On May 29, 2013 the Departments of Health and Human Resources (HHS), Labor (DOL) and the Treasury (collectively, the Departments) issued final regulations to provide comprehensive guidance with respect to the general requirements for wellness programs.

These final regulations are effective August 2, 2013 and generally apply (1) to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2014 and (2) to individual health insurance issuers for policy years beginning on or after January 1, 2014.

Overview of the Final Regulations

These final regulations generally implement standards for group health plans and health insurance issuers offering group health insurance coverage with respectto the wellness program exception from the HIPAA nondiscrimination provisions in PHS Act section 2705, ERISA section 702, and Code section 9802, as amended by the Affordable Care Act. These final regulations replace the wellness program provisions of paragraph (f) of the 2006 regulations and are applicable to both grandfathered and non-grandfathered group health plans and group health insurance coverage for plan years beginning on or after January 1, 2014.  These regulations also implement the nondiscrimination provisions of PHS Act section 2705 applicable to non-grandfathered individual health insurance coverage for policy years beginning on or after January 1, 2014. This rulemaking does not modify provisions of the 2006 regulations other than paragraph (f).

These final regulations do not establish requirements for all types of programs or information technology platforms offered by an employer, health plan, or health insurance issuer that could be labeled a wellness program, disease management program, case management program, or similar term. Instead, these final regulations set forth criteria for a program of health promotion or disease prevention offered or provided by a group health plan or group health insurance issuer that must be satisfied in order for the plan or issuer to qualify for an exception to the prohibition on discrimination based on health status under paragraphs (b)(2)(ii) and (c)(3) of the 2006 regulations (which provide exceptions to the general prohibition against discrimination based on a health factor in benefits and premiums or contributions, respectively).  That is, these rules set forth criteria for an affirmative defense that can be used by plans and issuers in response to a claim that the plan or issuer discriminated under the HIPAA nondiscrimination provisions.

These final regulations are restructured, as compared to the proposed regulations, to help clarify this relationship and how the five statutory requirements apply to different types of programs, including different types of health-contingent wellness programs (described below as activity-only wellness programs and outcome-based wellness programs). The final regulations also reorganize the presentation of the steps a plan or issuer must take to ensure a wellness program: is reasonably designed to promote health or prevent disease; has a reasonable chance of improving the health of, or preventing disease in, participating individuals; 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.

To meet these standards, health-contingent wellness programs that are outcome-based wellness programs must offer a "reasonable alternative standard" (or waiver of the otherwise applicable standard) to a broader group of individuals than is required for activity-only wellness programs. Specifically, for activity-only wellness programs, a reasonable alternative standard for obtaining the reward must be provided for any individual for whom, for that period, 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 outcome-based wellness programs, which generally provide rewards based on whether an individual has attained a certain health outcome (such as a particular body mass index (BMI), cholesterol level, or non-smoking status, determined through a biometric screening or health risk assessment), a reasonable alternative standard must be provided to all individuals who do not meet the initial standard, to ensure that the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status.  

These requirements are generally intended to be the same as those included in the proposed rules, but the terminology has changed (for example, the term "different, reasonable means," which was used side by side with the term "reasonable alternative standard," has been dropped to reduce confusion). These changes help to clarify that the group of individuals that must be offered a reasonable alternative standard differs when comparing the requirements for an activity-only wellness program to the requirements for an outcome-based wellness program. The requirements that the alternative be reasonable taking into account an individual's medical condition, and the option of waiving the initial standard, remain the same. The term "reasonable alternative standard" is used in these final rules as it is in the statute.

The intention of the Departments in these final regulations is that, regardless of the type of wellness program, every individual participating in the program should be able to receive the full amount of any reward or incentive, regardless of any health factor. The reorganized requirements of the final regulations explain how a plan or issuer is required to provide such an opportunity for each category of wellness program.

These Final Regulations also discuss, clarify and/or expand the following topics:

·         Requirement for Participatory Wellness Programs;

·         Requirements for Health-Contingent Wellness Programs;

·         Applicable Percentage;

·         Application to Grandfathered Plans;

·         Application of Nondiscrimination Provisions to the Individual Health Insurance Market; and

·         No Effect on Other Laws

Definitions

Participatory wellness programs: These final regulations continue to divide wellness programs into two categories: "participatory wellness programs," which are a majority of wellness programs (as noted below), and "health-contingent wellness programs." Participatory wellness programs are defined under the final regulations as programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor.  Several examples of participatory wellness programs are provided in these final regulations, including: (1) a program that reimburses employees for all or part of the cost of membership in a fitness center; (2) a diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes; and (3) a program that provides a reward to employees for attending a monthly, no-cost health education seminar.

Health-contingent wellness programs: In contrast, health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward (or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward).  This standard may be performing or completing an activity relating to a health factor, or it may be attaining or maintaining a specific health outcome. In these final regulations, the category of health-contingent wellness programs is subdivided into: (1) activity-only wellness programs, and (2) outcome-based wellness programs.  Under paragraphs (b)(2)(ii) and (c)(3) of the 2006 regulations (which remain unchanged), both of these types of health-contingent wellness programs are permissible only if they comply with the criteria of these final regulations.

Activity-only wellness programs: Activity-only wellness programs are a subcategory of health-contingent wellness programs.  Under an activity-only wellness program, an individual is required to perform or complete an activity related to a health factor in order to obtain a reward. Activity-only wellness programs do not require an individual to attain or maintain a specific health outcome. The final regulations, therefore, provide safeguards to ensure these individuals are given a reasonable opportunity to qualify for the reward.

Outcome-based wellness programs: Outcome-based wellness programs are a subcategory of health-contingent wellness programs. Under an outcome-based wellness program, an individual must attain or maintain a specific health outcome (such as not smoking or attaining certain results on biometric screenings) in order to obtain a reward. Generally, these programs have two tiers: (a) a measurement, test, or screening as part of an initial standard; and (b) a larger program that then targets individuals who do not meet the initial standard with wellness activities.  For individuals who do not attain or maintain the specific health outcome, compliance with an educational program or an activity may be offered as an alternative to achieve the same reward.  However, this alternative pathway does not mean that the overall program, which has an outcome-based initial standard, is not an outcome-based wellness program. That is, if a measurement, test, or screening is used as part of an initial standard and individuals who meet the standard are granted the reward, the program is considered an outcome-based wellness program.