[Federal Register Volume 78, Number 106 (Monday, June 3, 2013)]
[Rules and Regulations]
[Pages 33158-33192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12916]
[[Page 33157]]
Vol. 78
Monday,
No. 106
June 3, 2013
Part II
Department of the Treasury
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Internal Revenue Service
26 CFR Part 54
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Department of Labor
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Employee Benefits Security Administration
29 CFR Part 2590
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Department of Health and Human Services
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45 CFR Parts 146 and 147
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Incentives for Nondiscriminatory Wellness Programs in Group Health
Plans; Final Rule
Federal Register / Vol. 78 , No. 106 / Monday, June 3, 2013 / Rules
and Regulations
[[Page 33158]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9620]
RIN 1545-BL07
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB55
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 146 and 147
[CMS-9979-F]
RIN 0938-AR48
Incentives for Nondiscriminatory Wellness Programs in Group
Health Plans
AGENCIES: Internal Revenue Service, Department of the Treasury;
Employee Benefits Security Administration, Department of Labor; Centers
for Medicare & Medicaid Services, Department of Health and Human
Services.
ACTION: Final rule.
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SUMMARY: This document contains final regulations, consistent with the
Affordable Care Act, regarding nondiscriminatory wellness programs in
group health coverage. Specifically, these final regulations increase
the maximum permissible reward under a health-contingent wellness
program offered in connection with a group health plan (and any related
health insurance coverage) from 20 percent to 30 percent of the cost of
coverage. The final regulations further increase the maximum
permissible reward to 50 percent for wellness programs designed to
prevent or reduce tobacco use. These regulations also include other
clarifications regarding the reasonable design of health-contingent
wellness programs and the reasonable alternatives they must offer in
order to avoid prohibited discrimination.
DATES: Effective Date: August 2, 2013.
Applicability Date: These final regulations generally apply to
group health plans and group health insurance issuers for plan years
beginning on or after January 1, 2014. These final regulations
generally apply to individual health insurance issuers for policy years
beginning on or after January 1, 2014.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the
Treasury, at (202) 927-9639; or Jacob Ackerman, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at (410)
786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (www.dol.gov/ebsa). In addition, information from HHS on private health insurance
for consumers can be found on the Centers for Medicare & Medicaid
Services (CMS) Web site (www.cciio.cms.gov) and information on health
reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
A. Introduction
The Patient Protection and Affordable Care Act, Pub. L. 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act, Pub. L. 111-152, was enacted on March 30, 2010
(these are collectively known as the ``Affordable Care Act''). The
Affordable Care Act reorganizes, amends, and adds to the provisions of
part A of title XXVII of the Public Health Service Act (PHS Act)
relating to group health plans and health insurance issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and self-insured group health plans.\1\ The Affordable
Care Act adds section 715(a)(1) to the Employee Retirement Income
Security Act (ERISA) and section 9815(a)(1) to the Internal Revenue
Code (the Code) to incorporate the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code, and to make them applicable to
group health plans and health insurance issuers providing health
insurance coverage in connection with group health plans. The PHS Act
sections incorporated by these references are sections 2701 through
2728.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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B. Wellness Exception to HIPAA Nondiscrimination Provisions
Prior to the enactment of the Affordable Care Act, titles I and IV
of the Health Insurance Portability and Accountability Act of 1996
(HIPAA), Pub. L. 104-191, added section 9802 of the Code, section 702
of ERISA, and section 2702 of the PHS Act (HIPAA nondiscrimination and
wellness provisions). These provisions generally prohibit group health
plans and group health insurance issuers from discriminating against
individual participants and beneficiaries in eligibility, benefits, or
premiums based on a health factor.\2\ An exception to the general rule
allows premium discounts or rebates or modification to otherwise
applicable cost sharing (including copayments, deductibles, or
coinsurance) in return for adherence to certain programs of health
promotion and disease prevention.
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\2\ The HIPAA nondiscrimination provisions set forth eight
health status-related factors, which the December 13, 2006 final
regulations refer to as ``health factors.'' Under HIPAA and the 2006
regulations, as well as under PHS Act section 2705 (as added by the
Affordable Care Act), the eight health factors are health status,
medical condition (including both physical and mental illnesses),
claims experience, receipt of health care, medical history, genetic
information, evidence of insurability (including conditions arising
out of acts of domestic violence), and disability. See 66 FR 1379,
January 8, 2001.
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The Departments of Labor, Health and Human Services (HHS), and the
Treasury (collectively, the Departments \3\) published joint final
regulations implementing the HIPAA nondiscrimination and wellness
provisions on December 13, 2006 at 71 FR 75014 (the 2006
regulations).\4\ The 2006 regulations divided wellness programs into
two general categories: Participatory wellness programs and health-
contingent wellness programs. Under the 2006 regulations, participatory
wellness programs \5\ are considered to comply with the HIPAA
nondiscrimination requirements
[[Page 33159]]
without having to satisfy any additional standards if participation in
the program is made available to all similarly situated individuals,
regardless of health status. Paragraph (d) of the 2006 regulations
provided that, generally, distinctions among groups of similarly
situated participants in a health plan must be based on bona fide
employment-based classifications consistent with the employer's usual
business practice. A plan may also distinguish between beneficiaries
based on, for example, their relationship to the plan participant (such
as spouse or dependent child) or based on the age of dependent
children. Distinctions are not permitted to be based on any of the
health factors listed in the 2006 regulations.
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\3\ Note, however, that in the Economic Analysis and Paperwork
Burden section of this preamble, in sections under headings listing
only two of the three Departments, the term ``Departments''
generally refers only to the two Departments listed in the heading.
\4\ See 26 CFR 54.9802-1; 29 CFR 2590.702; 45 CFR 146.121. Prior
to issuance of the final 2006 regulations, the Departments published
interim final regulations with request for comment implementing the
HIPAA nondiscrimination provisions on April 8, 1997 at 62 FR 16894,
followed by proposed regulations regarding wellness programs on
January 8, 2001 at 66 FR 1421.
\5\ Under the 2006 regulations, a participatory wellness program
is generally a program under which none of the conditions for
obtaining a reward is based on an individual satisfying a standard
related to a health factor or under which no reward is offered.
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Under the 2006 regulations, plans and issuers with health-
contingent wellness programs \6\ were permitted to vary benefits
(including cost-sharing mechanisms), premiums, or contributions based
on whether an individual has met the standards of a wellness program
that meets the requirements of paragraph (f)(2), which outlined five
specific criteria.
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\6\ Under the 2006 regulations, a health-contingent wellness
program is generally a program under which any of the conditions for
obtaining a reward is based on an individual satisfying a standard
related to a health factor (such as not smoking, attaining certain
results on biometric screenings, or meeting targets for exercise).
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C. Amendments Made by the Affordable Care Act
The Affordable Care Act (section 1201) amended the HIPAA
nondiscrimination and wellness provisions of the PHS Act (but not of
ERISA section 702 or Code section 9802). (Affordable Care Act section
1201 also moved those provisions from PHS Act section 2702 to PHS Act
section 2705.) As amended by the Affordable Care Act, the
nondiscrimination and wellness provisions of PHS Act section 2705
largely reflect the 2006 regulations (except as discussed later in this
preamble), and extend the HIPAA nondiscrimination protections to the
individual market.\7\ The wellness program exception to the prohibition
on discrimination under PHS Act section 2705 applies with respect to
group health plans (and any health insurance coverage offered in
connection with such plans), but does not apply to coverage in the
individual market.
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\7\ Section 1201 of the Affordable Care Act also moved the
guaranteed availability provisions that were previously codified in
PHS Act section 2711 to PHS Act section 2702, and extended those
requirements to the individual market.
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D. Proposed Regulations Implementing PHS Act Section 2705 and Amending
the 2006 Regulations
On November 26, 2012, the Departments published proposed
regulations at 77 FR 70620, to implement PHS Act section 2705 and amend
the 2006 regulations regarding nondiscriminatory wellness programs in
group health coverage. Like the 2006 regulations, the proposed
regulations continued to divide wellness programs into participatory
wellness programs and health-contingent wellness programs. Examples of
participatory wellness programs provided in the proposed regulations
included a program that reimburses for all or part of the cost of
membership in a fitness center; a diagnostic testing program that
provides a reward for participation and does not base any part of the
reward on outcomes; and a program that provides a reward to employees
for attending a monthly, no-cost health education seminar. Examples of
health-contingent wellness programs in the proposed regulations
included a program that imposes a premium surcharge based on tobacco
use; and a program that uses a biometric screening or a health risk
assessment to identify employees with specified medical conditions or
risk factors (such as high cholesterol, high blood pressure, abnormal
body mass index, or high glucose level) and provides a reward to
employees identified as within a normal or healthy range (or at low
risk for certain medical conditions), while requiring employees who are
identified as outside the normal or healthy range (or at risk) to take
additional steps (such as meeting with a health coach, taking a health
or fitness course, adhering to a health improvement action plan, or
complying with a health care provider's plan of care) to obtain the
same reward.
The proposed regulations re-stated that participatory wellness
programs are not required to meet the five requirements applicable to
health-contingent wellness programs. The proposed regulations also
outlined the conditions for health-contingent wellness programs, as
follows:
1. The program must give eligible individuals an opportunity to
qualify for the reward at least once per year.
2. The reward for a health-contingent wellness program, together
with the reward for other health-contingent wellness programs with
respect to the plan, must not exceed 30 percent of the total cost of
employee-only coverage under the plan, or 50 percent to the extent the
program is designed to prevent or reduce tobacco use.
3. The reward must be available to all similarly situated
individuals. For this purpose, a reasonable alternative standard (or
waiver of the otherwise applicable standard) must be made available to
any individual for whom, during that period, it is unreasonably
difficult due to a medical condition to satisfy the otherwise
applicable standard (or for whom it is medically inadvisable to attempt
to satisfy the otherwise applicable standard).
4. The program must be reasonably designed to promote health or
prevent disease. For this purpose, it must have a reasonable chance of
improving the health of, or preventing disease in, participating
individuals, and not be overly burdensome, not be a subterfuge for
discriminating based on a health factor, and not be highly suspect in
the method chosen to promote health or prevent disease. The proposed
regulations also stated that, to the extent a plan's initial standard
for obtaining a reward (or a portion of a reward) is based on results
of a measurement, test, or screening that is related to a health factor
(such as a biometric examination or a health risk assessment), the plan
is not reasonably designed unless it makes available to all individuals
who do not meet the standard based on the measurement, test, or
screening, a different, reasonable means of qualifying for the reward.
5. The plan must disclose in all plan materials describing the
terms of the program the availability of other means of qualifying for
the reward or the possibility of waiver of the otherwise applicable
standard.
II. Overview of the Final Regulations
A. General Overview
The Departments believe that appropriately designed wellness
programs have the potential to contribute importantly to promoting
health and preventing disease. After consideration of all the comments,
the Departments are issuing these final regulations to provide
comprehensive guidance with respect to the general requirements for
wellness programs. At the same time, the Departments recognize that
each wellness program is unique and questions may remain regarding the
application of these requirements. The Departments anticipate issuing
future subregulatory guidance to provide additional clarity and
potentially proposing modifications to this final rule as necessary.
These final regulations generally implement standards for group health
plans and health insurance issuers offering group health insurance
coverage with respect
[[Page 33160]]
to the wellness program exception from the HIPAA nondiscrimination
provisions in PHS Act section 2705, ERISA section 702, and Code section
9802, as amended by the Affordable Care Act. These final regulations
replace the wellness program provisions of paragraph (f) of the 2006
regulations and are applicable to both grandfathered and non-
grandfathered group health plans and group health insurance coverage
for plan years beginning on or after January 1, 2014.\8\ These
regulations also implement the nondiscrimination provisions of PHS Act
section 2705 applicable to non-grandfathered individual health
insurance coverage for policy years beginning on or after January 1,
2014. This rulemaking does not modify provisions of the 2006
regulations other than paragraph (f).
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\8\ See section 1251 of the Affordable Care Act and interim
final regulations at 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and
45 CFR 147.140 for the definition of a grandfathered health plan.
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Stakeholder feedback suggested that there is some degree of
confusion regarding the scope of the HIPAA and Affordable Care Act
rules governing wellness programs, which is clarified in these final
regulations. Specifically, these final regulations do not establish
requirements for all types of programs or information technology
platforms offered by an employer, health plan, or health insurance
issuer that could be labeled a wellness program, disease management
program, case management program, or similar term. Instead, these final
regulations set forth criteria for a program of health promotion or
disease prevention offered or provided by a group health plan or group
health insurance issuer that must be satisfied in order for the plan or
issuer to qualify for an exception to the prohibition on discrimination
based on health status under paragraphs (b)(2)(ii) and (c)(3) of the
2006 regulations (which provide exceptions to the general prohibition
against discrimination based on a health factor in benefits and
premiums or contributions, respectively).\9\ That is, these rules set
forth criteria for an affirmative defense that can be used by plans and
issuers in response to a claim that the plan or issuer discriminated
under the HIPAA nondiscrimination provisions.
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\9\ 26 CFR 54.9802-1(b)(2)(ii) and (c)(3); 29 CFR
2590.702(b)(2)(ii) and (c)(3); and 45 CFR 146.121(b)(2)(ii) and
(c)(3).
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These final regulations are restructured, as compared to the
proposed regulations, to help clarify this relationship and how the
five statutory requirements apply to different types of programs,
including different types of health-contingent wellness programs
(described below as activity-only wellness programs and outcome-based
wellness programs). The final regulations also reorganize the
presentation of the steps a plan or issuer must take to ensure a
wellness program: is reasonably designed to promote health or prevent
disease; has a reasonable chance of improving the health of, or
preventing disease in, participating individuals; is not overly
burdensome; is not a subterfuge for discriminating based on a health
factor; and is not highly suspect in the method chosen to promote
health or prevent disease. To meet these standards, health-contingent
wellness programs that are outcome-based wellness programs must offer a
``reasonable alternative standard'' (or waiver of the otherwise
applicable standard) to a broader group of individuals than is required
for activity-only wellness programs. Specifically, for activity-only
wellness programs, a reasonable alternative standard for obtaining the
reward must be provided for any individual for whom, for that period,
it is either unreasonably difficult due to a medical condition to meet
the otherwise applicable standard, or for whom it is medically
inadvisable to attempt to satisfy the otherwise applicable standard.
For outcome-based wellness programs, which generally provide rewards
based on whether an individual has attained a certain health outcome
(such as a particular body mass index (BMI), cholesterol level, or non-
smoking status, determined through a biometric screening or health risk
assessment), a reasonable alternative standard must be provided to all
individuals who do not meet the initial standard, to ensure that the
program is reasonably designed to improve health and is not a
subterfuge for underwriting or reducing benefits based on health
status.\10\ These requirements are generally intended to be the same as
those included in the proposed rules, but the terminology has changed
(for example, the term ``different, reasonable means,'' which was used
side by side with the term ``reasonable alternative standard,'' has
been dropped to reduce confusion). These changes help to clarify that
the group of individuals that must be offered a reasonable alternative
standard differs when comparing the requirements for an activity-only
wellness program to the requirements for an outcome-based wellness
program. The requirements that the alternative be reasonable taking
into account an individual's medical condition, and the option of
waiving the initial standard, remain the same. The term ``reasonable
alternative standard'' is used in these final rules as it is in the
statute.\11\
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\10\ See 77 FR 70625.
\11\ The ``reasonable alternative standard'' is separate and
distinct from the standard for ``reasonable accommodations'' under
the Americans with Disabilities Act of 1990 (ADA) and related laws,
regulations and guidance. See section II.H later in this preamble
for a discussion of how compliance with the nondiscrimination rules
(including the wellness program provisions) is not determinative of
compliance with any other law.
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The intention of the Departments in these final regulations is
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
reorganized requirements of the final regulations explain how a plan or
issuer is required to provide such an opportunity for each category of
wellness program.
B. Definitions
Paragraph (f)(1) provides several definitions that govern for
purposes of these final regulations.
Reward. References in these final regulations to an individual
obtaining a reward include both obtaining a reward (such as a discount
or rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism (such as a deductible, copayment, or
coinsurance), an additional benefit, or any financial or other
incentive) and avoiding a penalty (such as the absence of a surcharge
or other financial or nonfinancial disincentives). References in the
final regulations to a plan providing a reward include both providing a
reward (such as a discount or rebate of a premium or contribution, a
waiver of all or part of a cost-sharing mechanism, an additional
benefit, or any financial or other incentive) and imposing a penalty
(such as a surcharge or other financial or nonfinancial disincentive).
Participatory wellness programs. Consistent with the 2006
regulations and PHS Act section 2705(j), these final regulations
continue to divide wellness programs into two categories:
``participatory wellness programs,'' which are a majority of wellness
programs (as noted below), and ``health-contingent wellness programs.''
Participatory wellness programs are defined under the final regulations
as programs that either do not provide a reward or do not include any
conditions for obtaining a reward that are based on an individual
satisfying a standard that is related to a health factor. Several
examples of participatory wellness programs are provided in these final
[[Page 33161]]
regulations, including: (1) A program that reimburses employees for all
or part of the cost of membership in a fitness center; (2) a diagnostic
testing program that provides a reward for participation and does not
base any part of the reward on outcomes; and (3) a program that
provides a reward to employees for attending a monthly, no-cost health
education seminar.
Health-contingent wellness programs. In contrast, health-contingent
wellness programs require an individual to satisfy a standard related
to a health factor to obtain a reward (or require an individual to
undertake more than a similarly situated individual based on a health
factor in order to obtain the same reward). This standard may be
performing or completing an activity relating to a health factor, or it
may be attaining or maintaining a specific health outcome. In these
final regulations, the category of health-contingent wellness programs
is subdivided into: (1) Activity-only wellness programs, and (2)
outcome-based wellness programs. Under paragraphs (b)(2)(ii) and (c)(3)
of the 2006 regulations (which remain unchanged),\12\ both of these
types of health-contingent wellness programs are permissible only if
they comply with the criteria of these final regulations.\13\
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\12\ 26 CFR 54.9802-1(b)(2)(ii) and (c)(3); 29 CFR
2590.702(b)(2)(ii) and (c)(3); and 45 CFR 146.121(b)(2)(ii) and
(c)(3).
\13\ Until these final regulations are effective and applicable,
the provisions of the 2006 regulations, at 26 CFR 54.9802-1(f), 29
CFR 2590.702(f), and 45 CFR 146.121(f), generally remain applicable
to group health plans and group health insurance issuers.
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Activity-only wellness programs. Activity-only wellness programs
are a subcategory of health-contingent wellness programs. Under an
activity-only wellness program, an individual is required to perform or
complete an activity related to a health factor in order to obtain a
reward. Activity-only wellness programs do not require an individual to
attain or maintain a specific health outcome. Examples of activity-only
wellness programs include walking, diet, or exercise programs. Some
individuals participating in an activity-only wellness program may be
unable to participate in or complete (or have difficulty participating
in or completing) the program's prescribed activity due to a health
factor. For example, an individual may be unable to participate in a
walking program due to a recent surgery or pregnancy, or may have
difficulty participating due to severe asthma. The final regulations,
therefore, provide safeguards to ensure these individuals are given a
reasonable opportunity to qualify for the reward.
Outcome-based wellness programs. Outcome-based wellness programs
are a subcategory of health-contingent wellness programs. Under an
outcome-based wellness program, an individual must attain or maintain a
specific health outcome (such as not smoking or attaining certain
results on biometric screenings) in order to obtain a reward.
