Proposed Wellness Program Guidance Issued

Transcription

1 November 29, 2012 Proposed Wellness Program Guidance Issued The Departments of Labor, the Treasury and Health and Human Services issued a proposed rule regarding incentives for nondiscriminatory wellness programs. This proposed guidance builds on the existing wellness program rules that apply under the regulations 1 and addresses changes under the Patient Protection and Affordable Care Act (PPACA) effective for plan years beginning on or after January 1, PPACA provides some important enhancement to existing wellness program rules, including an increase in allowed reward thresholds. Briefly, the proposed rule: applies to both grandfathered 2 and non-grandfathered plans; reclassifies the types of wellness programs as participatory wellness programs (currently referred to as participation only programs ) and health-contingent wellness programs (currently referred to as standards-based programs or rewards-based programs, where participants must satisfy a health-related factor to achieve the reward); 1 Under existing law, an employer rewarding employees based on a health factor (e.g., being a non-smoker or having a body mass index in a certain range) will need to comply with the 5 HIPAA requirements, which include: a maximum reward of 20% of the cost of employee-only coverage (if dependents are eligible for the wellness program, the 20% will be determined based on the cost of the employee and dependent coverage); the program has a reasonable plan design that is intended to promote health and prevent disease; at least annual qualification; the reward must be available to all similarly situated individuals and a reasonable alternative standard is available to obtain the reward for any individual for whom it is unreasonably difficult due to a medical condition (includes nicotine addiction) or for whom it is medically inadvisable to satisfy the otherwise applicable standard; and a notice of the availability of a reasonable alternative is provided. 2 Employers should be mindful that implementing a rewards-based wellness program may cause the plan to lose grandfathered status; imposing a surcharge that increases the employee s cost by more than 5% for any tier of coverage from where it was on March 23, 2010 will result in a loss of grandfathered status.

2 increases the reward threshold from a maximum of 20% to a maximum of 30% for a healthcontingent wellness program; and, with respect to programs designed to prevent or reduce tobacco use, allows a reward up to a maximum of 50%; clarifies that a plan cannot require a participant to find his or her own program to satisfy the reasonable alternative standard unassisted and the participant cannot be required to pay for the program (e.g., if the program is a smoking cessation program, the plan would need to help facilitate enrollment and pay for the program); and provides a new notice to be used to disclose the availability of a reasonable alternative. It is important to note that compliance with this rule does not ensure compliance with various other laws, such as GINA and ADA. Following is a more detailed summary of the highlights from the proposed rule, including examples. APPLICABILITY The proposed rule would be applicable for plan years that begin on or after January 1, 2014 and applies to both grandfathered and non-grandfathered plans. CLASSIFICATION OF WELLNESS PROGRAMS The proposed rule reclassifies the types of wellness programs as: Participatory Wellness Programs programs that are available to all similarly situated individuals and either do not provide a reward or do not include any conditions for obtaining a reward based on an individual satisfying a standard related to a health factor; and Health-Contingent Wellness Programs where an individual is required to satisfy a healthrelated standard to obtain a reward, or where an individual is required to do more than a similarly situated individual based on a health factor in order to achieve the reward. INCREASE IN A REWARD Currently, rewards based on satisfaction of a health factor are capped at a maximum of 20% of the total cost of coverage. The changes under the PPACA and the proposed rule will increase the reward threshold to a maximum of 30% for a health-contingent wellness programs. In a notable exception, the rule allows rewards-based wellness programs designed to prevent or reduce tobacco use to offer a reward of up to a maximum of 50% of the total cost of coverage. Examples of permitted rewards 3 1. An employer sponsors a group health plan. The annual premium for employee-only coverage is $6,000 (of which the employer pays $4,500 per year and the employee pays $1,500 per year). The plan offers employees a health-contingent wellness program focused on exercise, blood sugar, weight, cholesterol, and blood pressure. The reward for compliance is an annual premium rebate of $600. This program satisfies the reward requirements because the reward for the wellness program, $600, does not exceed 30 percent of the total annual cost of employee-only coverage, $1,800. ($6,000 x 30% = $1,800.) 3 These examples only illustrate acceptable rewards under the proposed rules and do not address the other factors the plan must satisfy in order to be a permitted health-contingent wellness program, including providing a reasonable alternative.

