Affordable Care Act: Implications of Wellness Programs

On June 3, 2013, rules were published in the Federal Register providing final guidance (Final Rules) on nondiscriminatory wellness programs that are implemented through employer-sponsored group health plans under the Affordable Care Act (ACA). The rules are largely unchanged from the rules initially proposed on November 20, 2012. In order to ensure that the terms of a wellness program do not discriminate against unhealthy individuals or target individuals on the basis of a specific health trait, the Final Rules impose certain rules on wellness programs that are tailored to the design of the wellness programs themselves. The Final Rules also create two divisions of wellness programs: participatory wellness programs and health-contingent wellness programs.

Participatory Wellness Programs
Under a participatory wellness program, a participant is required to engage in an activity to receive a reward under the wellness program. Rewards can take the form of a premium discount, rebate, waiver of cost sharing, some additional financial benefit, or the avoidance of a premium surcharge. The wellness program cannot require a specific health outcome. A participatory wellness program is nondiscriminatory without satisfying any further requirement, but it still must comply with other applicable laws including the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA). Examples of participatory wellness programs include paying for gym membership, attending a smoking cessation program or other no-cost seminar programs designed to promote a healthier lifestyle among participants, or requiring individuals to undergo a preventive care visit where no result is required.

Health-Contingent Wellness Programs
A health-contingent wellness program requires a participant to satisfy or achieve a certain criterion called a "health standard" in order to obtain a reward under the program. The Final Rules provide for two subdivisions of health-contingent wellness programs: activity-based wellness programs and outcome-based wellness programs.

An activity-based wellness program requires participants to complete a specific activity related to a health factor to obtain the offered reward, without requiring the participant to achieve any specific health outcome. Examples of such programs include those which require engaging in a physical activity or eating a more nutritious diet. Outcome-based wellness programs require participants to actually achieve a specific result or outcome to qualify for the reward. Examples of such programs include setting and meeting a healthy goal weight or BMI (body mass index) result, or quitting the use of tobacco products. All health-contingent wellness programs must satisfy five criteria to be deemed nondiscriminatory:

  1. The rewards must be made available at least once per year.
  2. The wellness program must be reasonably designed to promote health or prevent disease. The wellness program may not be designed in a manner which is overly burdensome and that has a reasonable chance of improving a participant’s well-being.
  3. The amount of the reward cannot exceed more than 30% of the total cost of the employee’s insurance premiums (including the employer and employee contributions) or more than 50% of the employee’s total cost of the insurance premiums if the program is a tobacco wellness program.
  4. The wellness program must be available to all similarly situated individuals. For activity-based wellness programs, this means providing an alternative to achieve the reward (including a waiver) to individuals for whom it is unreasonably difficult to satisfy the standard due to a medical condition or for whom it is medically inadvisable to attempt to satisfy the standard. For outcome-based wellness programs, this means providing individuals to take an alternative pathway to receive a reward based on failure to achieve an initial health standard. All reasonable alternatives must be reasonable as to time and cannot impose any additional costs on the participants.
  5. The wellness program must, in its plan materials, provide notice of availability of a reasonable alternative standard or of a waiver, including contact information and a statement that the recommendation of an individual’s personal physician will be accommodated. The Final Rules include the following sample language for this notice, which can be modified to meet your specific program.

Sample Language
Your health plan is committed to helping you achieve your best health. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at [insert contact information] and we will work with you (and, if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status.

Employers which currently maintain or desire to implement wellness programs to encourage healthy employee behavior or control health plans costs should start planning these activities now. Employers that currently maintain wellness programs will need to review the requirements of these wellness programs to ensure compliance with the Final Rules. Meanwhile, employers looking to implement a wellness program will want to ensure that the design of any wellness program is conducted in compliance with the Final Rules, HIPAA and the ADA.