Generally, these programs have two tiers: (a) A measurement, test, or
screening as part of an initial standard; and (b) a larger program that
then targets individuals who do not meet the initial standard with
wellness activities. For individuals who do not attain or maintain the
specific health outcome, compliance with an educational program or an
activity may be offered as an alternative to achieve the same reward.
However, this alternative pathway does not mean that the overall
program, which has an outcome-based initial standard, is not an
outcome-based wellness program. That is, if a measurement, test, or
screening is used as part of an initial standard and individuals who
meet the standard are granted the reward, the program is considered an
outcome-based wellness program. Examples of outcome-based wellness
programs include a program that tests individuals for specified medical
conditions or risk factors (such as high cholesterol, high blood
pressure, abnormal BMI, or high glucose level) and provides a reward to
employees identified as within a normal or healthy range (or at low
risk for certain medical conditions), while requiring employees who are
identified as outside the normal or healthy range (or at risk) to take
additional steps (such as meeting with a health coach, taking a health
or fitness course, adhering to a health improvement action plan, or
complying with a health care provider's plan of care) to obtain the
same reward.
C. Requirement for Participatory Wellness Programs
Paragraph (f)(2) of these final regulations requires a
participatory wellness program to be made available to all similarly
situated individuals, regardless of health status. Participatory
wellness programs are not required to meet the requirements applicable
to health-contingent wellness programs under these final regulations.
Some comments requested that the Departments impose additional
requirements with respect to participatory wellness programs. Other
commenters proposed that the Departments require that plans and issuers
take into account an individual's income or other personal
circumstances in determining whether a participatory wellness program
is available or accessible to all similarly situated individuals.
As discussed earlier, the HIPAA nondiscrimination provisions
generally prohibit group health plans and health insurance issuers from
discriminating against individual participants and beneficiaries in
eligibility, benefits, or premiums based on a health factor. To the
extent a plan or issuer establishes a wellness program that does not
adjust benefits or premiums based on a health factor, these wellness
program provisions are generally not implicated. These final rules make
clear that such ``participatory'' wellness programs (in contrast to
``health-contingent wellness programs'') are permissible under the
HIPAA nondiscrimination rules, as amended by the Affordable Care Act,
provided they are available to all similarly situated individuals
regardless of health status.
Availability regardless of health status ensures that the general
prohibition against discrimination based on a health factor is not
implicated. If factors other than health status (such as scheduling
limitations) limit an individual's ability to take part in a program,
that does not mean that the plan has violated the general rule
prohibiting discrimination based on a health factor because the program
was not discriminatory under the HIPAA nondiscrimination rules to begin
with. For example, if a plan made available a premium discount in
return for attendance at an educational seminar, but only healthy
individuals were provided the opportunity to attend, the program would
discriminate based on a health factor because only healthy individuals
were provided the opportunity to reduce their premiums. However, if all
similarly situated individuals were permitted to attend, but a
particular individual could not attend because the seminar was held on
a weekend day and the individual was unavailable to attend at that
time, that does not mean the program discriminated against that
individual based on a health factor. Because there is no discrimination
based on a health factor under HIPAA, the wellness exception is not
relevant. At the same time, as discussed in section II.H of this
preamble, compliance with the HIPAA nondiscrimination and wellness
provisions is not determinative of compliance with any other applicable
Federal or State law, which may impose additional accessibility
standards for wellness programs.
[[Page 33162]]
D. Requirements for Health-Contingent Wellness Programs
These final regulations generally retain the proposed five
requirements for health-contingent wellness programs, but the
regulations have been reorganized, subdividing health-contingent
wellness programs into activity-only wellness programs and outcome-
based wellness programs, to make it clearer to whom a plan or issuer is
required to provide a reasonable alternative standard. The final
regulations retain the proposed modification relating to the size of
the reward, as well as clarifications that were proposed to address
questions and issues raised by stakeholders since the 2006 regulations
were issued and to be consistent with the amendments made by the
Affordable Care Act.
(1) Frequency of Opportunity to Qualify
These final regulations retain the requirement, for both activity-
only and outcome-based wellness programs, that individuals eligible for
the program be given the opportunity to qualify for the reward at least
once per year. As stated in the preamble to the 2006 regulations and
the proposed regulations, the once-per-year requirement was included as
a bright-line standard for determining the minimum frequency that is
consistent with a reasonable design for promoting good health or
preventing disease.\14\
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\14\ See 71 FR at 75018. See also 77 FR at 70623.
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(2) Size of Reward
Like the proposed regulations, these final regulations continue to
limit the total amount of the reward for health-contingent wellness
programs (both activity-only and outcome-based) with respect to a plan,
whether offered alone or coupled with the reward for other health-
contingent wellness programs. Specifically, as in the proposed
regulations, the total reward offered to an individual under all
health-contingent wellness programs with respect to a plan cannot
exceed the applicable percentage (as defined in paragraph (f)(5) of the
final regulations) of the total cost of employee-only coverage under
the plan, taking into account both employer and employee contributions
towards the cost of coverage for the benefit package under which the
employee is (or the employee and any dependents are) receiving
coverage. If, in addition to employees, any class of dependents (such
as spouses, or spouses and dependent children) may participate in the
health-contingent wellness program, the reward cannot exceed the
applicable percentage of the total cost of the coverage in which the
employee and any dependents are enrolled (such as family coverage or
employee-plus-one coverage).
Several comments addressed health-contingent wellness programs that
allow dependents to participate, and what portion of the reward should
be attributable to each participating dependent. For health-contingent
wellness programs that allow a class of dependents to participate, some
commenters suggested that the maximum allowed reward or incentive be
prorated based on the portion of the premium or contribution
attributable to that family member. These commenters argued that if,
for example, one family member fails to meet the standard related to a
health factor, the entire family should not be faced with the maximum
penalty. Other commenters requested that the Departments not set forth
rules for the apportionment of the reward where dependent coverage
exists. These commenters argued that it would be an administrative
challenge to apportion the reward to each covered family member. While
final regulations issued by HHS under PHS Act section 2701 require
health insurance issuers in the small group market \15\ to apply rating
variations to family coverage based on the portion of the premium
attributable to each family member covered under the coverage,\16\
these final regulations do not set forth detailed rules governing
apportionment of the reward under a health-contingent wellness program.
Instead, plans and issuers have flexibility to determine apportionment
of the reward among family members, as long as the method is
reasonable. Additional subregulatory guidance may be provided by the
Departments if questions persist or if the Departments become aware of
apportionment designs that seem unreasonable.
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\15\ Small group market means the health insurance market under
which individuals obtain health insurance coverage (directly or
through any arrangement) on behalf of themselves (and their
dependents) through a group health plan maintained by a small
employer. See PHS Act section 2791(e)(5); 45 CFR 144.103. For this
purpose, for plan years beginning on or after January 1, 2014,
amendments made by the Affordable Care Act provide that the term
``small employer'' means, in connection with a group health plan
with respect to a calendar year and a plan year, an employer who
employed an average of at least 1 but not more than 100 employees on
business days during the preceding calendar year and who employs at
least 1 employee on the first day of the plan year. See PHS Act
section 2791(e)(4). In the case of plan years beginning before
January 1, 2016, a State may elect to substitute ``50 employees''
for ``100 employees'' in its definition of a small employer. See
section 1304(b)(3) of the Affordable Care Act.
\16\ 45 CFR 147.102(c).
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(3) Reasonable Design
Consistent with the 2006 regulations and PHS Act section 2705(j),
these final regulations continue to require that health-contingent
wellness programs be reasonably designed to promote health or prevent
disease, whether activity-only or outcome-based. Some commenters urged
that the Departments not impose a rigid set of pre-approved wellness
program structures or guidelines, which may inhibit innovation in
designing wellness programs. On the other hand, other commenters
requested that the Departments require that all wellness programs be
based on evidence-based clinical guidelines and national standards
established by bodies such as the Centers for Disease Control and
Prevention (CDC), Centers for Medicare & Medicaid Services, or the
National Institutes of Health. These final regulations state that a
wellness program is reasonably designed if it has a reasonable chance
of improving the health of, or preventing disease in, participating
individuals, and is not overly burdensome, is not a subterfuge for
discrimination based on a health factor, and is not highly suspect in
the method chosen to promote health or prevent disease. The
determination of whether a health-contingent wellness program is
reasonably designed is based on all the relevant facts and
circumstances. While programs are not required to be accredited or
based on particular evidence-based clinical standards, these practices,
such as those found in CDC's Guide to Community Preventive
Services,\17\ may increase the likelihood of wellness program success
and are encouraged as a best practice.
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\17\ See www.thecommunityguide.org/index.html.
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These final regulations continue to provide plans and issuers
flexibility and encourage innovation.\18\ Some commenters requested
confirmation that plans and issuers could design wellness programs that
are limited to targeted groups of individuals with adverse health
factors. Consistent with paragraph (g) of the 2006 regulations, nothing
in these final regulations
[[Page 33163]]
prevents a plan or issuer from establishing more favorable rules for
eligibility or premium rates (including rewards for adherence to
certain wellness programs) for individuals with an adverse health
factor than for individuals without the adverse health factor.
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\18\ The preamble to the 2006 regulations stated that the
``reasonably designed'' standard was designed to prevent abuse, but
otherwise was ``intended to be an easy standard to satisfy . . .
There does not need to be a scientific record that the method
promotes wellness to satisfy this standard. The standard is intended
to allow experimentation in diverse ways of promoting wellness.''
See 71 FR at 75018. The preamble also stated that the Departments
did not ``want plans and issuers to be constrained by a narrow range
of programs . . . but want plans and issuers to feel free to
consider innovative programs for motivating individuals to make
efforts to improve their health.'' See 71 FR at 75019.
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Several comments requested that the reasonable design requirement
include strong consumer protections to ensure that the opportunity for
a discount is available in practice and accessible to all individuals
regardless of health status. Some commenters argued that wellness
programs which set clear markers of medical illness, disability, or
largely non-preventable conditions as standards are not reasonably
designed and should therefore be prohibited under the final
regulations. Other commenters suggested that a ``reasonably designed''
wellness program must include a set of programs, resources, and
worksite policies designed to promote health and prevent disease and
must include more than a biometric test.
After consideration of all the comments, as in the proposed rules,
the final regulations direct that an outcome-based wellness program
must provide a reasonable alternative standard to qualify for the
reward, for all individuals who do not meet the initial standard that
is related to a health factor, in order to be reasonably designed. This
approach is intended to ensure that outcome-based programs are more
than mere rewards in return for results in biometric screenings or
responses to a health risk assessment, and are instead part of a larger
wellness program designed to promote health and prevent disease,
ensuring the program is not a subterfuge for discrimination or
underwriting based on a health factor.
(4) Uniform Availability and Reasonable Alternative Standards
An important element of these final regulations is the requirement
that the full reward under a health-contingent wellness program,
whether activity-only or outcome-based, be available to all similarly
situated individuals. As stated earlier, the proposed regulations
included requirements that, in certain circumstances, a health-
contingent wellness program provide a reasonable alternative standard
(or waiver of the otherwise applicable standard) and, to the extent
that a plan's initial standard for obtaining a reward (or a portion of
a reward) is based on the results of a measurement, test, or screening
that is related to a health factor (such as a biometric examination or
a health risk assessment), provide a different, reasonable means of
qualifying for the reward. Several commenters pointed out that the
interaction between these two requirements was confusing and unclear.
As discussed earlier in this preamble, these final regulations retain
the same requirements contained in the proposed regulations, but the
terminology has been changed to reduce confusion and provide clarity
for the regulated community.
Many clarifications regarding the reasonable alternative standards
are equally applicable to activity-only wellness programs and outcome-
based wellness programs. First, in order to satisfy the requirement to
provide a reasonable alternative standard, the same, full reward must
be available under a health-contingent wellness program (whether an
activity-only or outcome-based wellness program) to individuals who
qualify by satisfying a reasonable alternative standard as is provided
to individuals who qualify by satisfying the program's otherwise
applicable standard. Accordingly, while an individual may take some
time to request, establish, and satisfy a reasonable alternative
standard, the same, full reward must be provided to that individual as
is provided to individuals who meet the initial standard for that plan
year. (For example, if a calendar year plan offers a health-contingent
wellness program with a premium discount and an individual who
qualifies for a reasonable alternative standard satisfies that
alternative on April 1, the plan or issuer must provide the premium
discounts for January, February, and March to that individual.) Plans
and issuers have flexibility to determine how to provide the portion of
the reward corresponding to the period before an alternative was
satisfied (e.g., payment for the retroactive period or pro rata over
the remainder of the year) as long as the method is reasonable and the
individual receives the full amount of the reward. In some
circumstances, an individual may not satisfy the reasonable alternative
standard until the end of the year. In such circumstances, the plan or
issuer may provide a retroactive payment of the reward for that year
within a reasonable time after the end of the year, but may not provide
pro rata payments over the following year (a year after the year to
which the reward corresponds). The Departments may provide additional
subregulatory guidance if questions persist or if the Departments
become aware of payment designs that seem unreasonable with respect to
individuals who satisfy the reasonable alternative standard.
Other clarifications were retained from the proposed regulations.
The final regulations reiterate that, in lieu of providing a reasonable
alternative standard, a plan or issuer may always waive the otherwise
applicable standard and provide the reward. These final regulations
also do not require plans and issuers to establish a particular
reasonable alternative standard in advance of an individual's specific
request for one, as long as a reasonable alternative standard is
provided by the plan or issuer (or the condition for obtaining the
reward is waived) upon an individual's request. Plans and issuers have
flexibility to determine whether to provide the same reasonable
alternative standard for an entire class of individuals (provided that
it is reasonable for that class) or provide the reasonable alternative
standard on an individual-by-individual basis, based on the facts and
circumstances presented.
The Departments received several comments requesting that the final
regulations permit employers to retain flexibility to make reasonable
alternative standards health-focused and stringent enough so that these
alternatives do not become a loophole for individuals who can meet the
initial standard. These final regulations continue to permit plans and
issuers flexibility in designing reasonable alternative standards
(including using reasonable alternative standards that are health-
contingent), while also providing some clarification of what
constitutes being ``reasonable'' in the context of an alternative
standard.
All the facts and circumstances are taken into account in
determining whether a plan or issuer has provided a reasonable
alternative standard, including but not limited to the following
factors listed in these final regulations:
If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted)
and may not require an individual to pay for the cost of the program.
The time commitment required must be reasonable.
If the reasonable alternative standard is a diet program,
the plan or issuer is not required to pay for the cost of food but must
pay any membership or participation fee.
If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical
[[Page 33164]]
professional) is not medically appropriate for that individual, the
plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness.
The final regulations generally retain the factors that were
included in the proposed regulations with a few added clarifications.
Specifically, in response to comments, the final rules clarify that in
order for an alternative standard to be reasonable, the time commitment
must be reasonable. For example, requiring attendance nightly at a one-
hour class would be unreasonable.
In addition, the proposed regulations stated that if a reasonable
alternative standard is compliance with the recommendations of a
medical professional who is an agent of the plan, and an individual's
personal physician states that the recommendations are not medically
appropriate for that individual, the plan must provide a second
reasonable alternative standard that accommodates the recommendations
of the individual's personal physician with regard to medical
appropriateness, and that normal cost sharing could be imposed for
medical items and services furnished pursuant to the physician's
recommendations. The final rules retain the clarification of the
proposed regulations, and add an additional clarification that an
individual's personal physician can make recommendations regarding
medical appropriateness that must be accommodated with respect to any
plan standard (and is not limited to a situation in which a personal
physician disagrees with the specific recommendations of an agent of
the plan with respect to an individual). This additional clarification
is consistent with the final regulations' overall requirement that
wellness programs be designed to promote health and prevent disease,
and not be a subterfuge for discrimination or underwriting based on a
health factor. As stated in the preamble to the Departments'
regulations implementing the internal claims and appeals and external
review processes under PHS Act section 2719, adverse benefit
determinations based on whether a participant or beneficiary is
entitled to a reasonable alternative standard for a reward under a
wellness program are considered to involve medical judgment and
therefore are eligible for Federal external review.\19\ Plans and
issuers may impose standard cost sharing under the plan or coverage for
medical items and services furnished in accordance with the physician's
recommendations.
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\19\ See 76 FR at 37216.
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The Departments continue to maintain that, with respect to tobacco
cessation, ``overcoming an addiction sometimes requires a cycle of
failure and renewed effort,'' as stated in the preamble to the proposed
regulations.\20\ For plans with an initial outcome-based standard that
an individual not use tobacco, a reasonable alternative standard in
Year 1 may be to try an educational seminar. As clarified in an example
in the final regulations, an individual who attends the seminar is then
entitled to the reward, regardless of whether the individual quits
smoking. At the same time, in Year 2, the plan may require completion
of a different reasonable alternative standard, such as a complying
with a new recommendation from the individual's personal physician or a
new nicotine replacement therapy (and completion of that standard would
qualify the individual to receive the reward).
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\20\ See 71 FR 75019 (December 13, 2006) and 77 FR 70624
(November 26, 2012).
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It is the view of the Departments that the same can be true with
respect to meeting any outcome-based standard. That is, with respect to
weight loss and weight management, for example, clinical evidence
suggests that a number of environmental factors can influence an
individual's ability to achieve a desired health outcome.\21\ Under
these final regulations, plans and issuers cannot cease to provide a
reasonable alternative standard under any health-contingent wellness
program merely because an individual was not successful in satisfying
the initial standard before; plans and issuers must continue to offer a
reasonable alternative standard whether it is the same or different
and, to the extent the reasonable alternative standard is, itself, a
health-contingent wellness program, it must meet the relevant
requirements of these final regulations. Language in the final
regulations clarifies that, for example, if a plan or issuer provides a
walking program as a reasonable alternative standard to a running
program, individuals for whom it is unreasonably difficult due to a
medical condition to complete the walking program (or for whom it is
medically inadvisable to attempt to complete the walking program) must
be provided a reasonable alternative standard to the walking program.
Similarly, to the extent a reasonable alternative standard is, itself,
an outcome-based wellness program, the reasonable alternative standard
must comply with the requirements for outcome-based wellness programs,
subject to certain special rules, described below.
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\21\ See Katz DL, O'Connell M, Yeh MC, Nawaz H, Njike V,
Anderson LM, Cory S, Dietz W: Task Force on Community Preventive
Services. Public health strategies for preventing and controlling
overweight and obesity in school and worksite settings: a report on
recommendations of the Task Force on Community Preventive Services.
MMWR Recomm Rep 2005, 7; 54 (RR-10):1-12. See also Fiore, M., Jaen,
C., Baker, T., Bailey, W., Benowitz, N., Curry, S., Healton, C.
(2008). Treating tobacco use and dependence; 2008 clinical practice
guideline. Rockville, MD: U.S. Department of Health and Human
Services.
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While, as discussed earlier, many clarifications regarding the
reasonable alternative standards are equally applicable to activity-
only wellness programs and outcome-based wellness programs, some of the
requirements apply in different ways depending on whether the program
is an activity-only or an outcome-based wellness program.