3 2. Same facts as Example 1, except the wellness program is exclusively a tobacco prevention program. Employees who have used tobacco in the last 12 months and who are not enrolled in the plan s tobacco cessation program are charged a $1,000 premium surcharge (in addition to their employee contribution towards the coverage). (Those who participate in the plan s tobacco cessation program are not assessed the $1,000 surcharge.) This program satisfies the reward requirements because the reward for the wellness program (absence of a $1,000 surcharge), does not exceed 50 percent of the total annual cost of employee-only coverage, $3,000. ($6,000 x 50% = $3,000.) 3. Same facts as Example 1, except that, in addition to the $600 reward for compliance with the health-contingent wellness program, the plan also imposes an additional $2,000 tobacco premium surcharge on employees who have used tobacco in the last 12 months and who are not enrolled in the plan s tobacco cessation program. (Those who participate in the plan s tobacco cessation program are not assessed the $2,000 surcharge.) The program satisfies the reward requirements because both the total of all rewards (including absence of a surcharge for participating in the tobacco program) is $2,600 ($600 + $2,000 = $2,600), which does not exceed 50 percent of the total annual cost of employeeonly coverage ($3,000); and, tested separately, the $600 reward for the wellness program unrelated to tobacco use does not exceed 30 percent of the total annual cost of employeeonly coverage, $1,800. UNIFORM AVAILABILITY AND REASONABLE ALTERNATIVES The rule provides some helpful clarification regarding reasonable alternatives. Briefly, for individuals where it is unreasonably difficult due to a medical condition or medically inadvisable for the individual to attempt to satisfy the health-related standard (e.g., non-smoker status, certain body mass index, low cholesterol level), a reasonable alternative (or a waiver of the standard) must be made available to allow the individual to receive the reward (or avoid the surcharge). The proposed rule provides the following clarification: While plans are not required to determine a particular alternative standard in advance of an individual s request for one, an individual who is eligible for a reasonable alternative standard must be furnished this alternative upon his or her request or the condition for obtaining the reward must be waived. All facts and circumstances must be taken into account in determining whether the plan furnished a reasonable alterative standard, including (but not limited to): If the reasonable alternative standard is completion of an educational program, the plan must make the educational program available instead of requiring an individual to find such a program unassisted, and may not require an individual to pay for the cost of the program. If the reasonable alternative standard is a diet program, plans are not required to pay for the cost of food but must pay any membership or participation fee. If the reasonable alternative standard is compliance with the recommendations of a medical professional who is an employee or agent of the plan, and an individual s personal physician states that the plan s recommendations are not medically appropriate for that individual, the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual s personal physician with regard to medical appropriateness. Plans may impose standard cost sharing under the plan or coverage for medical items and services furnished pursuant to the physician s recommendations. If reasonable under the circumstances, a plan may seek verification, such as a statement from an individual s personal physician, that a health factor makes it unreasonably difficult for the

