ACA Final Rule on Wellness Plans

By Leslie Francis

On May 29th, HHS issued the final rule governing wellness incentives in group health plans. While the incentives themselves are not a surprise, the scope they are given is worthy of ongoing attention. Wellness incentives have been controversial because of their potential for intrusion into individual choice, their subtle (or not so subtle) coerciveness, their valorization of a particularly model of health, and the possibility that they will impose differential burdens and costs on people with disabilities or other disfavored groups. The final rule attempts to meet these objections in several helpful ways.

Nonetheless, the final rule still will allow programs that are differentially burdensome as a result of factors other than health status. It will also allow programs under which it is more difficult for some than for others to obtain rewards because of their states of health. In programs that give rewards for health outcomes, alternatives must be available for those who do not meet targets—but the reasonableness standard for these alternatives permits requirements that may be differentially burdensome so if they are medically appropriate and follow the recommendations of the patient’s personal physician. HHS supports wellness programs as engaging individuals in their health, as encouraging them in healthy behaviors and discouraging them in unhealthy behaviors, and as incentivizing people to make use of recommended health care services such as screenings.

The rule includes two types of wellness programs. “Participatory” programs are those which make participation available to all similarly situated individuals. Such programs may differentiate among bona fide employment-based classifications or the participant’s relationship to the plan beneficiary, but otherwise must be available to all similarly situated participants regardless of health status. If so, participatory plans do not need to meet any further non-discrimination requirements. An example is a plan that gives participants a premium discount for attending a health education class. Although such participatory programs are facially non-discriminatory, they may impose very different burdens on people depending on their life circumstances. Attending a class at the end of the working day may be a comparably simple matter for a single man without dependents and with a reliable form of transportation. It may be a quite different matter for a single mother of children who is dependent on day care and public transportation. The rule is specific that such factors should not be taken into account in determining whether a program is available to all similarly situated participants regardless of health status and thus non-discriminatory.

“Health contingent” programs make a reward such as a premium discount available to participants based on their meeting a specified health-related goal. The goal might be activity-only (e.g. participating in a walking program) or outcome-based (e.g. achieving a targeted cholesterol level). These programs must meet five non-discrimination requirements. These are: (1) each participant must be given an opportunity to qualify for the reward at least once a year; (2) the reward must not exceed 30% of the total cost of employee coverage under the plan (or 50% if the program is designed to address tobacco use); (3) the reward must be available to all similarly situated individuals, with reasonable alternatives for those who cannot meet the standard for medical reasons; (4) the program must be designed to promote health or prevent disease and not be a subterfuge for discrimination; and (5) the plan must disclose in all descriptive materials the possibility of alternative methods for qualifying for the reward or of a waiver of the applicable standard. The rule is structured to give plans an affirmative defense to a claim of discrimination for meeting these five requirements.

The rule is designed to clarify the relationship between the five non-discrimination requirements and health contingent wellness programs. Most importantly from the perspective of non-discrimination, the rule requires alternatives for a larger group for health contingent wellness programs than for activity only programs. For the latter, alternatives must be available for anyone for whom “it is either unreasonably difficult due to a medical condition to meet the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard.“ For a walking program, this would include anyone whose medical condition made it unreasonably difficult or medically inadvisable to participate. It would not include people who lacked the time to walk, lacked the energy to walk for non-medical reasons such as tending to a sick child, who did not enjoy going out in the cold in winter, or who simply preferred a sedentary life. For health contingent programs, a reasonable alternative must be provided for anyone who does not meet the initial standard—for example, for someone whose cholesterol level is determined to be too high. This is a welcome development in the final rule, as it is aimed to prevent wellness programs from simply being underwriting based on health status in a different guise.

Plans are given flexibility in determining what counts as a reasonable alternative but list a number of relevant factors to be taken into account. If the alternative is an educational program, the plan must make it available or assist the participant in finding it—and the plan may not require the participant to pay the program costs. Time commitments must be reasonable. For diet programs, plans are required to pay membership fees but not the cost of food. Another helpful clarification in the final rule is that plans must accommodate the recommendations of the individual’s personal physician regarding medical appropriateness.

Nonetheless, the burdens imposed by these plans may be substantial. The permissible size of the award is calculated based on the total cost of the health plan—that is, both the employer and the employee’s premium contribution. The reward may not exceed 30% (50% in the case of a program addressing smoking). This is potentially a very significant cost. For example, if a total premium is $900/month and the employee’s share is $200/month—a not unusual amount—the “reward” could be $270/month—leaving an employee who fails the wellness program effectively paying more than double the premium costs than an employee who meets the program’s standard.

The full text of the rule is here.

[This is a cross post from HealthLawProf]


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.