(a) Activity-Only Wellness Programs
An activity-only wellness program must make the full reward under
the program available to all similarly-situated individuals. Under
paragraph (f)(3)(iv) of these final regulations, a reward under a
wellness program is not available to all similarly situated individuals
for a period unless the program allows a reasonable alternative
standard (or waiver of the otherwise applicable standard) for obtaining
the reward for any individual for whom, for that period, it is either
unreasonably difficult due to a medical condition to meet the otherwise
applicable standard, or for whom it is medically inadvisable to attempt
to satisfy the otherwise applicable standard.
Under an activity-only wellness program, it is permissible for a
plan or issuer to seek verification, such as a statement from the
individual's personal physician, that a health factor makes it
unreasonably difficult for the individual to satisfy, or medically
inadvisable for the individual to attempt to satisfy, the otherwise
applicable standard in an activity-only wellness program, if reasonable
under the circumstances.\22\ Some commenters stated that it is common
practice to require verification
[[Page 33165]]
when an individual requests a reasonable alternative standard and urged
the Departments to permit plans and issuers to require physician
verification in all circumstances involving a request for a reasonable
alternative standard. Other commenters supported the approach set forth
in the proposed rules that limits plans' and issuers' ability to impose
verification requirements to verification of claims that require the
use of medical judgment to evaluate. Some of these commenters also
asked the Departments to clarify that verification, when allowed, could
be performed by any type of medical professional. The Departments also
received comments on the example in the proposed regulations that
stated it would not be reasonable for a plan or issuer to seek
verification of a claim that is obviously valid based on the nature of
the individual's medical condition that is known to the plan or issuer.
Many commenters had questions about what the Departments would consider
a plan or issuer to know or not know, cited the fact that different
information technology systems exist for wellness program information
and claims data, and raised concerns regarding what types of situations
would be ``obviously valid'' under this standard.
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\22\ The 2006 regulations provided that it is permissible for a
plan or issuer to seek verification, such as a statement from the
individual's personal physician, that a health factor makes it
unreasonably difficult for the individual to satisfy, or medically
inadvisable for the individual to attempt to satisfy, the otherwise
applicable standard. The Affordable Care Act amendments codified
this provision with one modification: PHS Act section
2705(j)(3)(D)(ii) makes clear that verification, such as a statement
from an individual's personal physician, may be required by a plan
or issuer ``if reasonable under the circumstances.''
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The Departments originally included the example in the proposed
regulations in the context of what these final regulations now refer to
as outcome-based wellness programs, so that if an individual requested
a reasonable alternative standard after failing to meet an initial
standard based on a measurement, test, or screening, the plan or issuer
could not then require physician verification of the need for a
reasonable alternative standard. As described in more detail below, the
reorganized final regulations clarify that, with respect to outcome-
based wellness programs, plans and issuers cannot require verification
by the individual's physician that a health factor makes it
unreasonably difficult for the individual to satisfy, or medically
inadvisable for the individual to attempt to satisfy, the otherwise
applicable standard as a condition of providing a reasonable
alternative to the initial standard. While plans and issuers may still
require such verification as a condition of providing a reasonable
alternative standard in the context of an activity-only wellness
program, the reorganization of the final regulations makes the language
stating that it would not be reasonable for an issuer to seek
verification of a claim which is obviously valid, as it was included in
the proposed regulations, now moot. Therefore, after reviewing the
comments received in response to the proposed regulations, the
Departments have deleted this example from the regulatory text. Plans
and issuers are still permitted under these final regulations to seek
verification in the case of an activity-only wellness program with
respect to requests for a reasonable alternative standard for which it
is reasonable to determine that medical judgment is required to
evaluate the validity of the request.
In addition, with respect to which type of medical professional can
be required by the plan or issuer to provide verification, the final
regulations repeat the statutory language. Wellness programs and
reasonable alternative standards can vary greatly, and the nature of
the program or alternative standard may require different levels of
clinical expertise to evaluate reasonableness with respect to any
particular individual. These final regulations do not expressly
prohibit plan provisions that require verification to be provided by a
physician in clinically appropriate circumstances. Nor do these final
regulations expressly require that medical professionals other than a
physician be permitted to provide verification in specific
circumstances if a physician's expertise would be required to evaluate
the validity of a request. Instead, the Departments generally view any
plan requirement for verification to be subject to the broader
standards for reasonable design and intend to examine verification
requirements in light of all the relevant facts and circumstances. The
Departments may provide future guidance on this issue.
A number of commenters raised concerns about the privacy and
confidentiality of health information provided to wellness programs,
particularly with respect to employer access to such information and
the potentially discriminatory results of such access. As noted in
section II.H later in this preamble, these final regulations are
implementing only the provisions regarding wellness programs in the
Affordable Care Act. Other State and Federal laws may apply with
respect to the privacy, disclosure, and confidentiality of information
provided to these programs. For example, HIPAA-covered entities,
including certain health plans and providers, must comply with the
HIPAA Privacy and Security Rules \23\ with respect to the
confidentiality of individually identifiable health information, and
employers subject to the Americans with Disabilities Act of 1990 (ADA)
must comply with any applicable ADA requirements for disclosure and
confidentiality of medical information and non-discrimination on the
basis of disability.
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\23\ See 45 CFR Parts 160 and 164.
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(b) Outcome-Based Wellness Programs
Outcome-based wellness programs allow plans and issuers to conduct
screenings and employ measurement techniques in order to target
wellness programs effectively, as discussed earlier. For example, plans
and issuers are able to target only individuals with high cholesterol
for participation in cholesterol reduction programs, or individuals who
use tobacco for participation in tobacco cessation programs, rather
than the entire population of participants and beneficiaries, with the
reward based on health outcomes or participation in reasonable
alternatives. For outcome-based wellness programs to meet the
requirement that the reward be available to all similarly situated
individuals, the proposed regulations generally required that the
program allow a reasonable alternative standard (or waiver of the
otherwise applicable standard) for obtaining the reward for any
individual who does not meet the initial standard based on a
measurement, test, or screening. Several commenters asserted that a
reasonable alternative standard should be required to be made available
only to individuals who have a medical condition that prevents them
from meeting the initial standard. As discussed earlier, programs
consisting solely of a measurement, test, or screening are not
reasonably designed to promote health and prevent disease. Therefore,
if an individual does not meet a plan's target biometrics (or other,
similar initial standards), that individual must be provided with a
reasonable alternative standard regardless of any medical condition or
other health status, to ensure that outcome-based initial standards are
not a subterfuge for discrimination or underwriting based on a health
factor.
The requirement to provide a reasonable alternative standard to all
individuals who do not meet or achieve a particular health outcome is
not intended to transform all outcome-based wellness programs to
participatory wellness programs, although plans may choose to utilize
participatory programs, such as educational programs, when designing
reasonable alternative standards. Plans and issuers may provide
reasonable alternative standards that are themselves health-contingent
wellness programs. To the extent a reasonable alternative standard
under
[[Page 33166]]
an outcome-based wellness program is, itself, an activity-only wellness
program, the reasonable alternative standard must comply with the
requirements for activity-only programs as if it were an initial
program standard. Therefore, for example, as discussed in more detail
earlier in this preamble, if a plan or issuer provides a walking
program as an alternative to a running program, the plan must provide
reasonable alternatives to individuals who cannot complete the walking
program because of a medical condition.
Moreover, to the extent that a reasonable alternative standard
under an outcome-based wellness program is, itself, another outcome-
based wellness program, it must generally comply with the requirements
for outcome-based wellness programs, subject to certain special rules.
Among other things, these special rules prevent a never-ending cycle of
reasonable alternative standards being required to be provided by plans
and issuers, while also ensuring that a reasonable alternative standard
prescribed for an individual is, in fact, reasonable in light of the
individual's actual circumstances, as determined to be medically
appropriate in the judgment of the individual's personal physician.
Under the first special rule, the final regulations provide that the
reasonable alternative standard cannot be a requirement to meet a
different level of the same standard without additional time to comply
that takes into account the individual's circumstances. For example, if
the initial standard is to achieve a BMI less than 30, the reasonable
alternative standard cannot be to achieve a BMI less than 31 on that
same date. However, if the initial standard is to achieve a BMI less
than 30, a reasonable alternative standard for the individual could be
to reduce the individual's BMI by a small amount or a small percentage
over a realistic period of time, such as within a year. Second, an
individual must be given the opportunity to comply with the
recommendations of the individual's personal physician as a second
reasonable alternative standard to meeting the reasonable alternative
standard defined by the plan or issuer, but only if the physician joins
in the request. The individual can make a request to involve a personal
physician's recommendations at any time and the personal physician can
adjust the physician's recommendations at any time, consistent with
medical appropriateness, as determined by the personal physician.
With respect to outcome-based wellness programs, it is not
reasonable to require verification, such as a statement from the
individual's personal physician, that a health factor makes it
unreasonably difficult for the individual to satisfy, or medically
inadvisable for the individual to attempt to satisfy, the otherwise
applicable standard as a condition of providing a reasonable
alternative to the initial standard. (As discussed in the preceding
paragraph, however, an individual must be given the opportunity to
comply with the recommendations of the individual's personal physician
as a second reasonable alternative standard to meeting the reasonable
alternative standard defined by the plan or issuer, but only if the
physician joins in the request.) However, if a plan or issuer provides
an activity-only wellness program as an alternative to the otherwise
applicable measurement, test, or screening of the outcome-based
wellness program, then the plan or issuer may, if reasonable under the
circumstances, seek verification with respect to the activity-only
component of the program that it is unreasonably difficult due to a
medical condition for an individual to perform or complete the activity
(or it is medically inadvisable to attempt to perform or complete the
activity). For example, if an outcome-based wellness program requires
participants to maintain a certain healthy weight and provides a diet
and exercise program for individuals who do not meet the targeted
weight (which is an activity-only standard), a plan or issuer may seek
verification that a second reasonable alternative standard is needed
for individuals for whom it would be unreasonably difficult due to a
medical condition to comply, or medically inadvisable to attempt to
comply, with the diet and exercise program, due to a medical condition.
(5) Notice of Availability of Reasonable Alternative Standard
These final regulations, like the proposed regulations, require
plans and issuers to disclose the availability of a reasonable
alternative standard to qualify for the reward (and, if applicable, the
possibility of waiver of the otherwise applicable standard) in all plan
materials describing the terms of a health-contingent wellness program
(both activity-only and outcome-based wellness programs). These final
regulations clarify that a disclosure of the availability of a
reasonable alternative standard includes contact information for
obtaining the alternative and a statement that recommendations of an
individual's personal physician will be accommodated. For outcome
based-wellness programs, this notice must also be included in any
disclosure that an individual did not satisfy an initial outcome-based
standard.
For all health contingent wellness programs (both activity-only and
outcome-based wellness programs), if plan materials merely mention that
such a program is available, without describing its terms, this
disclosure is not required. For example, a summary of benefits and
coverage required under section 2715 of the PHS Act that notes that
cost sharing may vary based on participation in a diabetes wellness
program, without describing the standards of the program, would not
trigger this disclosure. In contrast, a plan disclosure that references
a premium differential based on tobacco use, or based on the results of
a biometric exam, is a disclosure describing the terms of a health-
contingent wellness program and, therefore, must include this
disclosure.
The proposed regulations provided new sample language in the
regulatory text and in examples that was intended to be simpler for
individuals to understand and to increase the likelihood that those who
qualify for a reasonable alternative standard will contact the plan or
issuer to request one. Some commenters supported the new sample
language, while others suggested additions and modifications. Several
commenters proposed adding additional information to the notice, in
most cases related to requests for a reasonable alternative standard.
The model notice is intended to be brief and many of the details
regarding a wellness program are available in other plan documents.\24\
Accordingly, these final regulations do not adopt all of the
suggestions made by commenters (for example, the sample language does
not provide examples of reasons why an employee may request a
reasonable alternative or government contact information for
complaints). However, the sample language now includes a statement that
recommendations of an individual's personal physician will be
accommodated.
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\24\ For ERISA plans, wellness program terms (including the
availability of any reasonable alternative standard) are generally
required to be disclosed in the summary plan description (SPD), as
well as in the applicable governing plan documents (which must be
provided upon request), if compliance with the wellness program
affects premiums, cost sharing, or other benefits under the terms of
the plan.
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E. Applicable Percentage
Paragraph (f)(5) of the final regulations sets the applicable
percentage for the size of the reward under a health-contingent
wellness
[[Page 33167]]
program. The 2006 regulations specified 20 percent as the maximum
permissible reward for participation in a health-contingent wellness
program. PHS Act section 2705(j)(3)(A), effective for plan years
beginning on or after January 1, 2014, increases the maximum reward to
30 percent and authorizes the Departments to increase the maximum
reward to as much as 50 percent, if the Departments determine that such
an increase is appropriate. These final regulations increase the
applicable percentage from 20 percent to 30 percent, effective for plan
years beginning on or after January 1, 2014, with an increase of an
additional 20 percentage points (to 50 percent) for health-contingent
wellness programs designed to prevent or reduce tobacco use. Examples
illustrate how to calculate the applicable percentage.
As described in the proposed regulations, the additional increase
for programs designed to prevent or reduce tobacco use is warranted to
conform to the new PHS Act section 2701, to avoid inconsistency across
group health coverage, whether insured or self-insured, or offered in
the small group or large group market, and to provide grandfathered
plans the same flexibility to promote health and prevent disease as
non-grandfathered plans. Specifically, PHS Act section 2701, the ``fair
health insurance premium'' provision, sets forth the factors that
issuers may use to vary premium rates in the individual or small group
market. PHS Act section 2701(a)(1)(A)(iv) provides that issuers in the
individual and small group markets cannot vary rates for tobacco use by
more than a ratio of 1.5 to 1 (that is, allowing up to a 50 percent
premium surcharge for tobacco use). HHS published a final regulation
implementing PHS Act section 2701 \25\ stating that health insurance
issuers in the small group market are permitted to implement the
tobacco use surcharge under PHS Act section 2701 to employees only in
connection with a wellness program meeting the standards of PHS Act
section 2705(j) and its implementing regulations.
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\25\ See 45 CFR 147.102(a)(1)(iv), published on February 27,
2013 at 78 FR 13406.
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As discussed in the proposed rule, to coordinate these regulations
with the tobacco use rating provisions of PHS Act section 2701, these
final regulations use the authority in PHS Act section 2705(j)(3)(A)
(and, with respect to grandfathered health plans, the preexisting
authority in the HIPAA nondiscrimination and wellness provisions) to
increase the applicable percentage for determining the size of the
reward for participating in a health-contingent wellness program by an
additional 20 percentage points (to 50 percent) to the extent that the
additional percentage is attributed to tobacco use prevention or
reduction.
Several commenters requested clarification that an individual's
statement regarding tobacco use is not grounds for a permissible
rescission under PHS Act section 2712 and its implementing regulations.
Under the HHS final regulation implementing PHS Act section 2701, an
issuer that must comply with the requirements under PHS Act section
2701 may not rescind coverage on the basis that an enrollee is found to
have reported false or incorrect information about their tobacco
use.\26\ While the HHS final regulation implementing PHS Act section
2701 addresses rescission, that provision is only applicable to health
insurance issuers providing coverage in the individual and small group
markets, and does not apply to self-insured group health plans and
large insured group health plans.\27\ Whether self-insured group health
plans and large insured group health plans can recoup the otherwise
applicable premiums or benefits is generally determined under the plan
terms and other applicable law, such as ERISA. Rescission in connection
with an individual's statement regarding tobacco use under self-insured
and large, insured group health plans may be addressed by the
Departments in future regulations or subregulatory guidance under PHS
Act section 2712.
---------------------------------------------------------------------------
\26\ The remedy of recouping the tobacco premium surcharge that
should have been paid since the beginning of the plan or policy year
is provided under PHS Act section 2701 and its implementing
regulations. As stated in the preamble to those regulations, it is
the view of the Departments (which share interpretive jurisdiction
over section 2712 of the PHS Act) that this remedy of recoupment
renders any misrepresentation with regard to tobacco use no longer a
``material'' fact for purposes of rescission under PHS Act section
2712 and its implementing regulations. See 78 FR 13414.
\27\ Starting in 2017, States will have the option of allowing
health insurance issuers in the large group market to participate in
the Exchange. In States that elect this option, issuers in the large
group market will be subject to the rating requirements of PHS
section 2701 including the prohibition against rescinding based on
failure to report tobacco use.
---------------------------------------------------------------------------
F. Application to Grandfathered Plans
Under these final regulations, the same wellness program standards
apply to grandfathered health plans (under authority in the HIPAA
nondiscrimination and wellness provisions) and non-grandfathered plans
(under the rules of PHS Act section 2705 governing rewards for
adherence to certain wellness programs, which largely adopt the
wellness program provisions of the 2006 regulations with some
modification and clarification). While section 1251 of the Affordable
Care Act provides that certain amendments made by the Affordable Care
Act (including the amendments to PHS Act section 2705(j)) do not apply
to grandfathered health plans,\28\ the Departments believe that the
provisions of these final regulations are authorized under both HIPAA
and the Affordable Care Act. This approach is intended to avoid
inconsistency across group health coverage and to provide grandfathered
plans the same flexibility to promote health and prevent disease as
non-grandfathered plans.
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\28\ In these final regulations, the Departments have deleted
language from the applicability date section of the proposed
regulations that references the regulations regarding grandfathered
health plans. This deletion was made to avoid confusion regarding
the applicability of these final regulations, which apply the same
wellness program standards to both grandfathered and non-
grandfathered health plans. The HHS regulations continue to provide,
however, that with respect to individual health insurance coverage,
the nondiscrimination provisions do not apply to grandfathered
health plans.
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G. Application of Nondiscrimination Provisions to the Individual Health
Insurance Market
The HHS proposed regulations included a new 45 CFR 147.110 to apply
the nondiscrimination protections of the 2006 regulations to non-
grandfathered individual health insurance coverage effective for policy
years beginning on or after January 1, 2014. The proposed regulation,
however, did not extend the wellness provisions to the individual
health insurance market because the wellness exception of PHS Act
section 2705(j) does not apply to the individual health insurance
market.
Commenters requested that the wellness provisions be extended to
the individual market or that states be allowed to authorize
participatory programs in the individual market. Although the proposed
rule addressing the individual market is being finalized without
change, it is HHS's belief that participatory wellness programs in the
individual market do not violate the nondiscrimination provisions
provided that such programs are consistent with State law and available
to all similarly situated individuals enrolled in the individual health
insurance coverage. This is because participatory wellness programs do
not base rewards on achieving a standard related to a health factor,
and thus do not discriminate based upon health status.
[[Page 33168]]
H. No Effect on Other Laws
Many commenters requested that the Departments address the
interaction of these wellness program requirements with other laws.
Paragraph (h) of the 2006 regulations clarifies that compliance with
the HIPAA nondiscrimination rules (which were later amended by the
Affordable Care Act), including the wellness program requirements in
paragraph (f), is not determinative of compliance with any other
provision of ERISA, or any other State or Federal law, including the
ADA.\29\ This paragraph is unchanged by these final regulations and
remains in effect. As stated in the preamble to the 2006
regulations,\30\ the Departments recognize that many other laws may
regulate plans and issuers in their provision of benefits to
participants and beneficiaries. These laws include, but are not limited
to, the ADA, Title VII of the Civil Rights Act of 1964, Code section
105(h) and PHS Act section 2716 (prohibiting discrimination in favor of
highly compensated individuals), the Genetic Information
Nondiscrimination Act of 2008, the Family and Medical Leave Act,
ERISA's fiduciary provisions, and State law. The Departments did not
attempt to summarize the requirements of those laws in the 2006
regulations and do not attempt to do so in these final regulations.
