Employee Benefits-DOL Issues FAQs about Affordable Care Act Implementation, Including Wellness Programs

The Department of Labor (the “DOL”), in conjunction with the Department of Health and Human Services and the Treasury (together, the “Departments”), has issued FAQs (Part XVIII) regarding implementation of the Affordable Care Act, including among other things guidance on wellness programs. Here is what the FAQs say on those programs:

Final Regulations. On June 3, 2013, the Departments issued final regulations regarding nondiscriminatory wellness programs providing group health coverage under PHS Act section 2705 and the related provisions of ERISA and the Code. The final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20 percent to 30 percent of the cost of coverage, and further increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use. The final regulations also address the reasonable design of health-contingent wellness programs and the reasonable alternatives that must be offered in order to avoid prohibited discrimination.

Tobacco Use. Some group health plans charge participants a tobacco premium surcharge, but also provide an opportunity to avoid the surcharge if, at the time of enrollment or annual re-enrollment, the participant agrees to participate in (and subsequently completes within the plan year) a tobacco cessation educational program. If a participant, who is a tobacco user, initially declines the opportunity to participate in the tobacco cessation program, but joins in the middle of the plan year, the plan may, but is not required to, provide the opportunity to avoid the surcharge or provide another reward to the individual for that plan year.

Reasonable Alternative Standards. The plan must provide a reward for individuals who qualify by satisfying a reasonable alternative standard. If an individual’s personal physician states that an outcome-based wellness program is not medically appropriate for that individual and recommends a weight reduction program (an activity-only program) instead, the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual’s personal physician with regard to medical appropriateness. Many different weight reduction programs may be reasonable for this purpose, and a participant should discuss different options with the plan.
Notice of Availability of Reasonable Alternative Standard. Paragraph (f)(6) of the final regulations provides sample language that may be used to satisfy the requirement to provide notice of the availability of a reasonable alternative standard. Plans are permitted to modify this language. The final regulations state that the sample language provided in paragraph (f)(6), or substantially similar language, can be used to satisfy the notice requirement. Plans may modify the sample language to reflect the details of their wellness programs, provided that the notice includes all of the required content of the final regulations. Additional sample language is available in examples illustrating the final regulations’ requirements for outcome-based wellness programs.