HNI Account Executive
The federal government last week released final rules on wellness programs under the Affordable Care Act. In all, these final rules are not dramatically different from the tentative ACA regulations that came out in November 2012. The final rules, however, expand on two subcategories of health-contingent wellness programs.
The final rules cover two types of wellness programs that employers may run: participatory wellness programs and health-contingent wellness programs.
No Changes to Participatory Wellness Programs
With the final rules, the regulations that cover participatory wellness programs basically are unchanged. The programs must comply with standards set by the 2006 HIPAA nondiscrimination act. Participatory wellness programs must be available to all similar employees, regardless of health.
According to the final rule as published in the Federal Register, participatory wellness programs "do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor." Examples include a program that covers the cost of a fitness club membership; a diagnostic-testing program that provides employees a reward for participation but does not base the reward on outcomes; and a program that rewards employees for attending monthly, no-cost health education workshops.
Clarification on Health-Contingent Wellness Programs
The two subcategories of health-contingent wellness programs are activity-only programs and outcome-based programs. In an activity-based wellness program, employees earn awards if they perform or complete a health-related activity — but the employees don't need to meet a specific health outcome. Examples of an activity-only program include a walking program with rewards for participation (not accomplishment), diet, or exercise programs.
The difference between participatory wellness programs and activity-based programs is that participatory programs do not impact health status. Activity-based programs, on the other hand, may impact health status. The impact could be positive — for instance, the program improves health. [This obviously is the goal of an activity-based wellness program!] But the impact could be negative — for instance, an employee with a health condition participates against doctor's orders gets sicker.
The second type of health-contingent wellness programs — outcome-based programs — requires employees to reach or maintain a specific wellness goal to get a reward. For example, employee may quit using tobacco or hit specific results on a biometric screening to earn a reward. Outcome-based programs usually have two levels: first, a measurement as part of an initial standard and second, a longer-term program tailored to employees who do not meet the initial standard with wellness activities.
How to Satisfy Health-Contingent Program Requirements
According to the final rules, employers' health-contingent wellness programs must satisfy five requirements:
1.) Eligible employees must have the opportunity to qualify for the reward yearly.
2.) The reward can't exceed 30% of the cost of employee-only coverage (including the employee and employer portion of coverage cost). If an employee's dependents can participate, the reward can be based on 30% of the cost of coverage for the employee and her dependents. If the program is designed for tobacco cessation, the top reward can be 50% of the total coverage cost. The reward limit is cumulative for all health-contingent wellness programs.
3.) The program must be designed to improve health or prevent disease.
4.) In an activity-based wellness program, the full reward must be available to similar individuals by offering an alternative standard for earning the award if achieving the original standard goes against a doctor's advice. A doctor's verification may be needed to set an alternative standard.
In an outcome-based wellness program, the full reward must be available to employees who failed to meet the standard based on an initial screening. If the employee needs an alternative standard, the final rules say that employees must be given additional time to reach a different level of the same standard. The employee's doctor can be involved in setting the alternative standard.
For both types of health-contingent wellness programs, the final rule calls for reasonable time standards to satisfy and alternative standard.
5.) Wellness program materials must disclose the availability of a reasonable alternative standard that can be met for the full reward. Outcome-based wellness programs must include a similar statement when notifying employees that they did not meet the original standard.
Here's yet another way to think about the wellness programs: Participatory programs get you thinking about health (but do not impact health status); activity-only programs get you acting on health (and may impact health status); and outcome-based programs measure healthiness.
The final rules for wellness programs go into effect Jan. 1, 2014. Below is a table that breaks down the wellness program rules.
How does your employer-sponsored wellness program stack up? How do you plan to gain compliance? Please share in comments!