way to obtain the full reward each year.

Employers should review wellness programs they offer before the end of the plan year to ensure that the program meets the requirements of these new regulations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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