HIPAA and the Affordable Care Act Wellness Program Requirements

HIPAA and the Aordable

Care Act Wellness Program

Requirements

The U.S. Departments of Labor, Health and Human Services and the Treasury is-

sued nal regulations on incentives for nondiscriminatory wellness programs in group

health plans under the Aﬀordable Care Act and the HIPAA nondiscrimination provi-

sions. These rules apply to both grandfathered and nongrandfathered group health plans.

Are wellness programs provided in connection with a group health

plan allowed under the Affordable Care Act and HIPAA?

The Aﬀordable Care Act and HIPAA generally prohibit group health plans from

charging similarly situated individuals diﬀerent premiums or contributions or

imposing diﬀerent deductibles, copayment or other cost sharing requirements

based on a health factor. However, there is an exception that allows plans to oﬀer

wellness programs.

There are two types of wellness programs provided in connection with a

group health plan. Participatory wellness programs are generally available

without regard to an individual’s health status. Either no reward is oﬀered,

or none of the conditions for obtaining a reward are based on an individual

satisfying a standard related to a health factor. These programs comply with the

nondiscrimination requirements so long as the program is made available to all

similarly situated individuals. For example:

A program that reimburses employees for all or part of the cost for

memberships in a tness center.

A diagnostic testing program that provides a reward for participation and

does not base any part of the reward on outcomes.

A program that reimburses employees for the costs of participating, or

that otherwise provides a reward for participating, in a smoking cessation

program without regard to whether the employee quits smoking.

A program that provides a reward to employees for aending a monthly,

no-cost health education seminar.

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Health-contingent wellness programs require participants to satisfy a standard

related to a health factor in order to obtain a reward. There are two types of

health-contingent wellness programs: activity-only and outcome-based. Activity-

only programs require an individual to perform or complete an activity related

to a health factor in order to obtain a reward. Examples include a walking, diet

or exercise program. Outcome-based programs require an individual to aain

or maintain a specic health outcome (such as not smoking or aaining certain

results on biometric screenings) in order to obtain a reward. To comply with the

nondiscrimination rules, health-contingent wellness programs must meet ve

requirements described in the nal rules.

What are the ve requirements for health-contingent wellness

programs under the nal regulations?

1) The program must give individuals eligible to participate the opportunity

to qualify for the reward at least once per year.

2) The total reward for all the plan’s wellness programs that require

satisfaction of a standard related to a health factor is limited – generally,

it must not exceed 30 percent (or 50 percent for programs designed to

prevent or reduce tobacco use) of the cost of employee-only coverage

under the plan. If dependents (such as spouses and/or dependent

children) may participate in the wellness program, the reward must not

exceed 30 percent (or 50 percent) of the cost of the coverage in which an

employee and any dependents are enrolled.

3) The program must be reasonably designed to promote health and prevent

disease. (Note: diﬀerent requirements apply for activity-only and

outcome-based programs, as described later in this section.)

4) The full reward must be available to all similarly situated individuals.

This means the program must allow a reasonable alternative standard

(or waiver of the otherwise applicable standard). (Note: diﬀerent

requirements apply for activity-only and outcome-based programs, as

described later in this section.)

5) The plan must disclose in all materials describing the terms of the

program the availability of a reasonable alternative standard (or the

possibility of a waiver of the otherwise applicable standard). (Note:

diﬀerent requirements apply for activity-only and outcome-based

programs, as described later in this section.) Model language is available

(see page 139).

What factors may be considered in determining whether a program is

reasonably designed to promote health and prevent disease?

An activity-only or outcome-based program is considered reasonably designed

to promote health or prevent disease, if the program has a reasonable chance

of improving the health of, or preventing disease in, participating individuals;

is not overly burdensome; is not a subterfuge for discrimination based on a

health factor; and is not highly suspect in the method chosen to promote health

or prevent disease. The determination is based on all the relevant facts and

circumstances.

To ensure that an outcome-based wellness program is reasonably designed to

improve health and does not act as a subterfuge for underwriting or reducing

benets based on a health factor, a reasonable alternative standard to qualify for

the reward must be provided to any individual who does not meet the initial

standard based on a test or screening that is related to a health factor.

Under what circumstances must a reasonable alternative standard

be offered?

