Department of Health and Human Services Issues Final Rules on Wellness Incentives
Wednesday, Jun 26th, 2013
On May 29, 2013, the Department of Health and Human Services (“HHS”) issued the final rule governing wellness incentives in group health plans. The rule includes two types of wellness programs – Participatory and Health Contingent. If you currently have a wellness program, please see definitions below to determine the type of wellness program you have.
“Participatory” programs are those, which make participation available to all similarly situated individuals. Such programs may differentiate among bona fide employment-based classifications or the participant’s relationship to the plan beneficiary, but otherwise must be available to all similarly situated participants regardless of health status. An example of a participatory program would be offering a table time. Employees may visit the table if they want to participate. Participatory plans do not need to meet any further non-discrimination requirements.
“Health Contingent” programs make a reward such as a premium discount available to participants based on their meeting a specified health-related goal. The goal might be activity-only (e.g. participating in a walking program) or outcome-based (e.g. achieving a targeted cholesterol level). These programs must meet five non-discrimination requirements.
(1) Each participant must be given an opportunity to qualify for the reward at least once a year.
(2) The reward must not exceed 30% of the total cost of employee coverage under the plan (or 50% if the program is designed to address tobacco use).
(3) The reward must be available to all similarly situated individuals, with reasonable alternatives for those who cannot meet the standard for medical reasons.
(4) The program must be designed to promote health or prevent disease and not be a subterfuge for discrimination.
(5) The plan must disclose in all descriptive materials the possibility of alternative methods for qualifying for the reward or of a waiver of the applicable standard. The rule is structured to give plans an affirmative defense to a claim of discrimination for meeting these five requirements.
The allowable amount of the award is calculated based on the total cost of the health plan—that is, both the employer and the employee’s premium contribution. The reward may not exceed 20%. Beginning January 2014, the amount increases to 30% (50% in the case of a program addressing smoking). This is potentially a very significant cost. For example, if a total premium is $900/month and the employee’s share is $300/month—the reward for a non-tobacco designed program could be as high $270/month based on 30%. For a “tobacco designed program”, the reward could be as high as $450/month based on 50%.