By: Alan M. Levy
A major element of the Affordable Care Act (the “ACA,” a/k/a “Obamacare”) is the prohibition against denying coverage due to a pre- existing condition or otherwise discriminating in coverage, premium cost, or benefits because of an individual’s health condition. “Wellness programs” typically seek to incentivize a healthy lifestyle by rewarding organized efforts to exercise, diet, stop smoking, or take similar health measures. Because wellness programs might be perceived as discriminatory through higher premium costs due to health conditions of those who do not use them, the ACA provides an exception for those which offer “rewards,” but not for penalties. Effective for plan years beginning on or after January 1, 2014, final regulations issued by IRS, HHS, and DOL apply the exception to all group health plans (whether or not grandfathered, insured, or self-insured) and all group health insurance, but not to individual health insurance.
The final rules permit:
(1) “Participating wellness programs” which reimburse an employee for all or part of the cost of utilizing health programs such as membership in a fitness center, a diagnostic testing program, or health education. The payment toward the
employee’s cost for such participation is limited to an amount equal to 30% of premium cost.
(2) “Health–contingent wellness programs” which involve rewarding an employee for satisfying health-related standards such as diet, exercise, or smoking cessation.
- a) “Activity–only wellness programs” reward the employee for simply participating in the program, such as adhering to a daily exercise regimen regardless of outcome.
- b) “Outcome–related wellness programs” reward the employee for attaining or maintaining a standard, such as succeeding in cessation of smoking, losing weight, or maintaining a prescribed blood pressure level.
One issue with the health-contingent programs is the treatment of people whose personal health limitations prevent them from gaining the reward.
For example, a wheelchair bound person could not participate in a lunch hour walking program or satisfy a goal of walking ten miles per week. In cases where personal health conditions limit or prevent successful participation in, and obtaining a reward from, the wellness program, particularly if it is outcome–based, accommodations must be offered in the form of a “reasonable alternative standard” which must be made available to all participants, regardless of their health status, who cannot satisfy the initial standards. All health–contingent programs are subject to five criteria to come under the wellness program exception to the anti- discrimination rules; they must:
- (1) Be reasonably designed to promote health or prevent disease.
- (2) Provide the participant a reasonable chance of improvinghealth or preventing disease.
- (3) Not be overly burdensome.
- (4) Not be a subterfuge for discrimination based on personal healthfactors.
- (5) Not use a highly suspect method to promote health or preventdisease.
The maximum reward a plan can provide for satisfactory participation in a wellness program is the equivalent of 30% of premium cost, except that a 50% reward can be given for satisfaction of programs to prevent or reduce tobacco use.
Because of the wide variety of potential wellness programs and the thus- far non-specific aspects of reasonable alternative standards, “the Departments [which issued these final regulations] anticipate issuing future sub-regulatory guidelines to provide additional clarity and potentially proposing modifications to this final rule as necessary.” A copy of these “final” regulations can be found in the Federal Register / Vol. 78, No. 106, 6/3/13; 26 CFR, TD 9620, RIN 1210-AB55, CMS-9979-F.
If you have questions about these rules, please contact Lindner & Marsack Attorney Alan Levy, who focuses on employee benefits.