The new final wellness program rules were released on June 3, 2013 and apply to wellness programs with plan years that begin on or after January 1, 2014. Under the final rules, wellness programs are divided into participatory programs and health-contingent programs. The final rules further subdivide health-contingent wellness programs into two separate types: activity-only and outcome-based programs. Activity-only programs provide rewards for participation in an activity related to a health factor without regard to health outcomes (for example; walking, diet, exercise programs). Outcome-based programs provide rewards for accomplishing or sustaining a particular health outcome (for example; not using tobacco products, attaining certain results on biometric screenings). These two types of health-contingent programs must meet five requirements, briefly summarized below.
- Individuals eligible for the program must be given the opportunity to qualify for the reward at least once per year.
- The amount of the reward is limited and must not exceed the “applicable percentage” of the total cost of the employee-only coverage under the plan, taking into account both the employer and employee contributions towards the cost of coverage. The final rules allow a 30% limit for non-tobacco wellness program rewards plus an additional 20% for tobacco wellness programs. Incentives for health-contingent wellness programs can reach up to 50% of the cost for employee-only coverage if tobacco wellness programs are included.
- A health-contingent wellness program must be reasonably designed. A wellness program will be deemed reasonably designed if it has a reasonable chance of improving the health of, or preventing disease in, participating individuals, and is not overly burdensome, is not a subterfuge for discrimination based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease.
- The full reward must be made available to all similarly situated individuals. For activity-based programs, this requires that a reasonable alternative (or waiver) if it is medically unwise for an individual to attempt to meet the activity-only standard or a medical condition makes it unreasonably difficult for an individual to meet the activity-only standard. For activity-based programs, the plan is permitted to require physician verification. For outcome-based programs, an alternative (or waiver) must be provided for any individual who does not meet the initial standard based on a measurement, test, or screening that is related to a health factor.
- The plan must disclose the existence of an employee’s option to complete a reasonable alternative in all materials describing the program and in all disclosures that indicate an individual did not satisfy an outcome-based standard. The notice must include contact information and a statement that recommendations from the individual’s physician will be accommodated.
While the new final rules are based on the same basic structure of the existing HIPAA wellness rules, there are some significant differences, particularly related to when alternative programs should be offered. All plans that have wellness programs or any type of incentive or reward programs should review the new final rules to ensure their programs are in compliance before January 1, 2014. Under the Affordable Care Act, noncompliant programs could be subject to penalties under the Internal Revenue Code and Public Health Service Act of up to $100 per day.