Proposed rule released on group wellness incentives
Update: June 11, 2013 - Final guidance on wellness programs released
Dec. 27, 2012
On November 20, 2012, the Internal Revenue Service, Department of Labor, and the Department of Health and Human Services issued a joint proposed rule on group wellness incentives.
What are group wellness programs?
Wellness programs are designed to promote health or prevent disease, and are intended to reward plan participants who are committed to working towards a healthier lifestyle.
Federal regulations divide wellness programs between two categories. In each case, the wellness program must be made available to all similarly situated individuals. Participatory wellness programs are wellness programs that either do not provide a reward or do not include any conditions for obtaining a reward based on an individual satisfying a health-related factor. Examples of a participatory wellness program include discounted fitness memberships, diagnostic testing programs that do not base rewards on the test results, waiver of cost sharing for prenatal and well baby visits, or rewards for completion of health risk assessment or screening regardless of results.
Health contingent wellness programs are wellness programs that require an individual to achieve a result that is connected to a health-related factor. BCN’s Healthy Blue Living products and BCBSM’s Healthy Blue Outcomes products are examples of a health contingent wellness program, as defined in the regulations. Other examples of health contingent wellness programs include programs requiring attaining certain results in biometric screening, requiring that targets for exercise be met, imposing a premium surcharge based on tobacco use, imposing requirements that only apply to “at risk” individuals such as coaching, taking a health fitness course, adhering to a health action plan, or complying with health care provider’s care plan
Who is affected?
The proposed rule applies to employer group plans and to issuers offering group coverage. The rule also implements the ACA provision relating to individual coverage. While the ACA has an exception to the nondiscrimination rules for health status related wellness programs if the program meets certain specified requirements, there is no such exception for individual market coverage. Health status related wellness programs will not be permitted in the individual market for BCBSM or BCN after January 1, 2014.
What are the proposed changes to “health contingent” wellness programs?
The agencies propose a significant increase in wellness rewards for health contingent programs. Under prior federal rules, the reward for a health contingent wellness program was limited to 20 percent of the cost of coverage. The new rules increase the reward to 30 percent. If the wellness program is designed to prevent or reduce tobacco use then the reward can be as high as 50 percent. Also new in the proposed rules is that where the standard for the reward or any part of the reward is based on the results of a measurement, screening or test that is related to a health factor (such as biometric testing or a health risk assessment), a different means of qualifying for the reward must be available to all participants in the wellness program – not just those for whom it is unreasonably difficult or are incapable of meeting the standard due to a medical condition.
When do the changes take place?
If the rule is finalized, the reward increases are effective for plan years beginning on or after January 1, 2014.
What is BCBSM doing?
The information is consistent with BCBSM’s current interpretation of rules surrounding group wellness programs.
Where can I find more information?
You can read the full text of the Notice of Proposed Rulemaking on group wellness incentives here.
The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.