Employers, plans, issuers, and other service providers should consider
the applicability of these laws to their coverage and contact legal
counsel or other government agencies such as the Equal Employment
Opportunity Commission and State Departments of Insurance if they have
questions about those laws. As stated earlier in this preamble, this
rulemaking does not modify paragraph (h) or any provisions of the 2006
regulations, other than paragraph (f). The Departments reiterate that
compliance with these final regulations is not determinative of
compliance with any other applicable requirements.
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\29\ Moreover, in paragraph (b) of the 2006 regulations, the
general rule governing the application of the nondiscrimination
rules to benefits clarifies that whether any plan provision or
practice with respect to benefits complies with paragraph (b)(2)(i)
does not affect whether the provision or practice is permitted under
any other provision of the Code, ERISA, or the PHS Act, the
Americans with Disabilities Act, or any other law, whether State or
Federal.
\30\ See 71 FR 75014, 75015 (December 13, 2006).
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I. Applicability Date
These final regulations are applicable to group health plans and
health insurance issuers in the group and individual markets for plan
years (in the individual market, policy years) beginning on or after
January 1, 2014, consistent with the statutory effective date of PHS
Act section 2705, as well as PHS Act section 2701.
III. Economic Impact and Paperwork Burden
A. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Management and Budget (OMB) has determined that this
final rule is a ``significant regulatory action'' under section 3(f)(4)
of Executive Order 12866, because it raises novel legal or policy
issues arising from the President's priorities. Accordingly, the rule
has been reviewed by the OMB.
Table 1--Accounting Table
------------------------------------------------------------------------
------------------------------------------------------------------------
Benefits.................................. Quantified: Minimal due to
low expected use of higher
reward limits.
Qualitative: Benefits
include the ability to
increase the reward based
on a health factor to
incentivize individuals to
meet a health standard
associated with improved
health, which could improve
the health of the
individual and reduce
health care costs. Improved
standards could reduce the
use of wellness programs as
a subterfuge for
discrimination based on a
health factor.
Costs..................................... Quantified: Minimal since
employers are expected to
create or expand wellness
programs only if the
expected benefit exceeds
the cost as well as due to
low expected use of higher
reward limits.
Qualitative: Costs of the
rule include clarifications
regarding what costs
individuals may pay as part
of an alternative means of
complying with the health
standard. To the extent an
individual faces an
increased cost for not
meeting a health standard,
the individual would have
reduced resources to use
for other purposes.
Transfers................................. Quantified: Minimal due to
low expected use of higher
reward limits.
Qualitative: Transfers
resulting from the rule
include transfers from
those who do not meet a
health standard to those
who do meet the standard or
the associated alternative
standard.
------------------------------------------------------------------------
Based on the Departments' \31\ review of the most recent literature
and studies regarding wellness programs, as summarized in Table 1, the
Departments have reached the conclusion that the impact of the
benefits, costs, and transfers associated with the final rules will be
minimal. As discussed in this analysis, few health-contingent wellness
programs today come close to meeting the 20 percent limit (based on the
data, the usual reward percentage ranges from three to 11 percent).\32\
Therefore, the Departments do not believe that expanding the limit to
30 percent (or 50 percent for programs designed to prevent or reduce
tobacco use) will result in significantly higher participation of
employers in such programs. The Departments provide a qualitative
discussion below and cite the survey data used to substantiate this
conclusion. Moreover, most wellness programs appear to be participatory
wellness programs that do not require an individual to meet a standard
related to a health factor in order to obtain a reward. As stated
earlier in this preamble, these participatory wellness programs are not
required to meet the five requirements that apply to health-contingent
wellness programs, but they are required to be made available to all
similarly situated individuals regardless of health status.
---------------------------------------------------------------------------
\31\ In section III of this preamble, some subsections have a
heading listing one or two of the three Departments. In those
subsections, the term ``Departments'' generally refers only to the
Departments listed in the heading.
\32\ The 2012 RAND Employer Survey found that the maximum
premium differential offered in a survey respondent was 16 percent.
---------------------------------------------------------------------------
Although the Departments believe few plans will expand the reward
percentage, the Departments provide a qualitative discussion regarding
the sources of benefits, costs, and transfers that could occur if plans
were to expand the reward beyond the current
[[Page 33169]]
maximum of 20 percent. Currently, insufficient broad-based evidence
makes it difficult to definitively assess the impact of workplace
wellness programs on health outcomes and cost, although, overall,
employers largely report that workplace wellness programs in general
(participatory wellness programs and health-contingent wellness
programs) are delivering on their intended objectives of improving
health and reducing costs.
The one source of potential additional cost discussed in the impact
analysis is the clarification that plans must provide a reasonable
alternative standard. The Departments present evidence that currently
employers not only allow a reasonable alternative standard, but that
most employers already pay for these alternatives. The Departments do
not have an estimate of how many plans are not currently paying for
alternatives consistent with the clarifications set forth in the final
regulations, but the number appears to be small. The Departments also
employ economic logic to conclude that employers will create or expand
their wellness program and provide reasonable alternatives only if the
expected benefits exceed the expected costs. Therefore, the Departments
believe that the benefits of the final rule will justify the costs.
B. Background and Need for Regulatory Action--Department of Labor and
Department of Health and Human Services
As discussed earlier in this preamble, on December 13, 2006, the
Departments published joint final regulations implementing the HIPAA
nondiscrimination and wellness provisions, which, among other things,
allowed plans and issuers with health-contingent wellness programs to
vary benefits (including cost-sharing mechanisms), premiums, or
contributions based on whether an individual has met the standards of a
wellness program that met five specific requirements. See section I.B.
of this preamble for a detailed discussion of the HIPAA
nondiscrimination and wellness provisions and the 2006 regulations.
C. Regulatory Alternatives--Department of Labor and Department of
Health and Human Services
The 2006 regulations outlined five specific criteria that must be
met for health-contingent wellness programs to comply with the
nondiscrimination requirements, including that the total reward for
wellness programs offered by a plan sponsor not exceed 20 percent of
the total cost of coverage under the plan.\33\ As amended by the
Affordable Care Act, the nondiscrimination and wellness provisions of
PHS Act section 2705 largely reflect the 2006 regulations with some
modification and clarification. Most notably, it increased the maximum
reward that can be provided under a health-contingent wellness program
from 20 percent to 30 percent and authorized the Departments to
increase the maximum reward to as much as 50 percent if the Departments
determine that such an increase is appropriate.
---------------------------------------------------------------------------
\33\ See 26 CFR 54.9802-1(f)(2)(i), 29 CFR 2590.702(f)(2)(i),
and 45 CFR 146.121(f)(2)(i).
---------------------------------------------------------------------------
PHS Act section 2701(a)(1)(A)(iv) provides that issuers in the
individual and small group markets cannot vary rates for tobacco use by
more than a ratio of 1.5 to 1 (that is, allowing up to a 50 percent
premium surcharge for tobacco use). PHS Act section 2701 applies to
non-grandfathered health insurance coverage in the individual and small
group markets, but does not apply in the large group market or to self-
insured plans. On February 27, 2013, HHS published a final regulation
stating that issuers in the small group market are permitted to
implement the tobacco use surcharge under PHS Act section 2701 to
employees only in connection with a wellness program meeting the
standards of PHS Act section 2705(j) and its implementing
regulations.\34\
---------------------------------------------------------------------------
\34\ See 45 CFR 147.102(a)(1)(iv), published on February 27,
2013 at 78 FR 13406.
---------------------------------------------------------------------------
An important policy goal of the Departments is to provide the large
group market and self-insured plans and grandfathered health plans with
the same flexibility as non-grandfathered plans in the small group
market to promote tobacco-free workforces. The Departments considered
several regulatory alternatives to meet this objective, including the
following:
(1) Stacking premium differentials. One alternative considered was
to permit a 50 percent premium differential for tobacco use in the
small group market under PHS Act section 2701 without requiring a
reasonable alternative standard. Under PHS Act section 2705, an
additional 30 percent premium differential would also be permitted if
the five criteria for a health-contingent wellness program were met
(including the offering of a reasonable alternative standard). Under
this option, an 80 percent premium differential would have been
allowable in the small group market based on factors related to health
status. Large and self-insured plans would have been limited to the 30
percent maximum reward. Allowing such a substantial difference between
what was permissible in the small group market and the large group
market was not in line with the Departments' policy goal of providing
consistency in flexibility for plans.
(2) Concurrent premium differentials with no reasonable alternative
required to be offered for tobacco use. Another alternative would be to
read sections 2701 and 2705 together such that, for non-grandfathered
health plans in the small group market, up to a 50 percent premium
differential would be permitted based on tobacco use, as authorized
under PHS Act section 2701(a)(1)(A)(iv), with no reasonable alternative
standard required for the tobacco use program. With respect to non-
tobacco-related wellness programs, a reward could be offered only to
the extent that a tobacco use wellness program were less than 30
percent of the cost of coverage because the two provisions apply
concurrently, and a reward would not be permitted under PHS Act section
2705 if the maximum reward already were exceeded by virtue of PHS Act
section 2701. Thus, the 50 percent tobacco surcharge under PHS Act
section 2701 would be available only to non-grandfathered, insured,
small group plans. The chosen approach is intended to avoid
inconsistency and to provide grandfathered plans the same flexibility
to promote health and prevent disease as non-grandfathered plans.
D. Current Use of Wellness Programs and Economic Impacts--Department of
Labor and Department of Health and Human Services
The current use of wellness programs and economic impacts of these
final regulations are discussed in this analysis.
Wellness programs \35\ have become common among employers in the
United States. The 2012 Kaiser/HRET survey indicates that 63 percent of
all employers who offered health benefits also offered at least one
wellness program.\36\ A RAND Employer Survey found that 51 percent of
employers offer wellness programs.\37\ The uptake of
[[Page 33170]]
wellness programs continues to be more common among large employers.
For example, the Kaiser/HRET survey found that health risk assessments
are offered by 38 percent of large employers offering health benefits,
but only 18 percent of employers with fewer than 200 workers.
---------------------------------------------------------------------------
\35\ On behalf of the Departments, RAND researchers did a review
of the current literature on this topic. ``A Review of the U.S.
Workplace Wellness Market'' February 2012. The report can be found
at http://www.dol.gov/ebsa/pdf/workplacewellnessmarketreview2012.pdf.
\36\ Kaiser Family Foundation, Employer Health Benefits: 2012
Annual Survey. 2012, The Kaiser Family Foundation, Menlo Park, CA;
Health Research & Educational Trust, Chicago, IL.
\37\ On behalf of the Departments, RAND produced the ``Workplace
Wellness Programs Study Final Report,'' to submit to Congress
contemporaneous with the issuance of these final regulations. This
report includes a literature review, case studies, analysis of an
employer survey conducted by RAND for the Departments, and a review
of Care Continuum Alliance data.
---------------------------------------------------------------------------
The Kaiser/HRET survey indicates that 27 percent of all firms and
65 percent of large firms offered weight loss programs, while 29
percent and 65 percent, respectively, offered gym memberships or on-
site exercise facilities. Meanwhile, 30 percent of all employers and 70
percent of large employers offered smoking cessation resources. Despite
widespread availability, actual participation of employees in wellness
programs remains limited. While no nationally representative data
exist, a 2010 non-representative survey suggests that typically less
than 20 percent of eligible employees participate in wellness
interventions such as smoking cessation.\38\
---------------------------------------------------------------------------
\38\ Nyce, S. Boosting Wellness Participation Without Breaking
the Bank. TowersWatson Insider. July, 2010:1-9.
---------------------------------------------------------------------------
Currently, insufficient broad-based evidence makes it difficult to
definitively assess the impact of workplace wellness on health outcomes
and cost; however, available evidence suggests that wellness programs
may have some effect on improving health outcomes. The RAND
Corporation's analysis of the Care Continuum Alliance (CCA) database
\39\ found statistically significant and clinically meaningful
improvements in exercise frequency, smoking behavior, and weight
control between wellness program participants and non-participants.
---------------------------------------------------------------------------
\39\ The Care Continuum Alliance (CCA) is the trade organization
of the health and wellness management industry. The CCA database
includes data on health plan enrollment, medical and prescription
claims, health risk assessment (HRA) responses, biometric screening
information, and employee participation in health and wellness
programs.
---------------------------------------------------------------------------
Overall, employers largely report that workplace wellness programs
are delivering on their intended benefit of improving health and
reducing costs. According to the 2012 Kaiser/HRET survey, 73 percent of
respondents that offered wellness programs stated that these programs
improved employee health, and 52 percent believed that they reduced
costs. Larger firms (defined as those with more than 200 workers in the
Kaiser/HRET survey) were more positive in believing that wellness
programs reduced costs, as 68 percent said that it reduced cost, as
opposed to 51 percent among smaller firms.\40\ Forty percent of
respondents to a survey by Buck Consultants indicated that they had
measured the impact of their wellness program on the growth trend of
their health care costs, and of these, 45 percent reported a reduction
in that growth trend. The majority of these employers, 61 percent,
reported that the reduction in growth trend of their health care costs
was between two and five percentage points per year.\41\ There are
numerous accounts of the positive impact of workplace wellness programs
in many industries, regions, and types of employers. For example, RAND
determined in their analysis that available data are suggestive that
incentives above $50 are effective to encourage participation in
wellness programs, and that incentives above $200 have a small, but
statistically significant, effect on weight loss, exercise, and smoking
outcomes. Additionally, a recent article published by the Harvard
Business Review cited positive outcomes reported by private-sector
employers along several different dimensions, including health care
savings, reduced absenteeism, and employee satisfaction.\42\
---------------------------------------------------------------------------
\40\ Kaiser Family Foundation, Employer Health Benefits: 2012
Annual Survey. 2012, The Kaiser Family Foundation, Menlo Park, CA;
Health Research & Educational Trust, Chicago, IL.
\41\ Buck Consultants, Working Well: A Global Survey of Health
Promotion and Workplace Wellness Strategies. 2010, Buck Consultants:
San Francisco, CA.
\42\ Berry, L., A. Mirabito, and W. Baun, What's the Hard Return
on Employee Wellness Programs? Harvard Business Review, 2010.
88(12): p. 104.
---------------------------------------------------------------------------
Several studies that looked at the impact of smoking cessation
programs found significantly higher quit rates or less tobacco use.\43\
Smoking cessation programs typically offered education and counseling
to increase social support.\44\ RAND found notable evidence of the
effectiveness of smoking cessation programs in its analysis of the CCA
database and case studies. The CCA database analysis found that
participation in a program targeting smoking cessation decreases the
smoking rate among participating smokers by 30 percent in the first
year. Employer D in RAND's case studies reported that a smoking
cessation program helped 33 employees quit smoking, which resulted in a
one-percentage point decrease in the total number of smokers. Two other
studies reported that individuals in the intervention group quit
smoking at a rate approximately 10 percentage points higher than those
in the control group, and another reported that participants were
almost four times as likely as nonparticipants to reduce tobacco
use.\45\
---------------------------------------------------------------------------
\43\ Heirich, M. and C.J. Sieck, Worksite cardiovascular
wellness programs as a route to substance abuse prevention. J Occup
Environ Med, 2000. 42(1): p. 47-56; 40; McMahon, S.D. and L.A.
Jason, Social support in a worksite smoking intervention. A test of
theoretical models. Behav Modif, 2000. 24(2): p. 184-201; Okechukwu,
C.A., et al., MassBuilt: effectiveness of an apprenticeship site-
based smoking cessation intervention for unionized building trades
workers. Cancer Causes Control, 2009. 20(6): p. 887-94; Sorensen,
G., et al., A comprehensive worksite cancer prevention intervention:
behavior change results from a randomized controlled trial (United
States). J Public Health Policy, 2003. 24(1): p. 5-25. Gold, D.B.,
D.R. Anderson, and S.A. Serxner, Impact of a telephone-based
intervention on the reduction of health risks. Am J Health Promot,
2000. 15(2): p. 97-106; Herman, C.W., et al., Effectiveness of an
incentive-based online physical activity intervention on employee
health status. Journal of Occupational and Environmental Medicine,
2006. 48(9): p. 889-895; Ozminkowski, R.J., et al., The impact of
the Citibank, NA, health management program on changes in employee
health risks over time. J Occup Environ Med, 2000. 42(5): p. 502-11.
\44\ Heirich, M. and C.J. Sieck, Worksite cardiovascular
wellness programs as a route to substance abuse prevention. J Occup
Environ Med, 2000. 42(1): p. 47-56; McMahon, S.D. and L.A. Jason,
Social support in a worksite smoking intervention. A test of
theoretical models. Behav Modif, 2000. 24(2): p. 184-201.
\45\ Heirich, M. and C.J. Sieck, Worksite cardiovascular
wellness programs as a route to substance abuse prevention. J Occup
Environ Med, 2000. 42(1): p. 47-56; Okechukwu, C.A., et al.,
MassBuilt: effectiveness of an apprenticeship site-based smoking
cessation intervention for unionized building trades workers. Cancer
Causes Control, 2009. 20(6): p. 887-94. In the study, 42% of
participants reduced their risk for tobacco use. See Gold, D.B.,
D.R. Anderson, and S.A. Serxner, Impact of a telephone-based
intervention on the reduction of health risks. Am J Health Promot,
2000. 15(2): p. 97-106.
---------------------------------------------------------------------------
Overall, evidence on the effectiveness of wellness programs is
promising, but it is not yet conclusive. An in-depth evaluation of an
extensive wellness program involving a St. Louis hospital system found
that the wellness program brought down inpatient hospitalization costs,
but these cost savings were cancelled out by increased outpatient
costs.\46\ Additionally, a recent article published by Health Affairs
found that employer savings from wellness programs may result more from
cost shifting, rather than from healthier outcomes and reduced health
care usage.\47\ Finally, a study investigating the effectiveness of a
smoking cessation program showed significant differences in smoking
rates at a one-month follow-up, but showed no significant
[[Page 33171]]
differences in quit rates at six months, highlighting the need to
investigate the sustainability of results.\48\
---------------------------------------------------------------------------
\46\ Gautam Gowrisankaran, Karen Norberg, Steven Kymes, Michael
E. Chernew, Dustin Stwalley, Leah Kemper and William Peck ``A
Hospital System's Wellness Program Linked To Health Plan Enrollment
Cut Hospitalizations But Not Overall Costs'' Health Affairs, 32,
no.3 (2013):477-485.
\47\ Jill R. Horwitz, Brenna D. Kelly, and John E. DiNardo
``Wellness Incentives In The Workplace: Cost Savings Through Cost
Shifting To Unhealthy Workers'' Health Affairs, 32, no.3 (2013):468-
476.
\48\ Kechukwu, C.A., et al., MassBuilt: effectiveness of an
apprenticeship site-based smoking cessation intervention for
unionized building trades workers. Cancer Causes Control, 2009.
20(6): p. 887-94.
---------------------------------------------------------------------------
While employer plan sponsors generally are satisfied with the
results, more than half stated in a recent survey that they do not know
their programs' return on investment.\49\ In the RAND Employer Survey,
only about half of employers with wellness programs stated that they
had formally evaluated program impact, and only two percent reported
actual cost savings. When RAND conducted their case studies, they found
that none of their employers had formally evaluated their programs,
although three of the five case studies did examine some data metrics
to conduct some level of assessment.
