The IRS, DOL, and HHS (the Departments) have jointly issued final regulations addressing employee wellness programs under the Affordable Care Act (ACA). These final regulations modify the proposed wellness regulations that were issued in November 2012. The final regulations apply to insured and self-insured group health plans (both grandfathered and non-grandfathered) effective for plan years beginning on or after January 1, 2014.
Most of the proposed regulations remained unchanged, including an increase in the maximum permissible reward under a health-contingent wellness program from 20 to 30% of the cost of individual coverage under the group health plan, and up to 50% for programs designed to prevent or reduce tobacco use. The final regulations contain clarifications as to what constitutes a reasonable design for health-contingent wellness programs (distinct from participatory wellness programs), and the reasonable alternatives that must be offered in order to avoid prohibited discrimination. The final regulations also rearrange the five health-contingent wellness program requirements, to clarify differences between “activity-only” wellness programs (requiring that an individual perform or complete an activity related to a health factor, such as dieting or exercising, in order to obtain a reward) and “outcome-based” wellness programs (requiring an individual to attain or maintain a specific health outcome, such as not smoking or attaining certain results on biometric screenings, in order to obtain a reward). The underlying requirements applicable to each of these sub-category health-contingent wellness program remain unchanged.
- Health-contingent wellness programs must provide a “reasonable alternative standard” for participants unable to meet the usual standard due to medical reasons. Plans can waive the standard for those unable to comply for medical reasons, or establish alternatives on a case-by-case basis. The final regulations clarify that educational programs can be reasonable alternatives. The final regulations also clarified that where an alternative program requires a membership fee (like a weight loss program), the plan must pay the membership fee but is not required to pay for the cost of food. Time commitment must also be considered in whether or not an alternative standard is reasonable. For example, requiring nightly attendance at a health fitness class will likely be considered unreasonable.
- The proposed regulations left some confusion as to when an employer/plan can request a medical verification when a reasonable alternative standard to a health-contingent wellness program is requested. Activity-only programs must offer a reasonable alternative standard to individuals for whom satisfying the program’s standard is unreasonably difficult due to a medical condition (or is medically inadvisable). Outcome-based programs must offer an alternative to any individual who does not meet the initial standard (i.e., without regard to whether the inability to meet the standard relates to a medical condition). Accordingly, as dictated in the final regulations, outcome-based programs are not permitted to require medical verification that compliance with a standard is unreasonably difficult for an individual, but activity-only programs may require medical verification.
- The proposed regulations require disclosure of the availability of a reasonable alternative standard in all plan materials describing a health-contingent wellness program. The final regulations provide revised sample language and clarify that communications referring to the wellness program but not providing details (such as the SBC) are not required to provide the alternative standard disclosure.
- Future sub-regulatory guidance may be issued, specifically with respect to verification of a participant’s medical limitations by a medical professional, and rescission in connection with false statements about tobacco use.
These regulations provide helpful guidance to employers implementing wellness programs. Keep in mind, however, that the “reasonableness” of a program’s design is determined by all of the facts and circumstances. Also, and perhaps most importantly, compliance with these final regulations does not determine a wellness program’s compliance with other laws touching on wellness programs, including the HIPAA privacy and security laws and the ADA.
