Final Rules for Wellness Programs Under Obamacare
To avoid discrimination, wellness programs must meet these regulatory requirements.
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In June 2013, final regulations were released on the employer wellness program provisions in the Patient Protection and Affordable Care Act (also known as the PPACA, the ACA, health care reform, or simply Obamacare). These regulations spell out what employers who want to offer wellness programs must do to avoid discriminating against employees based on their health status. The rules, which differ depending on what the program requires participants to do, go into effect at the start of 2014.
What Is a Wellness Program?
Wellness programs are plans intended to promote better health or prevent disease. Many employers have adopted wellness programs as part of their health benefits package. The purpose of these programs, from the employer’s perspective, is to lower the overall cost of health care benefits by encouraging employees to improve and maintain their health.
Typical wellness programs provide incentives for engaging in healthy behaviors or achieving or maintaining health-related goals. For example, a wellness program might pay the cost of gym membership or smoking cessation, reward employees who get or keep their blood pressure or cholesterol levels at healthy levels, or provide financial incentives to employees who engage in certain healthy activities, like a workplace walking club.
The rules seek to address a tricky issue with wellness programs: how to treat employees who want to improve their health but can’t meet the particular standards of the program. To avoid discriminating against employees based on their health factors, employers must follow these new rules.
Types of Wellness Programs
The final rules divide wellness programs into categories, depending on what employees must do to participate:
- Participatory programs either do not provide a reward to employees or do not require employees to meet a particular standard relating to a health measurement (such as blood pressure or cholesterol levels).
- Health-contingent wellness programs require participants to actually perform an activity or achieve a specific outcome to get a reward.
Rules for Participatory Programs
Participatory programs won’t be considered discriminatory under the new rules as long as the program is open to all similarly situated employees, regardless of their health status. Examples of programs that meet this standard include programs that reward employees for attending educational seminars, completing a health risk assessment, or taking diagnostic tests; reimburse employees for gym membership or smoking cessation programs; or encourage preventive care by waiving costs associated with doctor visits for check-ups or prenatal care.
What these programs have in common is that they reward employees for participating in activities, without requiring employees to achieve a certain outcome. If the program requires employees to hit a mark to get the reward, it isn’t a participatory program. For example, reimbursing employees for the cost of attending a smoking cessation program would qualify, but reimbursing employees only if they actually quit smoking by the end of the cessation program would not.
Rules for Health-Contingent Wellness Programs
Because health-contingent wellness programs reward employees for meeting goals that might not be safe or realistic for everyone, they must be more flexible in order to avoid discrimination. There are two types of health-contingent wellness programs:
- In an “activity-only” wellness program, the employee is rewarded for doing a particular activity. An activity-only program might, for example, require employees to walk for 30 minutes three days a week, follow a particular diet, or complete an exercise plan. These programs do not require the employee to hit a numerical goal, such as a particular weight, body mass index (BMI), or blood pressure measurement. Instead, they require only that the employee engage in the activity as prescribed by the program.
- In an “outcome-based” program, the employee is rewarded for achieving or maintaining a particular health goal, such as not smoking or achieving a BMI of 28 or less.
Most of the rules for health-contingent wellness programs are the same for both types of programs. However, the rules differ as to the alternative employers must offer to employees for whom it would difficult or dangerous to engage in the activity or strive for the goal.
All health-contingent programs must meet these requirements to avoid violating the discrimination rules:
- Employees who are eligible must have the opportunity to qualify for the reward at least once a year.
- The reward may not exceed 30% of the total cost (whether paid by the employee or the employer) of employee-only coverage under the employer’s health-care plan. For smoking cessation programs, the reward may not exceed 50% of the total cost. (Wellness programs that allow dependents to participate may offer a reward based on the cost of family coverage.)
- The program must be reasonably designed to promote health or prevent disease, meaning it has a reasonable chance of achieving those results in people who participate; it isn’t overly burdensome; it isn’t a subterfuge for discrimination; and it is not highly suspect in the methods is uses to promote health or prevent disease.
- The full reward offered under the program must be available to all similarly situated employees. This means the program must either waive the activity standard or allow a reasonable alternative standard that will allow an employee to get the reward, in specified circumstances.
The details of this final requirement depend on whether the program is activity-based or outcome-based.
Reasonable Alternative Standard for Activity-Based Programs
To make sure the program’s reward is available to all employees, an activity-based program must allow employees to achieve a reasonable alternative standard – or waive the applicable standard entirely – in order to earn the reward. This is required only for employees for whom it is medically inadvisable or unreasonably difficult due to a medical condition to achieve the normal standard under the program.
The alternative may not require employees to make an unreasonable time commitment, may not require employees to pay the cost of food (for a diet program) or an educational program, and must accommodate the recommendations of the employee’s physician as to medical appropriateness. (The plan may seek verification from the doctor.)
Employers need not come up with a reasonable alternative ahead of time, but must provide one upon the employee’s request. Employers must provide notice in their written materials about the program that a reasonable alternative is available, along with information about how to find out more and a statement that the recommendations of the employee’s doctor will be accommodated.
Reasonable Alternative Standard for Outcome-Based Plans
An outcome-based plan must make a reasonable alternative standard available to any employee who does not meet the initial standard. It need not be medically inadvisable or unreasonably difficult for the employee to meet the standard; any employee who doesn’t meet it qualifies for an alternative. The rest of the rules for activity-based programs apply. For example, the plan documents must provide information about the alternative, the plan must accommodate the recommendations of the employee’s physician, and the time commitment required must be reasonable. However, the plan is not entitled to seek verification from the employee’s doctor.
If the reasonable alternative is another outcome-based standard (for example, the employee must achieve a BMI of 32 rather than 28), additional rules apply:
- The employee must receive additional time to meet the standard that accounts for the employee’s circumstances.
- The plan must allow a second alternative: to comply with the recommendations of the employee’s physician. For example, an employee who cannot achieve a BMI of 32 has the alternative to achieve a BMI of 28 or to comply with the recommendations of his doctor regarding diet and exercise.
As you can see, the rules for avoiding discrimination in wellness programs are fairly complex. And, the Equal Employment Opportunity Commission plans to offer additional guidance on avoiding disability discrimination in wellness programs. If you have a wellness program or are considering implementing one, the best strategy is to consult with an experienced benefits attorney to make sure your plan will meet all of the applicable requirements.