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Healthcare News

June 3, 2013

Final regulations on wellness programs and rewards for group health plans were issued on May 29, 2013 by the Departments of Treasury, Labor and Health and Human Services. These regulations apply to insured and self-insured group plans, both grandfathered and non-grandfathered, for plan years beginning on or after January 1, 2014.

The final regulations confirmed the maximum wellness reward amounts that will be allowed.

  • The maximum wellness program reward is 30 percent of the total cost of medical coverage, including both employer and employee contributions.
  • The maximum wellness program total reward may be increased to 50 percent for programs related to tobacco use.
  • Rewards can take many forms, such as premium discounts or surcharges, reduced cost sharing, enhanced benefits, gift cards or deposits to Health Savings Accounts or Health Reimbursement Accounts.
  • The reward must be available at least once per year for all similarly situated individuals.
  • If family members participate in wellness programs, the reward can be based on the total cost of coverage for all covered family members. If some family members are eligible for the reward and others are not, employers have flexibility in determining the portion of the reward attributable to each family member.

There are two types of Wellness Programs: Participatory and Health-Contingent

1. Participatory Wellness Programs

Any Participatory Wellness program reward is based only on participation, not on meeting specific health standards. Examples of these types of programs include health club discounts or rewards for completing a health assessment. There are no limits on the rewards for Participatory Wellness programs.

2. Health-Contingent Wellness Programs

Health-Contingent Wellness programs require individuals to meet a health standard or participate in a health program to receive a reward. Every individual eligible for the program must be given an opportunity to qualify for the reward once a year. The reward cannot exceed the maximum amounts noted above.

Health-Contingent programs may be (a) Activity-Only programs or (b) Outcome-Based programs.

(a) Activity-Only Wellness Programs 

  • Individuals are rewarded for completing a program such as a walking, diet or exercise program.
  • Individuals are not required to achieve a specific result such as losing weight to earn the reward.
  • A physician may provide verification that a medical condition makes it unreasonably difficult or medically inadvisable for a person to perform the activity.

(b) Outcome-Based Wellness Programs 

  • Individuals are required to achieve a health outcome such as a specific blood pressure or BMI level to receive the reward.
  • Individuals who do not meet the required standard must take additional steps such as working with a health coach or completing a health improvement plan to receive the reward.
  • Physician verification that a medical condition makes it unreasonably difficult or medically inadvisable for a person to meet the standard is not permitted for Outcome-Based programs.

Reasonable Alternative Standards

If an individual does not qualify for a Health-Contingent reward, a reasonable alternative standard or waiver must be available. 

  • For Activity-Only programs, a reasonable alternative for obtaining the reward must be provided if it is unreasonably difficult due to a medical condition or medically inadvisable for an individual to attempt to complete the activity.
  • For Outcome-Based programs, a reasonable alternative must be provided to all individuals who do not meet the initial standard.

As an example, a reasonable alternative for an individual who failed to meet a BMI standard might be participation in a weight loss program or the requirement to reduce BMI by a small amount or percentage over a year’s time.

Any materials provided to employees that describe wellness programs must include information about the availability of reasonable alternatives and contact information to request an alternative. Reasonable alternatives do not need to be defined in advance and can be determined on an individual basis.

May 10, 2013

On May 8, 2013, the Department of Labor (DOL) provided temporary guidance and model notices that employers can use to inform their employees about the Exchanges, which will be available January 1, 2014. Please note that the Department of Health and Human Services (HHS) now calls the Exchange the "Health Insurance Marketplace," and DOL refers to the notice as the "Employee Notice of Coverage Options."

The original deadline for providing this notice to employees was March 1, 2013. The effective date has been changed to October 1, 2013 to coincide with the Exchange or Marketplace open enrollment period, which also begins on that date. Employers who want to start providing notices sooner can follow this temporary guidance and use these model notices. However, employers are not required to provide notices under this temporary guidance and can wait until formal guidance is provided later this year.

Impacted Employers

The notice requirement applies to all employers that are subject to the Fair Labor Standards Act (FLSA). Most employers fall into this category, but there are exceptions. The following link may assist employers in making this determination: http://www.dol.gov/elaws/esa/flsa/scope/screen24.asp 

Recipient and Distribution Requirements

This one-time notice must be provided to all current employees as of October 1, 2013 and to new employees as they are hired. For 2014, if the notice is provided within 14 days of an employee's start date, the notice will be considered as having been provided at the time of hiring.

Employers must provide a notice to all full-time and part-time employees, regardless of whether the employee is enrolled in an employer-sponsored medical plan. Employers must provide this notice even if they do not offer any health coverage to employees.

The notice does not have to be provided to employees' dependents.

Notices must be in writing and can be delivered electronically by the employer if the ERISA standards for electronic delivery are met.

What Must be Included in the Notice

There are two versions of the model notice:

  • Notice for employers that DO offer medical coverage to some or all of their employees
  • Notice for employers that DO NOT offer medical coverage to any employees

Employers can use the model notices or create their own notice as long as the notice includes the following required information:

  • Verbiage that the Exchange or Marketplace exists including a description of the services it provides and direction for employees to visit HealthCare.gov for more information.
  • Employees who purchase coverage through the Exchange or Marketplace may be eligible for a premium subsidy if their employer does not provide coverage that is "affordable" and provides "minimum value." Coverage is affordable if the employee-only option for the lowest-cost plan offered costs less than 9.5% of an employee's W-2 wages. Coverage provides minimum value if the plan pays at least 60% of allowed charges for covered services.
  • Employees who purchase coverage through the Exchange or Marketplace will pay for that coverage with after-tax dollars.
  • If applicable, information about the medical coverage the employer offers to its employees.

Changes to COBRA Notice

Employees and dependents who become eligible for COBRA will also have the option to purchase coverage through the Exchange/Marketplace and potentially receive a premium subsidy. The model COBRA notice that employers and COBRA administrators use has been revised to include information about the Marketplace.

May 5, 2013

On March 11, HHS announced it is delaying the “employee choice” option in the Small Business Health Options Program (SHOP) Exchanges from 2014 to 2015 for the 33 states where the Federal government will be running the Exchanges.

The employee choice option will allow employers to determine how much they will contribute toward the cost of employee coverage and offer their employees a choice of Exchange plans from different carriers at a certain metal level (Bronze, Silver, etc.).

Due to this delay, in states where the Federal government is developing the Exchange, in 2014, small employers will choose an Exchange plan and their employees will decide whether or not to enroll in that plan. Employers will not be able to offer their employees a choice of plans until 2015.

Exchanges being developed by states may choose to offer employee choice in 2014, or they may choose to delay implementation of that feature until 2015. The employee choice option will be available in all SHOP Exchanges for plan years beginning on or after January 1, 2015.