Alert
Alert
12.28.12
On November 20, 2012, the IRS, DOL and HHS jointly issued proposed regulations under the Affordable Care Act building on existing HIPAA regulations of wellness programs. The new proposed regulations provide clearer guidance and greater flexibility in some areas, but leave many questions unanswered. Earlier, the Eleventh Circuit Court of Appeals affirmed a decision that a wellness program surcharge is exempt under the ADA "bona fide benefit plan" safe harbor.
Increasing numbers of private employers are implementing wellness programs aimed at promoting good health and reducing costs of employer-sponsored health coverage. According to a recent survey by the U.S. Bureau of Labor Statistics, the percentage of private industry employers providing wellness programs increased from 23% to 31% between 2005 and 2010.
Frequently, these wellness programs include financial incentives for participating in health assessments, healthy lifestyle programs (e.g., smoking cessation programs), or biometric screening for potential health risks (e.g., blood pressure, cholesterol checks). Legal requirements of such programs can be complex – employers must navigate numerous laws including the Health Insurance Portability and Accountability Act (“HIPAA”), the Genetic Information Nondiscrimination Act (“GINA”), the Age Discrimination in Employment Act (“ADEA”), and Title VII of the Civil Rights Act, as well as contemplate state law implications. Additional compliance challenges are found in the Patient Protection and Affordable Care Act (“Affordable Care Act”) and the Americans with Disabilities Act (“ADA”) – two legal frameworks with recent developments in wellness program compliance.
The New Affordable Care Act Regulations
HIPAA provides employers with a wellness program exception to its general rule prohibiting group health plans from discriminating against individuals in eligibility, benefits or premiums based on eight enumerated health factors, specifically, health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), and disability.
The new proposed regulations implement the nondiscrimination provisions of the Affordable Care Act and in large part mirror the 2006 final HIPAA regulations, though with some significant changes. These proposed regulations, applicable to both grandfathered and non-grandfathered plans on the same basis, are effective for plan years beginning on or after January 1, 2014.
Participatory or Health-Contingent Wellness Programs
The compliance burdens continue to differ depending on which of two categories a wellness program falls into – participatory or health-contingent.
A participatory wellness program is one that is made available to all similarly-situated individuals, and either does not provide a reward or does not include a condition for obtaining a reward based on an individual satisfying a health factor-related standard. For instance, a program that reimburses employee gym memberships would be a participatory wellness program and, therefore, would not be subject to the more stringent requirements of a health-contingent wellness program.
Health-contingent wellness programs require that an individual satisfy a standard related to a health factor in order to obtain a reward, or require that an individual do more than a similarly-situated individual based on a health factor in order to obtain the same reward. For example, imposing a premium surcharge on smokers or requiring individuals with a cholesterol level outside of a specified range to participate in a healthy lifestyle program are both illustrations of health-contingent programs.
Under the proposed regulations, the form of reward under either a participatory or health-contingent wellness program remains unchanged. That is, the reward may be any of a variety of financial or nonfinancial incentives or disincentives including discounts, rebates, full or partial waiver of certain costs, surcharges or additional benefits that otherwise would not be provided under the group health plan.