---------------------------------------------------------------------------
\49\ Buck Consultants, Working Well: A Global Survey of Health
Promotion and Workplace Wellness Strategies. 2010, Buck Consultants:
San Francisco, CA.
---------------------------------------------------------------------------
The Departments are mindful that the peer-reviewed literature,
while predominantly positive, covers only a small proportion of the
universe of programs, limiting the generalizability of the reported
findings. Evaluating such complex interventions is difficult and poses
substantial methodological challenges that can invalidate findings.
Further, although correlations often can be easily demonstrated, it can
be difficult to show causal relationships. For example, it can be
difficult to separate individuals' varying levels of motivation to
become healthier, and their self-selection to participate in wellness
programs, from measures of the effectiveness of wellness programs
themselves.
In the Departments' impact analysis for the proposed rules,
available data indicated that employers' use of incentives in wellness
programs was relatively low. The Departments' review of more recent
literature indicates the use of incentives has become more common in
wellness programs that are not health-contingent programs. Over two-
thirds of RAND Employee Survey respondents reported using incentives to
promote employee participation in wellness programs. The Kaiser/HRET
Survey also reported that 41 percent offered any kind of incentive,
which was nearly double the percent reporting some kind of incentive
offering in 2010. Mercer Consulting's 2011 National Survey of Employer-
Sponsored Health Plans found similar patterns, estimating 33 percent of
those with 500 or more employees provided financial incentives for
participating in at least one program, which was a 12 percentage point
increase from the 2009 Survey.\50\
---------------------------------------------------------------------------
\50\ Mercer, National Survey of Employer-Sponsored Health Plans:
2011 Survey Report. 2012, Mercer.
---------------------------------------------------------------------------
Employers, especially large ones, are also looking to continue to
add incentives to their wellness programs. For example, the 2012 Mercer
Survey found that as much as 87 percent of employers with more than 200
employees plan to add or strengthen incentive programs.\51\
TowersWatson found that 17 percent of all employers intend to add a
reward or penalty based on tobacco-use status.\52\ The use of
incentives to promote employee engagement remains poorly understood, so
it is not clear how type (for example, cash or non-cash), direction
(reward versus penalty), and strength of incentive are related to
employee engagement and outcomes. The Health Enhancement Research
Organization and associated organizations also recognized this
deficiency and provided seven questions for future research.\53\ There
are also no data on potential unintended effects, such as
discrimination against employees based on their health or health
behaviors.
---------------------------------------------------------------------------
\51\ ``Employers accelerate efforts to bring health benefit
costs under control,'' Mercer: November 16, 2011; Available from:
http://www.mercer.com/press-releases/national-survey-employer-sponsored-health-plans.
\52\ ``Employer Survey on Purchasing Value in Health Care,''
17th Annual Towers Watson/National Business Group on Health Employer
Survey on Purchasing Value in Health Care.
\53\ ``Guidance for a Reasonably Designed, Employer-Sponsored
Wellness Program Using Outcomes-Based Incentives,'' joint consensus
statement of the Health Enhancement Research Organization, American
College of Occupational and Environmental Medicine, American Cancer
Society and American Cancer Society Cancer Action Network, American
Diabetes Association, and American Heart Association.
---------------------------------------------------------------------------
Currently, the most commonly incentivized program appears to be
associated with completion of a health risk assessment. According to
the RAND Employer Survey, 30 percent of employers with a wellness
program offered incentives for completing a health risk assessment. The
2009 Mercer survey found similar results, reporting that 10 percent of
all firms and 23 percent of large employers that offered a health risk
assessment provided an incentive for completing the assessment. For
other types of health management programs that the survey assessed,
only two to four percent of all employers and 13 to 19 percent of large
employers offered incentives.\54\ The Kaiser/HRET survey found that 63
percent of large firms that offered a health risk assessment provided a
financial incentive to employees who completed it.
---------------------------------------------------------------------------
\54\ Mercer, National Survey of Employer-Sponsored Health Plans:
2009 Survey Report. 2010, Mercer.
---------------------------------------------------------------------------
Cash and cash-equivalent incentives are the most popular incentive
for completion of a health risk assessment. The 2009 Mercer survey
reports that five percent of all employers and ten percent of those
with 500 or more workers provided cash incentives for completion of a
health risk assessment; one percent and two percent, respectively,
offering lower cost sharing; and two percent and seven percent,
respectively, offering lower premium contributions.\55\ Note that in
the Mercer survey, the results cited reflect the incentives provided by
all firms that offer a health risk assessment.
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\55\ Mercer, National Survey of Employer-Sponsored Health Plans:
2009 Survey Report. 2010, Mercer.
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Incentives may be triggered by a range of different levels of
employee engagement. The simplest incentives are triggered by program
enrollment--that is, by merely signing up for a wellness program. At
the next level, incentives are triggered by program participation--for
instance, attending a class or initiating a program, such as a smoking
cessation intervention. Other incentive programs may require completion
of a program, whether or not any particular health-related goals are
achieved, to earn an incentive. The health-contingent incentive
programs require successfully meeting a specific health outcome (or an
alternative standard) to trigger an incentive, such as verifiably
quitting smoking. Health-contingent incentive programs appear to be
among the least common incentive schemes. According to the RAND
Employer Survey, only 10 percent of employers with more than 50
employees that offer a wellness program use any incentives tied to
health standards, only seven percent link the incentives to health
insurance premiums, and only seven percent administer results-based
incentives through their health plans.
The most common form of outcome-based incentives is reported to be
awarded for smoking cessation. The 2010 survey by NBGH and TowersWatson
indicated that while 25 percent of responding employers offered a
financial incentive for employees to become tobacco-free, only four
percent offered financial incentives for maintaining a BMI within
target levels, three percent did so for maintaining blood pressure
within targets, and three percent for maintaining targeted cholesterol
levels.\56\ The RAND
[[Page 33172]]
Employer Survey found that almost the same percentage of employers
rewarded actual smoking cessation (19%) as rewarded mere participation
in a smoking cessation program (21%), whereas employers were three to
four times as likely to reward participation as outcomes for other
health factors. When RAND conducted its case studies for the
Departments, they found that four of five employers targeted smoking
cessation outcomes with incentives, whereas only two of five employers
had incentives for other outcomes.
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\56\ TowersWatson, Raising the Bar on Health Care: Moving Beyond
Incremental Change.
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The value of incentives can vary widely. Estimates from
representative surveys of the average value of incentives per year
range between $152 \57\ and $557,\58\ or between three and 11 percent
of the $5,049 average cost of individual coverage in 2010,\59\ among
employees who receive them. According to the RAND Employer Survey, the
maximum incentives average less than 10 percent. This suggests that
companies typically are not close to reaching the 20 percent of the
total cost of coverage threshold set forth in the 2006 regulations.
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\57\ Mercer, National Survey of Employer-Sponsored Health Plans:
2009 Survey Report. 2010, Mercer.
\58\ Linnan, L., et al., Results of the 2004 national worksite
health promotion survey. American Journal of Public Health, 2008.
98(8): p. 1503-1509.
\59\ Kaiser Family Foundation, Employer Health Benefits: 2010
Annual Survey.
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The Departments lack sufficient information to assess how firms
that currently are at the 20 percent limit will respond to the
increased limits. The Departments received comments indicating that
some firms may increase their limits, as permitted by the final rules;
however, the number of these firms currently at the 20 percent limit is
low. Furthermore, if a large number of firms already viewed the current
20 percent reward limit as sufficient, then the Departments would not
expect that increasing the limit would provide an incentive for program
design changes. These findings indicate that, based on currently
available data, increasing the maximum reward for particpating in a
health-contingent wellness program to 30 percent (and the Departments'
decision to allow an additional 20 percentage points for programs
designed to prevent or reduce tobacco use) is unlikely to have a
significant impact.
It is possible that the increased wellness program reward limits
will incentivize firms without health-contingent wellness programs to
establish them. The Departments, however, do not expect a significant
number of new programs to be created as a result of this change because
firms without health-contingent wellness programs could already have
provided rewards up to the 20 percent limit before the enactment of the
Affordable Care Act, but did not.
Two important elements of these final regulations are (1) the
standard that the reward under a health-contingent wellness program be
available to all similarly situated individuals and (2) the standard
that a program be reasonably designed to promote health or prevent
disease.\60\
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\60\ See section II.C, earlier in this preamble for a more
detailed discussion of these requirements.
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As discussed earlier in this preamble, the final regulations do not
prescribe a particular type of alternative standard that must be
provided. Instead, they permit plan sponsors flexibility to provide any
reasonable alternative. The Departments expect that plan sponsors will
select alternatives that entail the minimum net costs (or, stated
differently, the maximum net benefits) that are possible to achieve
offsetting benefits, such as a higher smoking cessation success rate.
It seems reasonable to presume that the net cost plan sponsors will
incur in the provision of alternatives, including transfers as well as
new economic costs and benefits, will not exceed the transfer cost of
waiving surcharges for all individuals who qualify for alternatives.
The Departments expect that many plan sponsors will find more cost
effective ways to satisfy this requirement, should they exercise the
option to provide incentives through a health-contingent wellness
program, and that the true net cost to them will therefore be much
smaller than the transfer cost of waiving surcharges for all plan
participants who qualify for alternatives. The Departments have no
basis for estimating the magnitude of the cost of providing alternative
standards or of potential offsetting benefits at this time.
The Departments note that plan sponsors will have strong motivation
to identify and provide reasonable alternative standards that have
positive net economic effects. Plan sponsors will be disinclined to
provide alternatives that undermine their overall wellness program and
worsen behavioral and health outcomes, or that make financial rewards
available absent meaningful efforts by participants to improve their
health habits and overall health. Instead, plan sponsors will be
inclined to provide alternatives that sustain or reinforce plan
participants' incentive to improve their health habits and overall
health, and/or that help participants make such improvements. It
therefore seems likely that gains in economic welfare from this
requirement will equal or outweigh losses. The Departments intend that
the requirement to provide a reasonable alternative standard will
eliminate instances where wellness programs serve only to shift costs
to higher risk individuals and increase instances where programs
succeed at helping high risk individuals improve their health.
In considering the transfers that might derive from the
availability of (and participants' satisfaction with) reasonable
alternative standards, the transfers arising from this requirement may
take the form of transfers to individuals who satisfy a reasonable
alternative standard, to such individuals from other individuals, or
some combination of these. The existence of a health-contigent wellness
program creates a transfer from those who do not meet the standard to
those who do meet the standard. Allowing individuals to satisfy a
reasonable alternative standard in order to qualify for a reward is a
transfer to those who satisfy the reasonable alternative standard from
everyone else in the risk pool.
The reward associated with the wellness program is an incentive to
encourage individuals to meet health standards associated with better
or improved health, which in turn is associated with lower health care
costs. If the rewards are effective, health care costs will be reduced
as an individual's health improves. Some of these lower health care
costs could translate into lower premiums paid by employers and
employees, which could offset some of the transfers. To the extent
larger rewards are more effective at improving health and lowering
costs, these final regulations will produce more benefits than the
current requirements.
Rewards also could create costs to individuals and to the extent
the new larger rewards create more costs than smaller rewards, these
final regulations may increase the costs relative to the 2006
regulations. To the extent an individual does not meet a standard or
satisfy a reasonable alternative standard, they could face higher
costs. (For example, in the case of an individual participating in a
wellness program with a tobacco cessation program, a plan or issuer is
permitted to apply premium surcharge of up to 50 percent for tobacco
use if certain conditions are met.)
Based on the foregoing discussion, the Departments expect the
benefits, costs, and transfers associated with these final regulations
to be minimal. However, the Departments are not able to provide
aggregate estimates, because they do not
[[Page 33173]]
have sufficient data to estimate the number of plans that will take
advantage of the new limits.
E. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) applies
to most Federal rules that are subject to the notice and comment
requirements of section 553(b) of the Administrative Procedure Act (5
U.S.C. 551 et seq.). Unless an agency certifies that such a rule will
not have a significant economic impact on a substantial number of small
entities, section 603 of the RFA requires the agency to present an
initial regulatory flexibility analysis at the time of the publication
of the rulemaking describing the impact of the rule on small entities.
Small entities include small businesses, organizations and governmental
jurisdictions.
For purposes of analysis under the RFA, the Departments consider a
small entity to be an employee benefit plan with fewer than 100
participants. The basis of this definition is found in section
104(a)(3) of ERISA, which permits the Secretary of Labor to prescribe
simplified annual reports for welfare benefit plans that cover fewer
than 100 participants.\61\ While some large employers may have small
plans, in general, small employers maintain most small plans. Thus, the
Departments believe that assessing the impact of these final
regulations on small plans is an appropriate substitute for evaluating
the effect on small entities. The definition of small entity considered
appropriate for this purpose differs, however, from a definition of
small business that is based on size standards promulgated by the Small
Business Administration (SBA) (13 CFR Sec. 121.201) pursuant to the
Small Business Act (15 U.S.C. 631 et seq.). The Departments requested
comments on the appropriateness of this size standard at the proposed
rule stage and received several supportive responses and no negative
responses.
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\61\ Under ERISA section 104(a)(2), the Secretary may also
provide exemptions or simplified reporting and disclosure
requirements for pension plans. Pursuant to the authority of ERISA
section 104(a)(3), the Department of Labor has previously issued at
29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46, and
2520.104b-10 certain simplified reporting provisions and limited
exemptions from reporting and disclosure requirements for small
plans, including unfunded or insured welfare plans, that cover fewer
than 100 participants and satisfy certain other requirements.
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The Departments expect that these final regulations will affect few
small plans. While a large number of small plans offer a wellness
program, the 2012 Kaiser/HRET survey reported that only seven percent
of employers with fewer than 200 employees had a wellness program that
offered cash or cash equivalent incentives (including gift cards,
merchandise, or travel incentives.) \62\ In addition, only two percent
of these firms offered lower employee health plan premiums to wellness
participants, less than one percent offered lower deductibles, and less
than one percent offered higher health reimbursement account or health
savings account contributions. Therefore, the Departments expect that
few small plans will be affected by increasing the rewards threshold
from 20 percent to 30 percent (50 percent for programs targeting
tobacco use prevention or reduction), because only a small percentage
of plans have health-contingent wellness programs. Moreover, as
discussed in the Economic Impacts section earlier in this preamble, few
plans that offer health-contingent wellness programs come close to
reaching the 20 percent limit, and most participatory wellness programs
are associated with completing the health risk assessment irrespective
of the results, which are not subject to the limitation.
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\62\ Kaiser Family Foundation, Employer Health Benefits: 2012
Annual Survey. 2012, The Kaiser Family Foundation, Menlo Park, CA;
Health Research & Educational Trust, Chicago, IL.
---------------------------------------------------------------------------
The Kaiser/HRET survey also reports that about 80 percent of small
plans had their wellness programs provided by the health plan provider.
Industry experts indicated to the Departments that when wellness
programs are offered by the health plan provider, they typically supply
alternative education programs and offer them free of charge. This
finding indicates that the requirement in the final rule for health-
contingent wellness programs to provide and pay for a reasonable
alternative standard for individuals for whom it is either unreasonably
difficult or medically inadvisable to meet the original activity-only
standard or for all individuals who fail to meet the initial outcome-
based standard will impose little new costs or transfers to the
affected plans.
The Departments received a comment suggesting that the rule would
have a significant economic impact on small entities no matter how they
are defined, because a final regulation issued by HHS on February 27,
2013 provided that that issuers in the small group market can vary
rates for tobacco use by up to a ratio of 1.5 to 1 (that is, allowing
up to a 50 percent premium surcharge for tobacco use), pursuant to PHS
Act section 2701(a)(1)(A)(iv) only in connection with a wellness
program meeting the standards of PHS Act section 2705(j) and these
final regulations.\63\ Since there are no data available to support
this prediction, and the Departments only received one comment
suggesting a substantial increase in the number of wellness programs,
the Departments do not believe that a substantial increase in the
number of wellness programs will occur.
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\63\ 78 FR 13405.
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In the event that the number of wellness programs associated with
small plans does increase, the Departments believe that this final rule
contains considerable regulatory flexibility for plans to design
wellness programs that suit their needs. With this flexibility in mind,
the Departments expect that plans will only choose to offer a wellness
program if the benefits outweigh the costs. If plans choose to offer a
wellness program, they will design one that minimizes costs and is not
overly burdensome. With this design flexibility, this rule should not
disproportionately impact small entities. Thus, the commenter has
highlighted the possibility that this final rule may affect a
substantial number of small entities, but the Departments do not see
any evidence to indicate that this final rule will have a significant
impact on small entities.
Based on the foregoing, the Departments hereby certify that these
final regulations will not have a significant economic impact on a
substantial number of small entities.
F. Paperwork Reduction Act--Department of Labor and Department of the
Treasury
The 2006 regulations and the proposed regulations regarding
wellness programs did not include an information collection request
(ICR). As described earlier in this preamble, these final regulations,
like the 2006 final regulations, require plans and issuers to disclose
the availability of a reasonable alternative standard to qualify for
the reward (and if applicable, the possibility of waiver of the
otherwise applicable standard) in all plan materials describing the
terms of a health-contingent wellness program (both activity-only and
outcome-based wellness programs). These final regulations clarify that
a disclosure of the availability of a reasonable alternative standard
includes contact information for obtaining the alternative and a
statement that recommendations of an individual's personal physician
will be accommodated. For outcome-
[[Page 33174]]
based wellness programs, this notice must also be included in any
disclosure that an individual did not satisfy an initial outcome-based
standard. If plan materials merely mention that such a program is
available, without describing its terms, this disclosure is not
required. These final regulations include sample language that can be
used to satisfy this requirement.
In concluding that these final regulations did not include an ICR,
the Departments reasoned that much of the information required was
likely already provided as a result of state and local requirements or
the usual business practices of group health plans and group health
insurance issuers in connection with the offer and promotion of health
care coverage. In addition, the sample disclosures would enable group
health plans to make any necessary modifications with minimal effort.
Finally, although the final regulations do not include an ICR, the
regulations could be interpreted to require a revision to an existing
collection of information. Administrators of group health plans covered
under Title I of ERISA are generally required to make certain
disclosures about the terms of a plan and material changes in terms
through a Summary Plan Description (SPD) or Summary of Material
Modifications (SMM) pursuant to sections 101(a) and 102(a) of ERISA and
related regulations. The ICR related to the SPD and SMM is currently
approved by OMB under OMB control number 1210-0039. While these
materials may in some cases require revisions to comply with the final
regulations, the associated burden is expected to be negligible, and is
already accounted for in the SPD, SMM, and the ICR by a burden
estimation methodology, which anticipates ongoing revisions. Based on
the foregoing, the Departments do not expect that any change to the
existing ICR arising from these final regulations will be substantive
or material. Accordingly, the Departments have not filed an application
for approval of a revision to the existing ICR with OMB in connection
with these final regulations.
G. Paperwork Reduction Act--Department of Health and Human Services
As described in earlier in this preamble, The 2006 regulations and
the proposed regulations regarding wellness programs did not include an
information collection request (ICR). As described earlier in this
preamble, these final regulations, like the 2006 final regulations,
require plans and issuers to disclose the availability of a reasonable
alternative standard to qualify for the reward (and if applicable, the
possibility of waiver of the otherwise applicable standard) in all plan
materials describing the terms of a health-contingent wellness program
(both activity-only and outcome-based wellness programs). These final
regulations clarify that a disclosure of the availability of a
reasonable alternative standard includes contact information for
obtaining the alternative and a statement that recommendations of an
individual's personal physician will be accommodated. For outcome-based
wellness programs, this notice must also be included in any disclosure
that an individual did not satisfy an initial outcome-based standard.
