SECOND OPINIONS: Preparing for New Wellness Program Rules for 2014

The new rules implement changes mandated by the Affordable Care Act (ACA), as well as other (rather sweeping) changes to wellness programs.  The new rules apply to plan years on or after January 1, 2014. Below we answer questions we have been receiving on the new rules.

Do these new rules apply to all wellness programs?

The new HIPAA wellness rules apply to an employer or plan that is providing any type of incentive, reward, or penalty to an individual based on:

·                     achieving a certain health status, such as a certain BMI level or being tobacco-free;

·                     a requirement that only is imposed on someone with a certain health condition, such as a coaching program that is only required for individuals with diabetes; or 

·                     engaging in an activity where there may be a health reason the individual could not participate, such as walking or running.

Requirements based on achieving a certain health outcome are called “Outcome-Based” programs.  Requirements to take part in certain activities where there may be a health reason someone cannot engage are called “Activity-Based.”

The HIPAA wellness rules generally would not apply to activities that only require participation where there is not a health reason someone would not be able to engage.  For example, providing a reward for simply taking a health screening, regardless of the results, or for attending a nutrition class, where no diet change is required, likely would be considered “participatory” and not subject to the HIPAA rules.

If our program is subject to the HIPAA rules, what are the new requirements?

Similar to the prior HIPAA rules, the program must meet 5 requirements in order to satisfy the new HIPAA wellness rules:

1.         Limit on Reward – Where an activity is considered health-based, the plan is limited in the amount of the incentive it can offer.  The limit is 30% of the cost of coverage (employer plus employee portion).  For example, if the annual cost of coverage is $1,000, then the limit on the amount of incentives would be $300 per year.  The 30% is based on the cost of single coverage if only employees are eligible for the wellness program.  If dependents also are eligible, the 30% is based on the cost of the coverage in which the individual is enrolled (single or family).  If a tobacco program is used, then this amount can increase to a total of 50% of the cost of coverage with respect to the tobacco piece (so an extra 20% for tobacco programs).  The limit is based on the incentives for all health-based wellness programs added together for a total of 30% (or up to 50% if including a tobacco program).

2.         Annual Qualification – HIPAA requires that the plan offer qualification for health-based incentives on an annual basis, such as at annual enrollment.

3.         Reasonable Design – HIPAA requires that, overall, the program be reasonably designed to promote health and prevent disease.

4.         Reasonable Alternative - HIPAA requires that, where there is a health-based standard (either the Outcome-Based or Activity-Based), the plan must provide an alternative to those who do not meet the initial standard.  The type of alternative depends on the type of program.

·                     Outcome-Based - For incentives that are based on achieving a certain outcome (such as a reward for not smoking or having a favorable cholesterol level), the alternative must be provided to anyone who fails to meet the outcome, regardless of medical reason.

·                     Activity-Based - For incentives that are based an activity (such as walking or exercising), the alternative only must be provided to someone who can show that they medically cannot engage in the activity.  The plan can require a doctor's note.

5.         Disclosure of Reasonable Alternative - Plans must disclose in all plan materials describing the wellness program the availability of the reasonable alternative standard.  The new rules require that this disclosure also must include contact information and a statement that an individual's personal physician may be accommodated.  The regulations provide sample language.  

What type of alternative is required?

The new rules provide that whether an alternative is “reasonable” will be based on facts and circumstances, but provide the following "Guidelines":

·                     If the alternative is to complete an educational program, such as smoking cessation or coaching, the plan must make the program available or assist employees in finding a program.  The plan cannot require an individual to find his or her own program unassisted.  The plan also must pay for the cost of the program.

·                     If a time commitment is required, it must be reasonable.  The regulations provide an example of requiring nightly attendance at a one-hour class as not being reasonable.

·                     If the alternative is a diet program, the plan must pay any membership fees, but is not required to pay for food.

·                     If an individual's personal physician says the plan's alternative is not “medically appropriate” for that individual, the plan must provide an alternative that accommodates the physician's recommendations.  However, the plan may impose cost sharing for medical items or services furnished as part of the physician's' recommendations.

·                     If the alternative is itself health-based (either Outcome-Based or Activity-Based), the plan must offer a second alternative (or more) until the alternative is no longer health-based.  

Are there special rules for Outcome-Based alternatives?

In addition to the Guidelines above, if a plan sets an Outcome-Based alternative to an Outcome-Based initial standard, there are two additional “Special Rules”:

·                     The plan must give the individual additional time to try to meet the second Outcome-Based standard; and

·                     The plan must allow the individual to, instead, work with his personal physician to design his own alternative.  The individual can make the request at any time, and the personal physician can adjust the recommendations at any time.

For example, if the plan will pay a reward for a certain BMI, with an alternative of a BMI that is easier to reach, the plan has a second Outcome-Based standard and must comply with the additional Special Rules. 

Do these rules apply to tobacco use?  Can we require someone to stop smoking?

The new HIPAA rules expressly state that tobacco use is considered an Outcome-Based standard.  That means that anyone who fails the tobacco-use test must be given an alternative, regardless of medical reason.  For example, if the plan provides a tobacco-free premium, the plan must offer the tobacco-free premium not only to those who do not use tobacco, but also to those who satisfy the alternative, such as attending a smoking cessation course.  The rules are clear that the reward must be the same for both groups and that the plan cannot require the individual to actually stop smoking – rather, participants should be able to earn the reward by attending smoking cessation, even if they don't stop smoking.

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions  

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html   

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.