For activity-only programs, a reasonable alternative standard (or waiver of the

otherwise applicable standard) must be oﬀered to any individual for whom

it is unreasonably diﬃcult due to a medical condition to satisfy the otherwise

applicable standard, or for whom it is medically inadvisable to aempt to

satisfy the otherwise applicable standard. Plans can seek physician verication

with respect to a request for a reasonable alternative standard, if the request is

reasonable under the circumstances.

For outcome-based programs, the reasonable alternative standard (or waiver of

the otherwise applicable standard) must be oﬀered to any individual who does

not meet the initial standard based on the measurement, test or screening. If

the reasonable alternative standard is, itself, another outcome-based wellness

standard, the reasonable alternative cannot be a requirement to meet a diﬀerent

level of the same standard without additional time to comply that takes into

account the individual’s circumstances and an individual must be given the

opportunity to comply with the recommendations of their personal physician as

a second reasonable alternative standard (if the physician joins in the request).

It is not reasonable for plans to seek physician verication that a health factor

makes it unreasonably diﬃcult for the individual to satisfy, or medically

inadvisable for the individual to aempt to satisfy a standard under an outcome-

based wellness program.

For all health-contingent wellness programs (whether activity-only or

outcome-based), all of the facts and circumstances are taken into account when

determining whether a plan has provided a reasonable alternative standard,

including but not limited to the following:

If the reasonable alternative standard is completion of an educational

program, the plan or issuer must make the educational program available

or assist the employee in nding such a program (instead of requiring an

individual to nd such a program unassisted), and may not require an

individual to pay for the cost of the program.

The time commitment required must be reasonable (for example,

requiring aendance nightly at a one hour class would be unreasonable).

If the reasonable alternative standard is a diet program, the plan or issuer

is not required to pay for the cost of food but must pay any membership

or participation fee.

If an individual’s personal physician states that a program standard

(including, if applicable, the recommendations of the plan’s medical

professional) is not medically appropriate for that individual, the plan or

issuer must provide a reasonable alternative standard that accommodates

the recommendations of the individual’s personal physician with regard

to medical appropriateness. Plans and issuers may impose standard

cost sharing under the plan or coverage for medical items and services

furnished pursuant to the physician’s recommendations.

What disclosure is required for the availability of a reasonable

alternative standard?

Plans and issuers must disclose the availability of a reasonable alternative

standard to qualify for the reward (and, if applicable, the possibility of waiver

of the otherwise applicable standard) in all plan materials describing the terms

of a health-contingent wellness program (both activity-only and outcome-

based wellness programs). This disclosure must include contact information

for obtaining the alternative and a statement that recommendations of an

individual’s personal physician will be accommodated. If plan materials merely

mention that such a program is available, without describing its terms, this

disclosure is not required.

In addition, for outcome based-wellness programs, this notice must also be

included in any disclosure that an individual did not satisfy an initial outcome-

based standard, for example a notice that an individual did not meet the BMI

target range to qualify for the reward.

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How do the wellness program rules apply to a group health plan that

offers a reward to individuals who participate in voluntary testing for

early detection of health problems? The plan does not use the test

results to determine whether an individual receives a reward or the

amount of an individual’s reward.

Such a program is considered a participatory wellness program since it does

not base any reward on the outcome of the testing. Thus, it is allowed under the

HIPAA nondiscrimination provisions as long as the program is made available to

all similarly situated individuals, without being subject to the ve requirements

that apply to health-contingent wellness programs.

Can a plan provide a premium differential between smokers and

nonsmokers?

The plan is oﬀering a reward based on an individual’s ability to stop smoking.

This is considered an outcome-based wellness program. For the plan to

implement this type of program, the plan’s nonsmoking program would need to

meet the ve requirements for wellness programs that require satisfaction of a

standard related to a health factor.

Accordingly, this wellness program is permied if:

The premium diﬀerential is not more than 50 percent of the total cost

of employee-only coverage (or 50 percent of the cost of coverage if

dependents can participate in the program);

The program is reasonably designed to promote health and prevent

disease;

Individuals eligible for the program are given an opportunity to qualify

for the discount at least once per year;

The program provides a reasonable alternative standard, without

physician verication that the individual met the standard, to all

individuals who do not meet the otherwise applicable standard (those

who use tobacco products). For example, the reasonable alternative

standard could include discounts in return for aending educational

classes or for trying a nicotine patch; and

Plan materials describing the terms of the premium diﬀerential (and

any disclosure that an individual did not satisfy the wellness program

standard) describe the availability of a reasonable alternative standard to

qualify for the lower premium.

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