HIPAA Wellness Program Rules Finalized
Posted in: Employee Benefits
The Patient Protection and Affordable Care Act (PPACA) increased the maximum reward/penalty that can be imposed under a health-contingent wellness program from 20% of the total cost of coverage to 30% (or 50% if designed to prevent or reduce tobacco use) for plan years beginning in 2014. A final regulation has been issued to implement this provision and to revise the requirements that must be included in a health-contingent wellness program.
Types of Wellness Programs
The final regulation distinguishes among three separate types of wellness programs:
- Participatory programs that do not offer a reward or that do not require an individual to meet a standard relating to a health factor to receive a reward;
- Activity-only programs that require completion of an activity to obtain a reward. It is possible that certain individuals will be unable to complete the activity due to a health factor; and
- Outcome-based programs that require meeting a specific health standard or outcome to obtain a reward.
Both activity-only and outcome-based wellness programs are subject to the final regulation for health-contingent wellness programs.
Five Requirements for Wellness Programs
The five basic requirements for health-contingent wellness program under the final regulation are:
- Individuals eligible for the wellness program must be given at least one opportunity per year to qualify;
- The reward/penalty cannot exceed 30% of the total cost of coverage (COBRA rate less the 2% administrative fee) or 50% for wellness programs designed to prevent or reduce tobacco use;
- The wellness program must be reasonably designed to promote health or prevent disease and must not be overly burdensome;
- The reward must be available to all similarly situation individuals, and the plan must provide a reasonable alternative standard (or waiver of the standard) for all individuals who do not meet the initial outcome-based standard; and
- The plan must disclose the availability of a reasonable alternative standard, including contact information and a statement that a personal physician’s recommendation will be accepted.
Amount of Reward/Penalty
When a wellness program includes both a tobacco use component and other wellness standards, the total reward/penalty cannot exceed 50% of the cost of coverage, and the reward attributable to the other wellness components cannot exceed 30%. If any class of dependents may participate in the wellness program, the reward must not exceed the applicable percentage of the total cost of coverage for the level of coverage in which the employee and dependents are enrolled.
Reasonable Alternative Standard
If a participant cannot meet the standard under an outcome-based wellness program, the plan must provide a reasonable alternative standard to allow the individual to obtain the reward, or waive the standard altogether and provide the reward. Plans are not required to determine a particular alternative standard in advance, but it must be furnished upon request. If the alternative standard is another outcome-based standard or an activity-based wellness program, then the plan must provide a second reasonable alternative as needed. If an individual cannot meet an outcome-based standard, the plan cannot require a medical certification as a condition of the alternative standard. However, a plan may require a medical certification to offer an alternative standard for an activity-based program. An individual must also be permitted to comply with recommendations of a personal physician as a second reasonable alternative standard.
If the reasonable alternative standard is completion of an educational program or a diet program, the plan must make the program available or assist in finding a program at no cost to the individual (the plan is not required to pay to the cost of food). The time time commitment to complete the program must be reasonable.
Wellness Programs and PPACA’s Minimum Value & Affordability Standards
For wellness programs designed to prevent tobacco use, the determination of whether a plan is affordable and/or provides minimum value will be based on the premium contribution and plan design available to individuals who meet the wellness program criteria (i.e. do not use tobacco products). For all other wellness programs, the determination will be based on the premium contribution and plan design available to individuals who do not meet the health standard (i.e. be affordable and provide minimum value to all).