Wellness Program Changes for 2014

by Constangy, Brooks, Smith & Prophete, LLP

Apple.jpgThere has been a deluge of new federal regulations related to health care reform since the presidential election, and wellness programs have been no exception. The IRS, U.S. Department of Labor, and the U.S. Department of Health and Human Services jointly issued new proposed regulations on the operation of wellness programs on November 26. Federal Register, Vol. 77, No. 227 (November 26, 2012). The new regulations apply to both insured and self-insured group health plans that have a wellness component, and they apply to non-grandfathered as well as grandfathered plans under the Affordable Care Act.

Although the new regulations do not contain sweeping changes, there are two important aspects of wellness programs which are affected.

Reward Percentages Increased

Current regulations set the maximum permissible reward for a program that requires meeting a certain health-related goal (e.g., lowering cholesterol, controlling diabetes) at 20% of the cost individual or family coverage under the group health plan. For plan years beginning on or after January 1, 2014, however, the maximum permissible reward can be as much as 30%. Also, the reward for programs designed to prevent tobacco use can be as much as 50%, which will be a significant incentive for employees and dependents to stop using tobacco products. Keep in mind that these percentages apply to the total of all rewards offered under a wellness program and not to each individual part aimed at a specific health issue.

“Reasonable Alternative Standard” Clarified

The new regulations also provide additional information about the “reasonable alternative standard” required for all wellness programs which require meeting a certain health-related goal. A “reasonable alternative standard” is another way for an employee or dependent to receive the wellness program reward(s) if the employee or dependent cannot meet the health-related goal for medical reasons. The new regulations provide:

  • Simpler and more clear model language describing the reasonable alternative standard in health plan and wellness program materials distributed to employees and dependents.
  • An option for the health plan to waive the standard altogether for individuals unable to meet the health-related goal for medical reasons.
  • An option for the health plan to determine a reasonable alternative standard on a case-by-case basis, depending on the specific situation of the individual.
  • If the completion of an educational program is required, the employer must provide or locate the program and pay for it.
  • If the alternative standard requires participation in a diet or weight-loss program, the employer must pay any program or membership fees. However, the employee is not required to pay for the cost of food.
  • If the alternative standard requires compliance with the recommendations of a medical professional hired or employed by the employer, then the employer must provide another alternative if the individual’s own physician disagrees with the recommendations.
  • The employer can still request a statement from the individual’s physician that he or she cannot meet the alternative standard for medical reasons, but only if such a request is “reasonable under the circumstances.”
  • If an individual is denied a program reward for failure to meet an alternative standard, then such denial is eligible for external review under the health plan’s claims and appeals procedures

Employer Action

Although these new [health care] regulations are not effective until 2014, we encourage you to start planning now to determine what changes you may want to make to the reward percentages available to wellness program participants.

Although these new regulations are not effective until 2014, we encourage you to start planning now to determine what changes you may want to make to the reward percentages available to wellness program participants. Also, most of the changes to the reasonable alternative standard aspect of the program are mandatory and not optional, so revisions to your health plan documents and wellness program materials will be necessary. Finally, now that the U.S. Supreme Court has upheld the Affordable Care Act and President Obama has been reelected, you can expect more and more regulations changing your health care plan in the coming months.


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.

© Constangy, Brooks, Smith & Prophete, LLP | Attorney Advertising

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