Martin Simon, JD, Senior Legal Editor
With the 2012 election results making the Affordable Care Act (ACA)/healthcare reform a long-term reality, the Internal Revenue Service, Department of Labor, and Department of Health and Human Services have issued a series of proposed regulations needed for implementation of many of the ACA’s key provisions by January, 1, 2014.

Importantly for employers planning for 2014, the three agencies have jointly issued proposed rules on wellness programs to reflect the changes to wellness provisions made by the ACA and to encourage wellness programs in group health coverage.

The proposed regulations will be effective for plan years beginning on or after January 1, 2014.

Wellness initiatives

The proposed regulations are designed to support workplace wellness programs, including "participatory wellness programs" which generally are available without regard to an individual’s health status. These include, for example, programs that reimburse for the cost of membership in a fitness center; that provide a reward to employees for attending a monthly, no-cost health education seminar; or that provides a reward to employees who complete a health risk assessment without requiring them to take further action.

The regulations also set out amended standards for nondiscriminatory "health contingent wellness programs," which generally require individuals to meet a specific standard related to their health to obtain a reward.

Examples of health-contingent wellness programs include programs that provide a reward to those who do not use, or decrease their use of, tobacco, or programs that provide a reward to those who achieve a specified cholesterol level or weight as well as to those who fail to meet that biometric target but take certain additional required actions.

Consumer protections.To protect consumers from unfair practices, the proposed regulations would require health-contingent wellness programs to follow certain rules, including:

• Programs must be reasonably designed to promote health or prevent disease. To meet this requirement, a program would have to offer a different, reasonable means of qualifying for the reward to any individual who does not meet the standard based on the measurement, test, or screening. Programs must have a reasonable chance of improving health or preventing disease and not be overly burdensome for individuals.
• Programs must be reasonably designed to be available to all similarly situated individuals. Reasonable alternative means of qualifying for the reward would have to be offered to individuals whose medical conditions make it unreasonably difficult, or for whom it is medically inadvisable, to meet the specified health-related standard.
• Individuals must be given notice of the opportunity to qualify for the same reward through other means. The proposed rules provide new sample language intended to be simpler for individuals to understand and to increase the likelihood that those who qualify for a different means of obtaining a reward will contact the plan.

Flexibility for employers. The proposed rules also implement changes that increase the maximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of health coverage, and that further increase the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use. The proposed rules would not specify the types of wellness programs employers can offer, and invite comments on additional standards for wellness programs to protect consumers.

Martin Simon, JD is a Senior Legal Editor for BLR’s human resources and employment law publications. Mr. Simon has worked in legal publishing for over 25 years. He worked for 7 years as a legal editor for Prentice Hall, where he wrote and edited for the Pension and Profit Sharing and the Plan Administrators Compliance Manual looseleaf services. He has been a legal editor for BLR for more than 20 years. Mr. Simon has been on the Board of the Hartford Chapter of Working in Employee Benefits for 4 years. Mr. Simon has a BA degree with Honors from the University of Connecticut, where he was a member of the Honors Program and Phi Beta Kappa. He received his law degree from the University of Connecticut and is a member of the Connecticut Bar.