If plan materials merely mention that such a program is available,
without describing its terms, this disclosure is not required. These
final regulations include sample language that can be used to satisfy
this requirement.
The burden associated with this requirement was previously approved
under OMB control number 0938-0819. We are not seeking reinstatement of
the information collection request under the aforementioned OMB control
number, since we believe that much of the information required is
likely already provided as a result of state and local requirements or
the usual business practices of group health plans and group health
insurance issuers in connection with the offer and promotion of health
care coverage. In addition, the sample disclosures would enable group
health plans to make any necessary modifications with minimal effort.
H. Special Analyses--Department of the Treasury
For purposes of the Department of the Treasury it has been
determined that this final rule is not a significant regulatory action
as defined in Executive Order 12866. Therefore, a regulatory assessment
is not required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these final regulations, and, because these final regulations do not
impose a collection of information on small entities, a Regulatory
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preceding this final rule was
submitted to the Small Business Administration for comment on its
impact on small business.
I. Congressional Review Act
These final regulations are subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and will be transmitted to Congress and the
Comptroller General for review. These regulations, do not constitute a
``major rule,'' as that term is defined in 5 U.S.C. 804 because they
are unlikely to result in (1) an annual effect on the economy of $100
million or more; (2) a major increase in costs or prices for consumers,
individual industries, or federal, State or local government agencies,
or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic or export markets.
J. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, these final regulations do
not include any federal mandate that may result in expenditures by
state, local, or tribal governments, or by the private sector, of $100
million or more, adjusted for inflation.\64\
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\64\ In 2013, that threshold level is approximately $141
million.
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K. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the states, the
relationship between the national government and states, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have these
federalism implications must consult with state and local officials,
and describe the extent of their consultation and the nature of the
concerns of state and local officials in the preamble to the
regulation.
In the Departments' view, these final regulations have federalism
implications, however, in the Departments' view, the federalism
implications of these final regulations are substantially mitigated
because, with respect to health insurance issuers, the vast majority of
states have enacted
[[Page 33175]]
laws, which meet or exceed the federal HIPAA standards prohibiting
discrimination based on health factors. Therefore, the regulations are
not likely to require substantial additional oversight of states by the
Department of HHS.
In general, through section 514, ERISA supersedes state laws to the
extent that they relate to any covered employee benefit plan, and
preserves state laws that regulate insurance, banking, or securities.
While ERISA prohibits states from regulating a plan as an insurance or
investment company or bank, HIPAA added a new preemption provision to
ERISA (as well as to the PHS Act) narrowly preempting state
requirements for group health insurance coverage. With respect to the
HIPAA nondiscrimination provisions, states may continue to apply state
law requirements except to the extent that the requirements prevent the
application of the portability, access, and renewability requirements
of HIPAA, which include HIPAA's nondiscrimination requirements
provisions. HIPAA's Conference Report states that the conferees
intended the narrowest preemption of state laws with regard to health
insurance issuers (H.R. Conf. Rep. No. 736, 104th Cong. 2d Session 205,
1996). State insurance laws that are more stringent than the federal
requirements are unlikely to ``prevent the application of'' the HIPAA
nondiscrimination provisions, and therefore are not preempted.
Accordingly, states have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the federal
law.
Guidance conveying this interpretation was published in the Federal
Register on April 8, 1997 (62 FR 16904) and on December 30, 2004 (69 FR
78720), and these final regulations clarify and implement the statute's
minimum standards and do not significantly reduce the discretion given
the states by the statute.
HIPAA provides that the states may enforce the provisions of HIPAA
as they pertain to issuers, but that the Secretary of HHS must enforce
any provisions that a state chooses not to or fails to substantially
enforce. When exercising its responsibility to enforce provisions of
HIPAA, HHS works cooperatively with the State for the purpose of
addressing the state's concerns and avoiding conflicts with the
exercise of state authority.\65\ HHS has developed procedures to
implement its enforcement responsibilities, and to afford the states
the maximum opportunity to enforce HIPAA's requirements in the first
instance. In compliance with Executive Order 13132's requirement that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, DOL
and HHS have engaged in numerous efforts to consult with and work
cooperatively with affected state and local officials.
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\65\ This authority applies to insurance issued with respect to
group health plans generally, including plans covering employees of
church organizations. Thus, this discussion of federalism applies to
all group health insurance coverage that is subject to the PHS Act,
including those church plans that provide coverage through a health
insurance issuer (but not to church plans that do not provide
coverage through a health insurance issuer).
---------------------------------------------------------------------------
The Departments received a comment letter suggesting that they
failed to take into account the reduction in states' tobacco tax
revenue that would occur if the proposed regulations result in fewer
people smoking. The Departments note that reduced tobacco tax revenue
is one of many indirect effects of reduced smoking. However, the
Departments believe that any lost tax revenue will be more than offset
by the benefits to the public welfare that will result from reduced
smoking. As the commenter stated in its letter, ``[t]hrough employees'
active participation in nondiscriminatory wellness programs, sick
leave, absenteeism, health plan costs, and worker's compensation will
be reduced. Needless to mention, a healthier workforce is a more
sustainable workforce. Therefore, from the point of view of public
health, the rule greatly contributes to the promotion of healthy
lifestyle of the states' population. If every small and large entity
improves the health of their employees, the overall health of the
states will be improved as well.''
In conclusion, throughout the process of developing these
regulations, to the extent feasible within the specific preemption
provisions of HIPAA, the Departments have attempted to balance the
states' interests in regulating health plans and health insurance
issuers, and the rights of those individuals that Congress intended to
protect through the enactment of HIPAA.
IV. Statutory Authority
The Department of the Treasury regulations are adopted pursuant to
the authority contained in sections 7805 and 9833 of the Code.
The Department of Labor regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169,
1181-1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b,
and 1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec.
401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and
1562(e), Public Law 111-148, 124 Stat. 119, as amended by Public Law
111-152, 124 Stat. 1029; Secretary of Labor's Order 1-2011, 77 FR 1088
(January 9, 2012).
The Department of Health and Human Services regulations are
adopted, with respect to 45 CFR part 146, pursuant to the authority
contained in sections 2702 through 2705, 2711 through 2723, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92) prior to the amendments made
by the Affordable Care Act and sections 2701 through 2763, 2791, and
2792 of the Public Health Service Act (42 U.S.C. 300gg through 300gg-
63, 300gg-91, and 300gg-92), as amended by the Affordable Care Act;
with respect to 45 CFR part 147, pursuant to the authority contained in
sections 2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C.
300gg through 300gg-63, 300gg-91, and 300gg-92), as amended by the
Affordable Care Act.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Parts 146 and 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
[[Page 33176]]
Approved: May 23, 2013.
Beth Tucker,
Deputy Commissioner for Operations Support, Internal Revenue Service.
Signed this May 15, 2013.
Mark Mazur,
Assistant Secretary of the Treasury (Tax Policy).
Dated: April 25, 2013.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: April 29, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
Department of the Treasury
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR part 54 is amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 is amended by adding an
entry for Sec. 54.9815-2705 in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815-2705 also issued under 26 U.S.C. 9833.
0
Par. 2. In Sec. 54.9802-1, paragraph (f) is revised to read as
follows:
Sec. 54.9802-1 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
* * * * *
(f) Nondiscriminatory wellness programs--in general. A wellness
program is a program of health promotion or disease prevention.
Paragraphs (b)(2)(ii) and (c)(3) of this section provide exceptions to
the general prohibitions against discrimination based on a health
factor for plan provisions that vary benefits (including cost-sharing
mechanisms) or the premium or contribution for similarly situated
individuals in connection with a wellness program that satisfies the
requirements of this paragraph (f).
(1) Definitions. The definitions in this paragraph (f)(1) govern in
applying the provisions of this paragraph (f).
(i) Reward. Except where expressly provided otherwise, references
in this section to an individual obtaining a reward include both
obtaining a reward (such as a discount or rebate of a premium or
contribution, a waiver of all or part of a cost-sharing mechanism, an
additional benefit, or any financial or other incentive) and avoiding a
penalty (such as the absence of a premium surcharge or other financial
or nonfinancial disincentive). References in this section to a plan
providing a reward include both providing a reward (such as a discount
or rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism, an additional benefit, or any financial or
other incentive) and imposing a penalty (such as a surcharge or other
financial or nonfinancial disincentive).
(ii) Participatory wellness programs. If none of the conditions for
obtaining a reward under a wellness program is based on an individual
satisfying a standard that is related to a health factor (or if a
wellness program does not provide a reward), the wellness program is a
participatory wellness program. Examples of participatory wellness
programs are:
(A) A program that reimburses employees for all or part of the cost
for membership in a fitness center.
(B) A diagnostic testing program that provides a reward for
participation in that program and does not base any part of the reward
on outcomes.
(C) A program that encourages preventive care through the waiver of
the copayment or deductible requirement under a group health plan for
the costs of, for example, prenatal care or well-baby visits. (Note
that, with respect to non-grandfathered plans, Sec. 54.9815-2713T
requires benefits for certain preventive health services without the
imposition of cost sharing.)
(D) A program that reimburses employees for the costs of
participating, or that otherwise provides a reward for participating,
in a smoking cessation program without regard to whether the employee
quits smoking.
(E) A program that provides a reward to employees for attending a
monthly, no-cost health education seminar.
(F) A program that provides a reward to employees who complete a
health risk assessment regarding current health status, without any
further action (educational or otherwise) required by the employee with
regard to the health issues identified as part of the assessment. (See
also Sec. 54.9802-3T for rules prohibiting collection of genetic
information.)
(iii) Health-contingent wellness programs. A health-contingent
wellness program is a program that requires an individual to satisfy a
standard related to a health factor to obtain a reward (or requires an
individual to undertake more than a similarly situated individual based
on a health factor in order to obtain the same reward). A health-
contingent wellness program may be an activity-only wellness program or
an outcome-based wellness program.
(iv) Activity-only wellness programs. An activity-only wellness
program is a type of health-contingent wellness program that requires
an individual to perform or complete an activity related to a health
factor in order to obtain a reward but does not require the individual
to attain or maintain a specific health outcome. Examples include
walking, diet, or exercise programs, which some individuals may be
unable to participate in or complete (or have difficulty participating
in or completing) due to a health factor, such as severe asthma,
pregnancy, or a recent surgery. See paragraph (f)(3) of this section
for requirements applicable to activity-only wellness programs.
(v) Outcome-based wellness programs. An outcome-based wellness
program is a type of health-contingent wellness program that requires
an individual to attain or maintain a specific health outcome (such as
not smoking or attaining certain results on biometric screenings) in
order to obtain a reward. To comply with the rules of this paragraph
(f), an outcome-based wellness program typically has two tiers. That
is, for individuals who do not attain or maintain the specific health
outcome, compliance with an educational program or an activity may be
offered as an alternative to achieve the same reward. This alternative
pathway, however, does not mean that the overall program, which has an
outcome-based component, is not an outcome-based wellness program. That
is, if a measurement, test, or screening is used as part of an initial
standard and individuals who meet the standard are granted the reward,
the program is considered an outcome-based wellness program. For
example, if a wellness program tests individuals for specified medical
conditions or risk factors (including biometric screening such as
testing for high cholesterol, high blood pressure, abnormal body mass
index, or high glucose level) and provides a reward to individuals
identified as within a normal or healthy range for these medical
conditions or risk factors, while requiring individuals who are
identified as outside the normal or healthy range (or at risk) to take
additional steps (such as meeting with a health coach, taking a health
or fitness course, adhering to a health improvement action plan,
complying with a walking or exercise program, or complying with a
health care provider's plan of care) to obtain the same reward,
[[Page 33177]]
the program is an outcome-based wellness program. See paragraph (f)(4)
of this section for requirements applicable to outcome-based wellness
programs.
(2) Requirement for participatory wellness programs. A
participatory wellness program, as described in paragraph (f)(1)(ii) of
this section, does not violate the provisions of this section only if
participation in the program is made available to all similarly
situated individuals, regardless of health status.
(3) Requirements for activity-only wellness programs. A health-
contingent wellness program that is an activity-only wellness program,
as described in paragraph (f)(1)(iv) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the activity-only wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(3)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the activity-only wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(3)(iv), a reward under an activity-
only wellness program is not available to all similarly situated
individuals for a period unless the program meets both of the following
requirements:
(1) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is unreasonably difficult due
to a medical condition to satisfy the otherwise applicable standard;
and
(2) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is medically inadvisable to
attempt to satisfy the otherwise applicable standard.
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in either
paragraph (f)(3)(iv)(A)(1) or (2) of this section, a reasonable
alternative standard must be furnished by the plan or issuer upon the
individual's request or the condition for obtaining the reward must be
waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
activity-only wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of this paragraph (f)(3)
in the same manner as if it were an initial program standard. (Thus,
for example, if a plan or issuer provides a walking program as a
reasonable alternative standard to a running program, individuals for
whom it is unreasonably difficult due to a medical condition to
complete the walking program (or for whom it is medically inadvisable
to attempt to complete the walking program) must be provided a
reasonable alternative standard to the walking program.) To the extent
that a reasonable alternative standard under an activity-only wellness
program is, itself, an outcome-based wellness program, it must comply
with the requirements of paragraph (f)(4) of this section, including
paragraph (f)(4)(iv)(D).
(E) If reasonable under the circumstances, a plan or issuer may
seek verification, such as a statement from an individual's personal
physician, that a health factor makes it unreasonably difficult for the
individual to satisfy, or medically inadvisable for the individual to
attempt to satisfy, the otherwise applicable standard of an activity-
only wellness program. Plans and issuers may seek verification with
respect to requests for a reasonable alternative standard for which it
is reasonable to determine that medical judgment is required to
evaluate the validity of the request.
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an activity-only wellness program the availability of a reasonable
alternative standard to qualify for the reward (and, if applicable, the
possibility of waiver of the otherwise applicable standard), including
contact information for obtaining a reasonable alternative standard and
a statement that recommendations of an individual's personal physician
will be accommodated. If plan materials merely mention that such a
program is available, without describing its terms, this disclosure is
not required. Sample language is provided in paragraph (f)(6) of this
section, as well as in certain examples of this section.
[[Page 33178]]
(vi) Example. The provisions of this paragraph (f)(3) are
illustrated by the following example:
Example. (i) Facts. A group health plan provides a reward to
individuals who participate in a reasonable specified walking
program. If it is unreasonably difficult due to a medical condition
for an individual to participate (or if it is medically inadvisable
for an individual to attempt to participate), the plan will waive
the walking program requirement and provide the reward. All
materials describing the terms of the walking program disclose the
availability of the waiver.
(ii) Conclusion. In this Example, the program satisfies the
requirements of paragraph (f)(3)(iii) of this section because the
walking program is reasonably designed to promote health and prevent
disease. The program satisfies the requirements of paragraph
(f)(3)(iv) of this section because the reward under the program is
available to all similarly situated individuals. It accommodates
individuals for whom it is unreasonably difficult to participate in
the walking program due to a medical condition (or for whom it would
be medically inadvisable to attempt to participate) by providing
them with the reward even if they do not participate in the walking
program (that is, by waiving the condition). The plan also complies
with the disclosure requirement of paragraph (f)(3)(v) of this
section. Thus, the plan satisfies paragraphs (f)(3)(iii), (iv), and
(v) of this section.
(4) Requirements for outcome-based wellness programs. A health-
contingent wellness program that is an outcome-based wellness program,
as described in paragraph (f)(1)(v) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the outcome-based wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(4)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances. To ensure that an outcome-based wellness program is
reasonably designed to improve health and does not act as a subterfuge
for underwriting or reducing benefits based on a health factor, a
reasonable alternative standard to qualify for the reward must be
provided to any individual who does not meet the initial standard based
on a measurement, test, or screening that is related to a health
factor, as explained in paragraph (f)(4)(iv) of this section.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the outcome-based wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(4)(iv), a reward under an outcome-
based wellness program is not available to all similarly situated
individuals for a period unless the program allows a reasonable
alternative standard (or waiver of the otherwise applicable standard)
for obtaining the reward for any individual who does not meet the
initial standard based on the measurement, test, or screening, as
described in this paragraph (f)(4)(iv).
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in
paragraph (f)(4)(iv)(A) of this section, a reasonable alternative
standard must be furnished by the plan or issuer upon the individual's
request or the condition for obtaining the reward must be waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of paragraph (f)(3) of
this section in the same manner as if it were an initial program
standard. To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, another outcome-based
wellness program, it must comply with the requirements of this
paragraph (f)(4), subject to the following special rules:
(1) The reasonable alternative standard cannot be a requirement to
meet a different level of the same standard without additional time to
comply that takes into account the individual's circumstances. For
example, if the initial standard is to achieve a BMI less than 30, the
reasonable alternative standard cannot be to achieve a BMI less than 31
on that same date. However, if the initial standard is to achieve a BMI
less than 30, a reasonable alternative standard for the individual
could be to reduce the individual's BMI by a small amount or small
percentage, over a realistic period of time, such as within a year.
(2) An individual must be given the opportunity to comply with the
recommendations of the individual's personal physician as a second
reasonable alternative standard to meeting the reasonable alternative
standard defined by the plan or issuer, but only if the physician joins
in the request. The individual can make a
[[Page 33179]]
request to involve a personal physician's recommendations at any time
and the personal physician can adjust the physician's recommendations
at any time, consistent with medical appropriateness.
(E) It is not reasonable to seek verification, such as a statement
from an individual's personal physician, under an outcome-based
wellness program that a health factor makes it unreasonably difficult
for the individual to satisfy, or medically inadvisable for the
individual to attempt to satisfy, the otherwise applicable standard as
a condition of providing a reasonable alternative to the initial
standard. However, if a plan or issuer provides an alternative standard
to the otherwise applicable measurement, test, or screening that
involves an activity that is related to a health factor, then the rules
of paragraph (f)(3) of this section for activity-only wellness programs
apply to that component of the wellness program and the plan or issuer
may, if reasonable under the circumstances, seek verification that it
is unreasonably difficult due to a medical condition for an individual
to perform or complete the activity (or it is medically inadvisable to
attempt to perform or complete the activity). (For example, if an
outcome-based wellness program requires participants to maintain a
certain healthy weight and provides a diet and exercise program for
individuals who do not meet the targeted weight, a plan or issuer may
seek verification, as described in paragraph (f)(3)(iv)(D) of this
section, if reasonable under the circumstances, that a second
reasonable alternative standard is needed for certain individuals
because, for those individuals, it would be unreasonably difficult due
to a medical condition to comply, or medically inadvisable to attempt
to comply, with the diet and exercise program, due to a medical
condition.)
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an outcome-based wellness program, and in any disclosure that an
individual did not satisfy an initial outcome-based standard, the
availability of a reasonable alternative standard to qualify for the
reward (and, if applicable, the possibility of waiver of the otherwise
applicable standard), including contact information for obtaining a
reasonable alternative standard and a statement that recommendations of
an individual's personal physician will be accommodated. If plan
materials merely mention that such a program is available, without
describing its terms, this disclosure is not required. Sample language
is provided in paragraph (f)(6) of this section, as well as in certain
examples of this section.
