Understanding wellness program regulations under the ACA

Last month, the U.S. Departments of Labor, Treasury and Health and Human Services released the final rules outlining requirements of employer-sponsored wellness programs under the Affordable Care Act. When the federal healthcare reform legislation was signed into law in 2010, it foresaw that beginning in 2014, employers would be able to offer employees greater premium cost incentives to participate in wellness programs. The legislation is aimed at lowering the prominence of chronic disease and improving wellness levels among the U.S. population, as well as helping both public and private organizations lower their healthcare costs. 

As more elements of healthcare reform take effect and alter the regulations governing employee-sponsored insurance benefits, state and local public employers may want to consider altering their wellness provisions to ensure compliance with federal laws, boost staff health and minimize healthcare expenses.

What the final rules mean
The Health Affairs Blog recently explained that while the ACA aims to prohibit the healthcare discrimination based on pre-existing conditions, the federal mandate does allow employers to impose premium surcharges, grant discounts and implement other incentives through wellness programs. 

Under the terms of the rules enacted in late May, employers must shape wellness initiatives so that any employee participant is given the opportunity to access all rewards in full, regardless of his or her health status, which includes whether he or she has previously sought medical care, made prior claims, and his or her genetic profile, disability and physical and mental state.

The main difference between the new regulations and those previously put it place by the Health Insurance Portability and Accountability Act signed in 1996 is the premium incentive amount programs can impose from 20 percent to 30 of total cost of coverage. In addition, certain programs, such as those aimed at helping employees quit smoking, can bring that rate up to 50 percent. 

In addition, the final rules distinguish between participatory and health-contingent plans. The former type simply needs to ensure all employees are able to take part, while the latter is governed by additional regulations.

The health-contingent plan requirements
Among health-contingent plans, the federal rules distinguish between active-only and outcome-based programs, both of which must be “reasonably designed” to prevent disease or promote healthy lifestyles. Active-only initiatives reward employees for completing certain activities, like exercising, dieting or attending classes or seminars. Meanwhile, Outcome-based programs would grant participants a premium discount or other positive incentive for achieving a certain goal, such as reaching a lowered cholesterol or blood pressure level, giving up smoking or reducing their body mass index.

Because certain conditions may prevent employees from participating in a wellness program, employers must provide a reasonable alternative to a health-contigent plan if an employee requests it.  The alternative must also be deemed “reasonable,” and employers can choose to create one alternative plan or various, unique ones tailored to individual workers’ needs. If the alternative program is educational or an exercise-based one, the employee must pay for the associated fees. In addition, if an employee’s physician determines the alternative is not suited to the person appropriately, the employer must tailor a new plan and receive the physician’s approval.

Study questions effectiveness of wellness plans
While the federal government contends that wellness programs may be able to promote the adoption of healthier lifestyles, boost health education among the workforce and help many access screenings, immunizations and other preventative care, a recent study revealed that wellness program participation remains relatively low in the U.S.

According to Reuters, RAND Corp. found that while roughly half of U.S. employers offer wellness programs, the number of employees who take part in such initiatives is low and current programs haven’t been proven to deliver the results of weight loss, smoking cessation and other health goals initially hoped for. 

While the intended effects of wellness programs seem promising, it is still unclear whether such initiatives can promise long-term cost savings for employers and workers alike. Because there are other ways school districts, local governments and other public employers can cut healthcare expenses, benefits administrators can work with National Insurance Services to determine the best plan for their employees.