Incentives for Nondiscriminatory Wellness Programs in Group Health Plans
Per PPACA, the maximum incentive differential for employer wellness programs will increase from the current 20% of premium to 30% for plan years beginning on or after January 1, 2014. Additionally, if an employer wants to have a tobacco-user surcharge that amount can go to 50% of premium. As with the current regulations, those percentages are of the employee-only premium for plans that are only for employees, but if dependents are added, that percentage can be of the family premium rates as well.
The new rules would require that any family incentives for the tobacco-user penalty be based on the “portion of premium attributable to each family member” that uses tobacco. An example was not provided in the regulations but this may become problematic if an employer wanted to address all dependents. For example, what do you do if your 23 year old child and your spouse smokes, but your 17 year old and your 14 year old do not? Grandfathered plans are not exempted from these rules.
Further, the new incentive limits ONLY apply to “health contingent” wellness programs. A health contingent program is one that requires participants to “satisfy a standard related to a health factor in order to obtain a reward” such as not smoking, attaining certain biometric screening results (such as total cholesterol of less than 200) or reducing their Body Mass Index (BMI). Conversely, there would be NO limit on the incentives for participatory plans. A participatory program issues the reward for participation in a wellness component, not achieving a specified wellness goal.
The regulations provide more clarity about these “health contingent” – or outcomes based –programs, specifically, if an employer introduces a “health contingent” plan, they must include disclosures in plan documents about the availability of alternative standards. They laid out 5 standards for such plans: frequency of opportunity to qualify (once a year), size of reward (30% or 50% if tobacco cessation included), uniform availability & alternative standards, reasonable design and notice of other means of qualifying for reward. These plans can require physician verification for needing an alternative standard. The regulations specifically state:
- If the employer has a tobacco user surcharge, an extra 20%, for example, they must now provide cessation programs and pay 100% of the cost. It is not clear if that is all cessation programs, including the most expensive approach of 1-on-1 counseling with prescription aids (Chantix), or telephone counseling and OTC nicotine replacement therapy (patches, gum, etc.)
- If a participant must lose weight to meet the standard, then the employer must pay 100% of the costs of a weight loss program. Again, it is unclear if that would that be 1-on-1 counseling and guidance by a registered dietician, an expensive option or Weight Watchers, a less expensive option. The employer does not need to pay for the cost of food.
- f the participant is instructed to follow the recommendation of a “medical professional who is an employee or agent of the plan or issuer” – for example, a health coach, a disease management nurse or an on-site clinic physician – but the participant’s personal physician disagrees with the recommendation, than the plan must come up with an alternative standard that satisfies the personal physician.
- The regulations still leave a lot of questions about what is and is not an ERISA wellness plan for documentation and COBRA purposes.
Certainly there needs to be more clarity around these parameters. WGA will continue to track and pass along emerging information about Wellness Program incentives. See your Client Executive at WGA for more information.