(vi) Examples. The rules of this paragraph (f)(4) are illustrated
by the following examples:
Example 1--Cholesterol screening with reasonable alternative
standard to work with personal physician. (i) Facts. A group health
plan offers a reward to participants who achieve a count under 200
on a total cholesterol test. If a participant does not achieve the
targeted cholesterol count, the plan allows the participant to
develop an alternative cholesterol action plan in conjunction with
the participant's personal physician that may include
recommendations for medication and additional screening. The plan
allows the physician to modify the standards, as medically
necessary, over the year. (For example, if a participant develops
asthma or depression, requires surgery and convalescence, or some
other medical condition or consideration makes completion of the
original action plan inadvisable or unreasonably difficult, the
physician may modify the original action plan.) All plan materials
describing the terms of the program include the following statement:
``Your health plan wants to help you take charge of your health.
Rewards are available to all employees who participate in our
Cholesterol Awareness Wellness Program. If your total cholesterol
count is under 200, you will receive the reward. If not, you will
still have an opportunity to qualify for the reward. We will work
with you and your doctor to find a Health Smart program that is
right for you.'' In addition, when any individual participant
receives notification that his or her cholesterol count is 200 or
higher, the notification includes the following statement: ``Your
plan offers a Health Smart program under which we will work with you
and your doctor to try to lower your cholesterol. If you complete
this program, you will qualify for a reward. Please contact us at
[contact information] to get started.''
(ii) Conclusion. In this Example 1, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain cholesterol level) to obtain a reward. The program satisfies
the requirements of paragraph (f)(4)(iii) of this section because
the cholesterol program is reasonably designed to promote health and
prevent disease. The program satisfies the requirements of paragraph
(f)(4)(iv) of this section because it makes available to all
participants who do not meet the cholesterol standard a reasonable
alternative standard to qualify for the reward. Lastly, the plan
also discloses in all materials describing the terms of the program
and in any disclosure that an individual did not satisfy the initial
outcome-based standard the availability of a reasonable alternative
standard (including contact information and the individual's ability
to involve his or her personal physician), as required by paragraph
(f)(4)(v) of this section. Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 2--Cholesterol screening with plan alternative and no
opportunity for personal physician involvement. (i) Facts. Same
facts as Example 1, except that the wellness program's physician or
nurse practitioner (rather than the individual's personal physician)
determines the alternative cholesterol action plan. The plan does
not provide an opportunity for a participant's personal physician to
modify the action plan if it is not medically appropriate for that
individual.
(ii) Conclusion. In this Example 2, the wellness program does
not satisfy the requirements of paragraph (f)(4)(iii) of this
section because the program does not accommodate the recommendations
of the participant's personal physician with regard to medical
appropriateness, as required under paragraph (f)(4)(iv)(C)(3) of
this section. Thus, the program is not reasonably designed under
paragraph (f)(4)(iii) of this section and is not available to all
similarly situated individuals under paragraph (f)(4)(iv) of this
section. The notice also does not provide all the content required
under paragraph (f)(4)(v) of this section.
Example 3--Cholesterol screening with plan alternative that can
be modified by personal physician. (i) Facts. Same facts as Example
2, except that if a participant's personal physician disagrees with
any part of the action plan, the personal physician may modify the
action plan at any time, and the plan discloses this to
participants.
(ii) Conclusion. In this Example 3, the wellness program
satisfies the requirements of paragraph (f)(4)(iii) of this section
because the participant's personal physician may modify the action
plan determined by the wellness program's physician or nurse
practitioner at any time if the physician states that the
recommendations are not medically appropriate, as required under
paragraph (f)(4)(iv)(C)(3) of this section. Thus, the program is
reasonably designed under paragraph (f)(4)(iii) of this section and
is available to all similarly situated individuals under paragraph
(f)(4)(iv) of this section. The notice, which includes a statement
that recommendations of an individual's personal physician will be
accommodated, also complies with paragraph (f)(4)(v) of this
section.
Example 4--BMI screening with walking program alternative. (i)
Facts. A group health plan will provide a reward to participants who
have a body mass index (BMI) that is 26 or lower, determined shortly
before the beginning of the year. Any participant who does not meet
the target BMI is given the same discount if the participant
complies with an exercise program that consists of walking 150
minutes a week. Any participant for whom it is unreasonably
difficult due to a medical condition to comply with this walking
program (and any participant for whom it is medically inadvisable to
attempt to comply with the walking program) during the year is given
the same discount if the participant satisfies an alternative
standard that is reasonable taking into consideration the
participant's medical situation, is not unreasonably burdensome or
[[Page 33180]]
impractical to comply with, and is otherwise reasonably designed
based on all the relevant facts and circumstances. All plan
materials describing the terms of the wellness program include the
following statement: ``Fitness is Easy! Start Walking! Your health
plan cares about your health. If you are considered overweight
because you have a BMI of over 26, our Start Walking program will
help you lose weight and feel better. We will help you enroll. (*
*If your doctor says that walking isn't right for you, that's okay
too. We will work with you (and, if you wish, your own doctor) to
develop a wellness program that is.)'' Participant E is unable to
achieve a BMI that is 26 or lower within the plan's timeframe and
receives notification that complies with paragraph (f)(4)(v) of this
section. Nevertheless, it is unreasonably difficult due to a medical
condition for E to comply with the walking program. E proposes a
program based on the recommendations of E's physician. The plan
agrees to make the same discount available to E that is available to
other participants in the BMI program or the alternative walking
program, but only if E actually follows the physician's
recommendations.
(ii) Conclusion. In this Example 4, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain BMI level) to obtain a reward. The program satisfies the
requirements of paragraph (f)(4)(iii) of this section because it is
reasonably designed to promote health and prevent disease. The
program also satisfies the requirements of paragraph (f)(4)(iv) of
this section because it makes available to all individuals who do
not satisfy the BMI standard a reasonable alternative standard to
qualify for the reward (in this case, a walking program that is not
unreasonably burdensome or impractical for individuals to comply
with and that is otherwise reasonably designed based on all the
relevant facts and circumstances). In addition, the walking program
is, itself, an activity-only standard and the plan complies with the
requirements of paragraph (f)(3) of this section (including the
requirement of paragraph (f)(3)(iv) that, if there are individuals
for whom it is unreasonably difficult due to a medical condition to
comply, or for whom it is medically inadvisable to attempt to
comply, with the walking program, the plan provide a reasonable
alternative to those individuals). Moreover, the plan satisfies the
requirements of paragraph (f)(4)(v) of this section because it
discloses, in all materials describing the terms of the program and
in any disclosure that an individual did not satisfy the initial
outcome-based standard, the availability of a reasonable alternative
standard (including contact information and the individual's option
to involve his or her personal physician) to qualify for the reward
or the possibility of waiver of the otherwise applicable standard.
Thus, the program satisfies the requirements of paragraphs
(f)(4)(iii), (iv), and (v) of this section.
Example 5--BMI screening with alternatives available to either
lower BMI or meet personal physician's recommendations. (i) Facts.
Same facts as Example 4 except that, with respect to any participant
who does not meet the target BMI, instead of a walking program, the
participant is expected to reduce BMI by one point. At any point
during the year upon request, any individual can obtain a second
reasonable alternative standard, which is compliance with the
recommendations of the participant's personal physician regarding
weight, diet, and exercise as set forth in a treatment plan that the
physician recommends or to which the physician agrees. The
participant's personal physician is permitted to change or adjust
the treatment plan at any time and the option of following the
participant's personal physician's recommendations is clearly
disclosed.
(ii) Conclusion. In this Example 5, the reasonable alternative
standard to qualify for the reward (the alternative BMI standard
requiring a one-point reduction) does not make the program
unreasonable under paragraph (f)(4)(iii) or (iv) of this section
because the program complies with paragraph (f)(4)(iv)(C)(4) of this
section by allowing a second reasonable alternative standard to
qualify for the reward (compliance with the recommendations of the
participant's personal physician, which can be changed or adjusted
at any time). Accordingly, the program continues to satisfy the
applicable requirements of paragraph (f) of this section.
Example 6--Tobacco use surcharge with smoking cessation program
alternative. (i) Facts. In conjunction with an annual open
enrollment period, a group health plan provides a premium
differential based on tobacco use, determined using a health risk
assessment. The following statement is included in all plan
materials describing the tobacco premium differential: ``Stop
smoking today! We can help! If you are a smoker, we offer a smoking
cessation program. If you complete the program, you can avoid this
surcharge.'' The plan accommodates participants who smoke by
facilitating their enrollment in a smoking cessation program that
requires participation at a time and place that are not unreasonably
burdensome or impractical for participants, and that is otherwise
reasonably designed based on all the relevant facts and
circumstances, and discloses contact information and the
individual's option to involve his or her personal physician. The
plan pays for the cost of participation in the smoking cessation
program. Any participant can avoid the surcharge for the plan year
by participating in the program, regardless of whether the
participant stops smoking, but the plan can require a participant
who wants to avoid the surcharge in a subsequent year to complete
the smoking cessation program again.
(ii) Conclusion. In this Example 6, the premium differential
satisfies the requirements of paragraphs (f)(4)(iii), (iv), and (v).
The program is an outcome-based wellness program because the initial
standard for obtaining a reward is dependent on the results of a
health risk assessment (a measurement, test, or screening). The
program is reasonably designed under paragraph (f)(4)(iii) because
the plan provides a reasonable alternative standard (as required
under paragraph (f)(4)(iv) of this section) to qualify for the
reward to all tobacco users (a smoking cessation program). The plan
discloses, in all materials describing the terms of the program, the
availability of the reasonable alternative standard (including
contact information and the individual's option to involve his or
her personal physician). Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 7--Tobacco use surcharge with alternative program
requiring actual cessation. (i) Facts. Same facts as Example 6,
except the plan does not provide participant F with the reward in
subsequent years unless F actually stops smoking after participating
in the tobacco cessation program.
(ii) Conclusion. In this Example 7, the program is not
reasonably designed under paragraph (f)(4)(iii) of this section and
does not provide a reasonable alternative standard as required under
paragraph (f)(4)(iv) of this section. The plan cannot cease to
provide a reasonable alternative standard merely because the
participant did not stop smoking after participating in a smoking
cessation program. The plan must continue to offer a reasonable
alternative standard whether it is the same or different (such as a
new recommendation from F's personal physician or a new nicotine
replacement therapy).
Example 8--Tobacco use surcharge with smoking cessation program
alternative that is not reasonable. (i) Facts. Same facts as
Example 6, except the plan does not facilitate participant F's
enrollment in a smoking cessation program. Instead the plan advises
F to find a program, pay for it, and provide a certificate of
completion to the plan.
(ii) Conclusion. In this Example 8, the requirement for F to
find and pay for F's own smoking cessation program means that the
alternative program is not reasonable. Accordingly, the plan has not
offered a reasonable alternative standard that complies with
paragraphs (f)(4)(iii) and (iv) of this section and the program
fails to satisfy the requirements of paragraph (f) of this section.
(5) Applicable percentage--(i) For purposes of this paragraph (f),
the applicable percentage is 30 percent, except that the applicable
percentage is increased by an additional 20 percentage points (to 50
percent) to the extent that the additional percentage is in connection
with a program designed to prevent or reduce tobacco use.
(ii) The provisions of this paragraph (f)(5) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan.
The annual premium for employee-only coverage is $6,000 (of which
the employer pays $4,500 per year and the employee pays $1,500 per
year). The plan offers employees a health-contingent wellness
program with several components, focused on exercise, blood sugar,
weight, cholesterol, and blood pressure. The reward for compliance
is an annual premium rebate of $600.
(ii) Conclusion. In this Example 1, the reward for the wellness
program, $600, does not exceed the applicable percentage of 30
[[Page 33181]]
percent of the total annual cost of employee-only coverage, $1,800.
($6,000 x 30% = $1,800.)
Example 2. (i) Facts. Same facts as Example 1, except the
wellness program is exclusively a tobacco prevention program.
Employees who have used tobacco in the last 12 months and who are
not enrolled in the plan's tobacco cessation program are charged a
$1,000 premium surcharge (in addition to their employee contribution
towards the coverage). (Those who participate in the plan's tobacco
cessation program are not assessed the $1,000 surcharge.)
(ii) Conclusion. In this Example 2, the reward for the wellness
program (absence of a $1,000 surcharge), does not exceed the
applicable percentage of 50 percent of the total annual cost of
employee-only coverage, $3,000. ($6,000 x 50% = $3,000.)
Example 3. (i) Facts. Same facts as Example 1, except that, in
addition to the $600 reward for compliance with the health-
contingent wellness program, the plan also imposes an additional
$2,000 tobacco premium surcharge on employees who have used tobacco
in the last 12 months and who are not enrolled in the plan's tobacco
cessation program. (Those who participate in the plan's tobacco
cessation program are not assessed the $2,000 surcharge.)
(ii) Conclusion. In this Example 3, the total of all rewards
(including absence of a surcharge for participating in the tobacco
program) is $2,600 ($600 + $2,000 = $2,600), which does not exceed
the applicable percentage of 50 percent of the total annual cost of
employee-only coverage ($3,000); and, tested separately, the $600
reward for the wellness program unrelated to tobacco use does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage ($1,800).
Example 4. (i) Facts. An employer sponsors a group health plan.
The total annual premium for employee-only coverage (including both
employer and employee contributions towards the coverage) is $5,000.
The plan provides a $250 reward to employees who complete a health
risk assessment, without regard to the health issues identified as
part of the assessment. The plan also offers a Healthy Heart
program, which is a health-contingent wellness program, with an
opportunity to earn a $1,500 reward.
(ii) Conclusion. In this Example 4, even though the total reward
for all wellness programs under the plan is $1,750 ($250 + $1,500 =
$1,750, which exceeds the applicable percentage of 30 percent of the
cost of the annual premium for employee-only coverage ($5,000 x 30%
= $1,500)), only the reward offered for compliance with the health-
contingent wellness program ($1,500) is taken into account in
determining whether the rules of this paragraph (f)(5) are met. (The
$250 reward is offered in connection with a participatory wellness
program and therefore is not taken into account.) Accordingly, the
health-contingent wellness program offers a reward that does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage.
(6) Sample language. The following language, or substantially
similar language, can be used to satisfy the notice requirement of
paragraphs (f)(3)(v) or (f)(4)(v) of this section: ``Your health plan
is committed to helping you achieve your best health. Rewards for
participating in a wellness program are available to all employees. If
you think you might be unable to meet a standard for a reward under
this wellness program, you might qualify for an opportunity to earn the
same reward by different means. Contact us at [insert contact
information] and we will work with you (and, if you wish, with your
doctor) to find a wellness program with the same reward that is right
for you in light of your health status.''
* * * * *
0
3. Section 54.9815-2705 is added to read as follows:
Sec. 54.9815-2705 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
(a) In general. A group health plan and a health insurance issuer
offering group health insurance coverage must comply with the
requirements of Sec. 54.9802-1.
(b) Applicability date. This section is applicable to group health
plans and health insurance issuers offering group health insurance
coverage for plan years beginning on or after January 1, 2014.
Department of Labor
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons set forth in the preamble, 29 CFR part 2590 is
amended as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
4. The authority citation for part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Pub. L. 104- 191, 110 Stat. 1936; sec. 401(b),
Pub. L. 105- 200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 12(d),
Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub.
L. 111-148, 124 Stat. 119, as amended by Pub. L. 111- 152, 124 Stat.
1029; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9,
2012).
Subpart B--Health Coverage Portability, Nondiscrimination, and
Renewability
0
5. Section 2590.702 is amended by revising paragraph (f) to read as
follows:
Sec. 2590.702 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
* * * * *
(f) Nondiscriminatory wellness programs--in general. A wellness
program is a program of health promotion or disease prevention.
Paragraphs (b)(2)(ii) and (c)(3) of this section provide exceptions to
the general prohibitions against discrimination based on a health
factor for plan provisions that vary benefits (including cost-sharing
mechanisms) or the premium or contribution for similarly situated
individuals in connection with a wellness program that satisfies the
requirements of this paragraph (f).
(1) Definitions. The definitions in this paragraph (f)(1) govern in
applying the provisions of this paragraph (f).
(i) Reward. Except where expressly provided otherwise, references
in this section to an individual obtaining a reward include both
obtaining a reward (such as a discount or rebate of a premium or
contribution, a waiver of all or part of a cost-sharing mechanism, an
additional benefit, or any financial or other incentive) and avoiding a
penalty (such as the absence of a premium surcharge or other financial
or nonfinancial disincentive). References in this section to a plan
providing a reward include both providing a reward (such as a discount
or rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism, an additional benefit, or any financial or
other incentive) and imposing a penalty (such as a surcharge or other
financial or nonfinancial disincentive).
(ii) Participatory wellness programs. If none of the conditions for
obtaining a reward under a wellness program is based on an individual
satisfying a standard that is related to a health factor (or if a
wellness program does not provide a reward), the wellness program is a
participatory wellness program. Examples of participatory wellness
programs are:
(A) A program that reimburses employees for all or part of the cost
for membership in a fitness center.
(B) A diagnostic testing program that provides a reward for
participation in that program and does not base any part of the reward
on outcomes.
(C) A program that encourages preventive care through the waiver of
the copayment or deductible requirement under a group health plan for
the costs of, for example, prenatal care or well-baby visits. (Note
that, with respect to non-grandfathered plans, Sec. 2590.715-2713 of
this part requires benefits for certain preventive health
[[Page 33182]]
services without the imposition of cost sharing.)
(D) A program that reimburses employees for the costs of
participating, or that otherwise provides a reward for participating,
in a smoking cessation program without regard to whether the employee
quits smoking.
(E) A program that provides a reward to employees for attending a
monthly, no-cost health education seminar.
(F) A program that provides a reward to employees who complete a
health risk assessment regarding current health status, without any
further action (educational or otherwise) required by the employee with
regard to the health issues identified as part of the assessment. (See
also Sec. 2590.702-1 for rules prohibiting collection of genetic
information.)
(iii) Health-contingent wellness programs. A health-contingent
wellness program is a program that requires an individual to satisfy a
standard related to a health factor to obtain a reward (or requires an
individual to undertake more than a similarly situated individual based
on a health factor in order to obtain the same reward). A health-
contingent wellness program may be an activity-only wellness program or
an outcome-based wellness program.
(iv) Activity-only wellness programs. An activity-only wellness
program is a type of health-contingent wellness program that requires
an individual to perform or complete an activity related to a health
factor in order to obtain a reward but does not require the individual
to attain or maintain a specific health outcome. Examples include
walking, diet, or exercise programs, which some individuals may be
unable to participate in or complete (or have difficulty participating
in or completing) due to a health factor, such as severe asthma,
pregnancy, or a recent surgery. See paragraph (f)(3) of this section
for requirements applicable to activity-only wellness programs.
