New Regulations Change Details on Workplace Wellness Programs

Final rules from the U.S. Department of Health and Human Services on employment-based wellness programs raise the maximum reward that may be offered by certain wellness programs and expand nondiscrimination protections for sick employees.

The final rules under President Barack Obama’s Patient Protection and Affordable Care Act were issued May 29 and will be effective for plan years beginning on or after January 1, 2014.

The regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20% to 30% of the cost of coverage, according to the regulations’ summary. Rewards of up to 50% of total premium cost are allowed for incentives related to smoking cessation or reduction programs.

The regulations also address reasonable alternatives to health-contingent programs to avoid prohibited discrimination. Health-contingent programs generally reward individuals who meet a specific standard related to their health. Examples of such programs are those that provide a reward to individuals who don’t use or decrease their use of tobacco or programs that reward those who achieve a specified health-related goal such as a certain cholesterol level, weight, or body mass index as well as those who fail to meet such goals but take certain other healthy actions.

The new regulations require employers to provide a “reasonable alternative standard” to individuals who don’t meet a wellness program’s health standard for incentive eligibility.

The regulations require that a health outcomes-based incentive program not be “overly burdensome; is not a subterfuge for discriminating based on a health factor; and is not highly suspect in the method chosen to promote health or prevent disease.” For outcomes-based programs, a reasonable alternative standard “must be provided to all individuals who do not meet the initial standard.”

For activity-only programs—those in which individuals are required to complete an activity to obtain an award—a reasonable alternative standard must be provided for “any individual for whom, for that period, it is either unreasonably difficult due to a medical condition to meet the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard,” according to the rules.

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