On May 29, 2013, the US Departments of Health and Human Services, Labor, and Treasury issued final regulations regarding wellness programs under the Patient Protection and Affordable Care Act (the “ACA”). Wellness programs are programs offered by employers, or directly by insurance companies to their enrollees, to improve health and promote fitness. The ACA, in conjunction with the Health Insurance Portability and Accountability Act of 1996, prohibits discrimination against individuals regarding plan eligibility, benefits or premiums, but makes an exception for wellness programs. Wellness programs such as weight loss programs or smoking cessation programs allow employers to offer certain rewards in return for the employee’s adherence to health promotion and disease prevention.
There are two types of wellness programs under the ACA: participatory wellness programs and health-contingent programs. Participatory wellness programs, which constitute the majority of wellness programs, are those that either do not provide a reward or do not include any conditions for obtaining a reward other than participation in the program. Participatory wellness programs include programs that reimburse employees for all or part of their gym memberships, offer rewards for participating in diagnostic testing programs, and provide a reward to employees for attending monthly, free health education seminars. Participatory wellness programs must be offered to all similar situated individuals, regardless of health status.
Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Health-contingent wellness programs are divided into two sub-types: activity-only and outcome-based.
Under activity-only wellness programs, an individual is required to perform or complete an activity related to a health factor in order to obtain a reward but isn’t required to attain or maintain a specific health outcome. Examples of activity-only wellness programs include walking, diet or exercise programs. The final regulations implement safeguards so that individuals that are unable to participate in or complete the program’s prescribed activity due to a health factor such as recent surgery or pregnancy are given a reasonable opportunity to qualify for the reward.
In contrast, outcome-based wellness programs require an individual to attain or maintain a specific health outcome in order to obtain a reward. For example, an outcome-based wellness program may offer a reward to an employee that stops smoking or that attains certain results on cholesterol or blood pressure readings. Outcome-based wellness programs generally have a measurement test or screening as part of an initial standard, and individuals who do not meet the initial standard may be offered an educational program or other activity to achieve the same reward.
To comply with the final regulations, health-contingent wellness programs must: (1) give individuals eligible for the programs the opportunity to qualify for the reward at least once per year; (2) provide rewards that do not exceed, together with the reward for other health-contingent wellness programs with respect to the plan, 30% of the total cost of employee-only coverage under the plan, or 50% to the extent the program is designed to prevent or reduce tobacco use; (3) be reasonably designed to promote health or prevent disease; (4) be uniformly available to all similarly situated individuals and provide a different, reasonable means of qualifying for the reward to those individuals who are unable to participate due to a medical condition; and (5) disclose the availability of a reasonable alternative standard to qualify for the reward in all plan materials describing the terms of a health-contingent wellness program.
The final regulations apply to group health plans with plan years beginning on and after January 1, 2014. The three Departments anticipate issuing guidance in the future, and may propose modifications to the final regulations as necessary.