4 individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard. It would not be reasonable, for example, for a plan to seek verification of a claim that is obviously valid based on the nature of the individual s medical condition that is known to the plan. However, plans may seek verification in the case of claims for which it is reasonable to determine that medical judgment is required to evaluate the validity of the claim. REASONABLE DESIGN Under the existing rules, rewards-based wellness programs must be reasonably designed to promote health or prevent disease. A program satisfies this standard if it has a reasonable chance of improving the health of, or preventing disease in, participating individuals and it is not overly burdensome, is not a subterfuge for discriminating based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease. The proposed rule provides some additional guidance in this area. To the extent a plan s initial standard for obtaining a reward (including a portion of a reward) is based on the results of a measurement, test, or screening relating to a health factor (such as a biometric examination or a health risk assessment), the plan must make available to any individual who does not meet the standard based on the measurement, test, or screening a different, reasonable means of qualifying for the reward. NOTICE Under the existing rules, plans must disclose in all plan materials describing the terms of the program the availability of other means of qualifying for the reward or the possibility of waiver of the otherwise applicable standard. If materials merely mention the availability of a program, without describing its terms, this disclosure is not required. Due to confusion around the existing notice, the proposed guidance provides language that can be used (or allows the use of substantially similar language) to satisfy the notice requirement. Your health plan is committed to helping you achieve your best health status. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at [insert contact information] and we will work with you to find a wellness program with the same reward that is right for you in light of your health status. The preamble indicates that this disclosure is not a required component of a Summary of Benefits and Coverage (SBC). EXAMPLES These examples assume the premium differential does not exceed the permitted thresholds. 1. A group health plan provides a reward to individuals who participate in a reasonable specified walking program. If it is unreasonably difficult due to a medical condition for an individual to participate (or if it is medically inadvisable for an individual to participate), the plan will waive the walking program requirement and provide the reward. All materials describing the terms of the walking program disclose the availability of the waiver. The program satisfies the wellness program requirements because the reward under the program is available to all similarly situated individuals because it accommodates individuals

5 who cannot participate in the walking program due to a medical condition (or for whom it would be medically inadvisable to attempt to participate) by providing them the reward even if they do not participate in the walking program (that is, by waiving the condition). The program satisfies the reasonableness requirement because the walking program is reasonably designed to promote health and prevent disease. Last, the plan complies with the disclosure requirement. 2. In conjunction with an annual open enrollment period, a group health plan provides a premium differential based on tobacco use, determined using a health risk assessment. The following statement is included in all plan materials describing the tobacco premium differential: Stop smoking today! We can help! If you are a smoker, we offer a smoking cessation program. If you complete the program, you can avoid this surcharge. The plan accommodates participants who smoke by facilitating their enrollment in a smoking cessation program that requires participation at a time and place that are not unreasonably burdensome or impractical for participants, and that is otherwise reasonably designed based on all the relevant facts and circumstances. The plan pays the cost of the program. Any participant can avoid the surcharge by participating in the program, regardless of whether the participant stops smoking. In this Example, the premium differential satisfies the requirements. The program s initial standard for obtaining a reward is dependent on the results of a health risk assessment, which is a screening. However, the plan is reasonably designed because the plan provides a different, reasonable means of qualifying for the reward to all tobacco users. The plan discloses, in all materials describing the terms of the program, the availability of other means of qualifying for the reward. Thus, the plan satisfies these requirements. 3. Same facts as Example 2, except the plan does not facilitate participant Frank s enrollment in any program. Instead the plan advises Frank to find a program, pay for it, and provide a certificate of completion to the plan. CONCLUSION In this Example, the requirement for Frank to find and pay for Frank s own smoking cessation program means that the alternative program is not reasonable. Accordingly, the plan has not offered a reasonable alternative standard and it violated the wellness program rules. This rule is in proposed format and applies effective for the first plan year that begins on or after January 1, The agencies are requesting comments from the public on various issues outlined in the guidance. Final guidance is expected in 2013, prior to the effective date of these increased incentives. For a copy of the proposed rule (and instructions on submitting comments), visit: USI 555 Pleasantville Road Suite 160 Suite 160 South Briarcliff Manor, NY Disclaimer: This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws, regulations or to address specific client situations. It should not be construed as legal advice or opinion. USI is a leading provider of employee benefit programs, commercial insurance, and retirement plan services operating nationally with 77 offices. In today's climate of escalating healthcare costs, USI has the knowledge and resources to support your company's critical employee benefits decisions. We offer strategic cost containment solutions, integrated wellness programs, compliance services, and administration and communication services. Please contact your USI representative or call (877) for additional information.

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