Final Rule on Wellness Programs Makes Significant Changes

Federal Health Care Reform

This week, the Departments of Treasury, Labor, and Health & Human Services released their final rule on wellness programs in group health coverage that, among other things, distinguishes between two types of programs: activity-based and outcome-based.  The rule makes some significant changes and clarifications to the proposed rule that employers should carefully review.  Among the most noteworthy is clarification of the “reasonable alternative standard” provision which requires employers to provide another way for certain employees to obtain the wellness program reward.  Specifically, the final rule:

• Creates two new types of subcategories for health-contingent wellness programs: 1) activity-only wellness programs where employees only have to complete an activity related to a health factor to receive a reward; and 2) outcome-based wellness programs where employees must meet some health factor measure or test.
  
  
• Although both subcategories have reasonable alternative standard provisions for obtaining a reward, outcome-based wellness programs have significantly different safeguards for employees:
  
  
  • For activity-only wellness programs, the reasonable alternative standard can be limited to individuals who request one, and for whom it is either unreasonably difficult due to a medical condition or medically inadvisable to attempt to satisfy the initial standard.  Employers can require verification of these claims from an employee’s personal physician.
    
    
  • For outcome-based wellness programs, a reasonable alternative standard must be provided to all employees who do not meet the initial standard based on a measurement, test, or screening.  Moreover, if the reasonable alternative is another health factor measurement, it is subject to certain special rules.  For example, employees must be given the opportunity to comply with the recommendations of their personal physician and employers cannot verify those recommendations.

The final rule also states it is the intention of the Departments 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 Departments also note that employers have to comply with any regulations or guidance from the Equal Employment Opportunities Commission related to how the Americans with Disabilities Act applies, or may apply in the future, to wellness programs.  The final rule is applicable to both grandfathered and non-grandfathered group health plans for plan years beginning on or after January 1, 2014.

Although the final rule clarifies some issues that arose in the proposed rule, it raises some potential new questions that the Departments recognize may have to be addressed in “future sub-regulatory guidance” or additional rulemaking.  The Association will likely be submitting additional comments, questions and concerns on the final rule to the Departments.