Health Care Reform Update: Changes to Rules on Incentives for Wellness Programs Proposed

November 28, 2012

Group health plans would be able to offer greater rewards for participation in certain types of wellness programs under rules proposed on November 26. The notice of proposed rulemaking, like many of those implementing the Affordable Care Act (ACA), is a joint notice issued by three agencies: the Internal Revenue Service (Treasury Department), the Employee Benefits Security Administration (Labor Department), and the Department of Health and Human Services. Comments are due January 25.

The agencies espouse the belief that appropriately-designed wellness programs have the potential to contribute to promoting health and preventing disease. A number of colleges and universities have instituted wellness programs in recent years.

The proposed rules would make changes to existing rules for group health plans issued under the Health Insurance Portability and Accountability Act of 1996 (HIPPA) in 2006 on nondiscriminatory wellness plans. The ACA included provisions allowing increased rewards in some cases. The agencies propose extending the revised rules to include group plans that have grandfathered status under the ACA by using existing authority under HIPPA. This will ensure that all plans have the flexibility to increase rewards if desired.

The existing rules delineated two types of wellness programs:

Participatory wellness programs that do not require an individual to meet a standard related to a health factor in order to obtain a reward or that do not offer any reward. Examples would be a program that reimburses participants for use of fitness centers or smoking cessation programs, without tying a reward to an outcome.
Health-contingent wellness programs require individuals to satisfy a standard related to a health factor in order to obtain a reward. Rewards may be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism, the absence of a surcharge, the value of a benefit that otherwise would not be provided, or other financial or nonfinancial incentives or disincentives.

Examples would include a program that imposes a premium surcharge for tobacco use or one that provides a reward to participants identified as normal on some risk factor (like cholesterol, blood pressure, or body mass index) and requires those outside the normal range to take additional steps to obtain the same reward.

Health-contingent plans are only permissible if they meet a number of provisions intended to ensure that they are nondiscriminatory in nature. The proposed rules would make a number of changes to those provisions and attempt to clarify areas that stakeholders have found confusing in the current rules.

These provisions fall into five categories:

Frequency of opportunity to qualify. Participants must have the opportunity to earn the reward at least once a year.
Size of reward. The proposed regulations would raise the maximum allowable incentive from 20 percent of the total cost of coverage in the plan to 30 percent. Rewards tied to preventing or reducing tobacco use could be as high as 50 percent.
Uniform availability and reasonable alternative standards. Rewards must be available to all similarly-situated individuals. Plans must ensure that alternatives are available for any individuals for whom it is either unreasonably difficult or medically inadvisable to meet the standard set for earning a reward.
Reasonable design. Programs must be reasonably designed to promote health or prevent disease, and must not be overly burdensome or a subterfuge for discrimination.
Notice of other means of qualifying for the reward. Plans and issuers must disclose the availability of other ways of earning the reward or of waivers of the standards in all plan materials that discuss the health-contingent wellness program.

The proposed rules provide greater detail on each of these provisions.