(v) Outcome-based wellness programs. An outcome-based wellness
program is a type of health-contingent wellness program that requires
an individual to attain or maintain a specific health outcome (such as
not smoking or attaining certain results on biometric screenings) in
order to obtain a reward. To comply with the rules of this paragraph
(f), an outcome-based wellness program typically has two tiers. That
is, for individuals who do not attain or maintain the specific health
outcome, compliance with an educational program or an activity may be
offered as an alternative to achieve the same reward. This alternative
pathway, however, does not mean that the overall program, which has an
outcome-based component, is not an outcome-based wellness program. That
is, if a measurement, test, or screening is used as part of an initial
standard and individuals who meet the standard are granted the reward,
the program is considered an outcome-based wellness program. For
example, if a wellness program tests individuals for specified medical
conditions or risk factors (including biometric screening such as
testing for high cholesterol, high blood pressure, abnormal body mass
index, or high glucose level) and provides a reward to individuals
identified as within a normal or healthy range for these medical
conditions or risk factors, while requiring individuals who are
identified as outside the normal or healthy range (or at risk) to take
additional steps (such as meeting with a health coach, taking a health
or fitness course, adhering to a health improvement action plan,
complying with a walking or exercise program, or complying with a
health care provider's plan of care) to obtain the same reward, the
program is an outcome-based wellness program. See paragraph (f)(4) of
this section for requirements applicable to outcome-based wellness
programs.
(2) Requirement for participatory wellness programs. A
participatory wellness program, as described in paragraph (f)(1)(ii) of
this section, does not violate the provisions of this section only if
participation in the program is made available to all similarly
situated individuals, regardless of health status.
(3) Requirements for activity-only wellness programs. A health-
contingent wellness program that is an activity-only wellness program,
as described in paragraph (f)(1)(iv) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the activity-only wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(3)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the activity-only wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(3)(iv), a reward under an activity-
only wellness program is not available to all similarly situated
individuals for a period unless the program meets both of the following
requirements:
(1) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is unreasonably difficult due
to a medical condition to satisfy the otherwise applicable standard;
and
(2) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is medically inadvisable to
attempt to satisfy the otherwise applicable standard.
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in either
paragraph (f)(3)(iv)(A)(1) or (2) of this section, a reasonable
alternative standard must be furnished by the plan or issuer upon the
individual's request or the condition for obtaining the reward must be
waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
[[Page 33183]]
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
activity-only wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of this paragraph (f)(3)
in the same manner as if it were an initial program standard. (Thus,
for example, if a plan or issuer provides a walking program as a
reasonable alternative standard to a running program, individuals for
whom it is unreasonably difficult due to a medical condition to
complete the walking program (or for whom it is medically inadvisable
to attempt to complete the walking program) must be provided a
reasonable alternative standard to the walking program.) To the extent
that a reasonable alternative standard under an activity-only wellness
program is, itself, an outcome-based wellness program, it must comply
with the requirements of paragraph (f)(4) of this section, including
paragraph (f)(4)(iv)(D).
(E) If reasonable under the circumstances, a plan or issuer may
seek verification, such as a statement from an individual's personal
physician, that a health factor makes it unreasonably difficult for the
individual to satisfy, or medically inadvisable for the individual to
attempt to satisfy, the otherwise applicable standard of an activity-
only wellness program. Plans and issuers may seek verification with
respect to requests for a reasonable alternative standard for which it
is reasonable to determine that medical judgment is required to
evaluate the validity of the request.
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an activity-only wellness program the availability of a reasonable
alternative standard to qualify for the reward (and, if applicable, the
possibility of waiver of the otherwise applicable standard), including
contact information for obtaining a reasonable alternative standard and
a statement that recommendations of an individual's personal physician
will be accommodated. If plan materials merely mention that such a
program is available, without describing its terms, this disclosure is
not required. Sample language is provided in paragraph (f)(6) of this
section, as well as in certain examples of this section.
(vi) Example. The provisions of this paragraph (f)(3) are
illustrated by the following example:
Example. (i) Facts. A group health plan provides a reward to
individuals who participate in a reasonable specified walking
program. If it is unreasonably difficult due to a medical condition
for an individual to participate (or if it is medically inadvisable
for an individual to attempt to participate), the plan will waive
the walking program requirement and provide the reward. All
materials describing the terms of the walking program disclose the
availability of the waiver.
(ii) Conclusion. In this Example, the program satisfies the
requirements of paragraph (f)(3)(iii) of this section because the
walking program is reasonably designed to promote health and prevent
disease. The program satisfies the requirements of paragraph
(f)(3)(iv) of this section because the reward under the program is
available to all similarly situated individuals. It accommodates
individuals for whom it is unreasonably difficult to participate in
the walking program due to a medical condition (or for whom it would
be medically inadvisable to attempt to participate) by providing
them with the reward even if they do not participate in the walking
program (that is, by waiving the condition). The plan also complies
with the disclosure requirement of paragraph (f)(3)(v) of this
section. Thus, the plan satisfies paragraphs (f)(3)(iii), (iv), and
(v) of this section.
(4) Requirements for outcome-based wellness programs. A health-
contingent wellness program that is an outcome-based wellness program,
as described in paragraph (f)(1)(v) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the outcome-based wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(4)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances. To ensure that an outcome-based wellness program is
reasonably designed to improve health and does not act as a subterfuge
for underwriting or reducing benefits based on a health factor, a
reasonable alternative standard to qualify for the reward must be
provided to any individual who does not meet the initial standard based
on a measurement, test, or screening that is related to a health
factor, as explained in paragraph (f)(4)(iv) of this section.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the outcome-based wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(4)(iv), a reward under an outcome-
based wellness program is not available to all similarly situated
individuals for a period unless the program allows a
[[Page 33184]]
reasonable alternative standard (or waiver of the otherwise applicable
standard) for obtaining the reward for any individual who does not meet
the initial standard based on the measurement, test, or screening, as
described in this paragraph (f)(4)(iv).
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in
paragraph (f)(4)(iv)(A) of this section, a reasonable alternative
standard must be furnished by the plan or issuer upon the individual's
request or the condition for obtaining the reward must be waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of paragraph (f)(3) of
this section in the same manner as if it were an initial program
standard. To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, another outcome-based
wellness program, it must comply with the requirements of this
paragraph (f)(4), subject to the following special provisions:
(1) The reasonable alternative standard cannot be a requirement to
meet a different level of the same standard without additional time to
comply that takes into account the individual's circumstances. For
example, if the initial standard is to achieve a BMI less than 30, the
reasonable alternative standard cannot be to achieve a BMI less than 31
on that same date. However, if the initial standard is to achieve a BMI
less than 30, a reasonable alternative standard for the individual
could be to reduce the individual's BMI by a small amount or small
percentage, over a realistic period of time, such as within a year.
(2) An individual must be given the opportunity to comply with the
recommendations of the individual's personal physician as a second
reasonable alternative standard to meeting the reasonable alternative
standard defined by the plan or issuer, but only if the physician joins
in the request. The individual can make a request to involve a personal
physician's recommendations at any time and the personal physician can
adjust the physician's recommendations at any time, consistent with
medical appropriateness.
(E) It is not reasonable to seek verification, such as a statement
from an individual's personal physician, under an outcome-based
wellness program that a health factor makes it unreasonably difficult
for the individual to satisfy, or medically inadvisable for the
individual to attempt to satisfy, the otherwise applicable standard as
a condition of providing a reasonable alternative to the initial
standard. However, if a plan or issuer provides an alternative standard
to the otherwise applicable measurement, test, or screening that
involves an activity that is related to a health factor, then the rules
of paragraph (f)(3) of this section for activity-only wellness programs
apply to that component of the wellness program and the plan or issuer
may, if reasonable under the circumstances, seek verification that it
is unreasonably difficult due to a medical condition for an individual
to perform or complete the activity (or it is medically inadvisable to
attempt to perform or complete the activity). (For example, if an
outcome-based wellness program requires participants to maintain a
certain healthy weight and provides a diet and exercise program for
individuals who do not meet the targeted weight, a plan or issuer may
seek verification, as described in paragraph (f)(3)(iv)(D) of this
section, if reasonable under the circumstances, that a second
reasonable alternative standard is needed for certain individuals
because, for those individuals, it would be unreasonably difficult due
to a medical condition to comply, or medically inadvisable to attempt
to comply, with the diet and exercise program, due to a medical
condition.)
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an outcome-based wellness program, and in any disclosure that an
individual did not satisfy an initial outcome-based standard, the
availability of a reasonable alternative standard to qualify for the
reward (and, if applicable, the possibility of waiver of the otherwise
applicable standard), including contact information for obtaining a
reasonable alternative standard and a statement that recommendations of
an individual's personal physician will be accommodated. If plan
materials merely mention that such a program is available, without
describing its terms, this disclosure is not required. Sample language
is provided in paragraph (f)(6) of this section, as well as in certain
examples of this section.
(vi) Examples. The provisions of this paragraph (f)(4) are
illustrated by the following examples:
Example 1--Cholesterol screening with reasonable alternative
standard to work with personal physician. (i) Facts. A group health
plan offers a reward to participants who achieve a count under 200
on a total cholesterol test. If a participant does not achieve the
targeted cholesterol count, the plan allows the participant to
develop an alternative cholesterol action plan in conjunction with
the participant's personal physician that may include
recommendations for medication and additional screening. The plan
allows the physician to modify the standards, as medically
necessary, over the year. (For example, if a participant develops
asthma or depression, requires surgery and convalescence, or some
other medical condition or consideration makes completion of the
original action plan inadvisable or unreasonably difficult, the
physician may modify the original action plan.) All plan materials
describing the terms of the program include the following statement:
``Your health plan wants to help you take charge of your health.
Rewards are available to all employees who participate in our
Cholesterol Awareness Wellness Program. If your total cholesterol
count is under 200, you will receive the reward. If not, you will
still have an opportunity to qualify for the reward. We will work
with you and your doctor to find a Health Smart program that is
right for you.'' In addition, when any individual participant
[[Page 33185]]
receives notification that his or her cholesterol count is 200 or
higher, the notification includes the following statement: ``Your
plan offers a Health Smart program under which we will work with you
and your doctor to try to lower your cholesterol. If you complete
this program, you will qualify for a reward. Please contact us at
[contact information] to get started.''
(ii) Conclusion. In this Example 1, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain cholesterol level) to obtain a reward. The program satisfies
the requirements of paragraph (f)(4)(iii) of this section because
the cholesterol program is reasonably designed to promote health and
prevent disease. The program satisfies the requirements of paragraph
(f)(4)(iv) of this section because it makes available to all
participants who do not meet the cholesterol standard a reasonable
alternative standard to qualify for the reward. Lastly, the plan
also discloses in all materials describing the terms of the program
and in any disclosure that an individual did not satisfy the initial
outcome-based standard the availability of a reasonable alternative
standard (including contact information and the individual's ability
to involve his or her personal physician), as required by paragraph
(f)(4)(v) of this section. Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 2--Cholesterol screening with plan alternative and no
opportunity for personal physician involvement. (i) Facts. Same
facts as Example 1, except that the wellness program's physician or
nurse practitioner (rather than the individual's personal physician)
determines the alternative cholesterol action plan. The plan does
not provide an opportunity for a participant's personal physician to
modify the action plan if it is not medically appropriate for that
individual.
(ii) Conclusion. In this Example 2, the wellness program does
not satisfy the requirements of paragraph (f)(4)(iii) of this
section because the program does not accommodate the recommendations
of the participant's personal physician with regard to medical
appropriateness, as required under paragraph (f)(4)(iv)(C)(3) of
this section. Thus, the program is not reasonably designed under
paragraph (f)(4)(iii) of this section and is not available to all
similarly situated individuals under paragraph (f)(4)(iv) of this
section. The notice also does not provide all the content required
under paragraph (f)(4)(v) of this section.
Example 3--Cholesterol screening with plan alternative that can
be modified by personal physician. (i) Facts. Same facts as Example
2, except that if a participant's personal physician disagrees with
any part of the action plan, the personal physician may modify the
action plan at any time, and the plan discloses this to
participants.
(ii) Conclusion. In this Example 3, the wellness program
satisfies the requirements of paragraph (f)(4)(iii) of this section
because the participant's personal physician may modify the action
plan determined by the wellness program's physician or nurse
practitioner at any time if the physician states that the
recommendations are not medically appropriate, as required under
paragraph (f)(4)(iv)(C)(3) of this section. Thus, the program is
reasonably designed under paragraph (f)(4)(iii) of this section and
is available to all similarly situated individuals under paragraph
(f)(4)(iv) of this section. The notice, which includes a statement
that recommendations of an individual's personal physician will be
accommodated, also complies with paragraph (f)(4)(v) of this
section.
Example 4--BMI screening with walking program alternative. (i)
Facts. A group health plan will provide a reward to participants who
have a body mass index (BMI) that is 26 or lower, determined shortly
before the beginning of the year. Any participant who does not meet
the target BMI is given the same discount if the participant
complies with an exercise program that consists of walking 150
minutes a week. Any participant for whom it is unreasonably
difficult due to a medical condition to comply with this walking
program (and any participant for whom it is medically inadvisable to
attempt to comply with the walking program) during the year is given
the same discount if the participant satisfies an alternative
standard that is reasonable taking into consideration the
participant's medical situation, is not unreasonably burdensome or
impractical to comply with, and is otherwise reasonably designed
based on all the relevant facts and circumstances. All plan
materials describing the terms of the wellness program include the
following statement: ``Fitness is Easy! Start Walking! Your health
plan cares about your health. If you are considered overweight
because you have a BMI of over 26, our Start Walking program will
help you lose weight and feel better. We will help you enroll. (**If
your doctor says that walking isn't right for you, that's okay too.
We will work with you (and, if you wish, your own doctor) to develop
a wellness program that is.)'' Participant E is unable to achieve a
BMI that is 26 or lower within the plan's timeframe and receives
notification that complies with paragraph (f)(4)(v) of this section.
Nevertheless, it is unreasonably difficult due to a medical
condition for E to comply with the walking program. E proposes a
program based on the recommendations of E's physician. The plan
agrees to make the same discount available to E that is available to
other participants in the BMI program or the alternative walking
program, but only if E actually follows the physician's
recommendations.
(ii) Conclusion. In this Example 4, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain BMI level) to obtain a reward. The program satisfies the
requirements of paragraph (f)(4)(iii) of this section because it is
reasonably designed to promote health and prevent disease. The
program also satisfies the requirements of paragraph (f)(4)(iv) of
this section because it makes available to all individuals who do
not satisfy the BMI standard a reasonable alternative standard to
qualify for the reward (in this case, a walking program that is not
unreasonably burdensome or impractical for individuals to comply
with and that is otherwise reasonably designed based on all the
relevant facts and circumstances). In addition, the walking program
is, itself, an activity-only standard and the plan complies with the
requirements of paragraph (f)(3) of this section (including the
requirement of paragraph (f)(3)(iv) that, if there are individuals
for whom it is unreasonably difficult due to a medical condition to
comply, or for whom it is medically inadvisable to attempt to
comply, with the walking program, the plan provide a reasonable
alternative to those individuals). Moreover, the plan satisfies the
requirements of paragraph (f)(4)(v) of this section because it
discloses, in all materials describing the terms of the program and
in any disclosure that an individual did not satisfy the initial
outcome-based standard, the availability of a reasonable alternative
standard (including contact information and the individual's option
to involve his or her personal physician) to qualify for the reward
or the possibility of waiver of the otherwise applicable standard.
Thus, the program satisfies the requirements of paragraphs
(f)(4)(iii), (iv), and (v) of this section.
Example 5--BMI screening with alternatives available to either
lower BMI or meet personal physician's recommendations. (i) Facts.
Same facts as Example 4 except that, with respect to any participant
who does not meet the target BMI, instead of a walking program, the
participant is expected to reduce BMI by one point. At any point
during the year upon request, any individual can obtain a second
reasonable alternative standard, which is compliance with the
recommendations of the participant's personal physician regarding
weight, diet, and exercise as set forth in a treatment plan that the
physician recommends or to which the physician agrees. The
participant's personal physician is permitted to change or adjust
the treatment plan at any time and the option of following the
participant's personal physician's recommendations is clearly
disclosed.
(ii) Conclusion. In this Example 5, the reasonable alternative
standard to qualify for the reward (the alternative BMI standard
requiring a one-point reduction) does not make the program
unreasonable under paragraph (f)(4)(iii) or (iv) of this section
because the program complies with paragraph (f)(4)(iv)(C)(4) of this
section by allowing a second reasonable alternative standard to
qualify for the reward (compliance with the recommendations of the
participant's personal physician, which can be changed or adjusted
at any time). Accordingly, the program continues to satisfy the
applicable requirements of paragraph (f) of this section.
Example 6--Tobacco use surcharge with smoking cessation program
alternative. (i) Facts. In conjunction with an annual open
enrollment period, a group health plan provides a premium
differential based on tobacco use, determined using a health risk
assessment. The following statement is included in all plan
materials describing the tobacco premium differential: ``Stop
smoking today! We can help! If you are a smoker, we
[[Page 33186]]
offer a smoking cessation program. If you complete the program, you
can avoid this surcharge.'' The plan accommodates participants who
smoke by facilitating their enrollment in a smoking cessation
program that requires participation at a time and place that are not
unreasonably burdensome or impractical for participants, and that is
otherwise reasonably designed based on all the relevant facts and
circumstances, and discloses contact information and the
individual's option to involve his or her personal physician. The
plan pays for the cost of participation in the smoking cessation
program. Any participant can avoid the surcharge for the plan year
by participating in the program, regardless of whether the
participant stops smoking, but the plan can require a participant
who wants to avoid the surcharge in a subsequent year to complete
the smoking cessation program again.
(ii) Conclusion. In this Example 6, the premium differential
satisfies the requirements of paragraphs (f)(4)(iii), (iv), and (v).
The program is an outcome-based wellness program because the initial
standard for obtaining a reward is dependent on the results of a
health risk assessment (a measurement, test, or screening). The
program is reasonably designed under paragraph (f)(4)(iii) because
the plan provides a reasonable alternative standard (as required
under paragraph (f)(4)(iv) of this section) to qualify for the
reward to all tobacco users (a smoking cessation program). The plan
discloses, in all materials describing the terms of the program, the
availability of the reasonable alternative standard (including
contact information and the individual's option to involve his or
her personal physician). Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 7--Tobacco use surcharge with alternative program
requiring actual cessation. (i) Facts. Same facts as Example 6,
except the plan does not provide participant F with the reward in
subsequent years unless F actually stops smoking after participating
in the tobacco cessation program.
(ii) Conclusion. In this Example 7, the program is not
reasonably designed under paragraph (f)(4)(iii) of this section and
does not provide a reasonable alternative standard as required under
paragraph (f)(4)(iv) of this section. The plan cannot cease to
provide a reasonable alternative standard merely because the
participant did not stop smoking after participating in a smoking
cessation program. The plan must continue to offer a reasonable
alternative standard whether it is the same or different (such as a
new recommendation from F's personal physician or a new nicotine
replacement therapy).
Example 8--Tobacco use surcharge with smoking cessation program
alternative that is not reasonable. (i) Facts. Same facts as Example
6, except the plan does not facilitate participant F's enrollment in
a smoking cessation program. Instead the plan advises F to find a
program, pay for it, and provide a certificate of completion to the
plan.
(ii) Conclusion. In this Example 8, the requirement for F to
find and pay for F's own smoking cessation program means that the
alternative program is not reasonable. Accordingly, the plan has not
offered a reasonable alternative standard that complies with
paragraphs (f)(4)(iii) and (iv) of this section and the program
fails to satisfy the requirements of paragraph (f) of this section.
(5) Applicable percentage--(i) For purposes of this paragraph (f),
the applicable percentage is 30 percent, except that the applicable
percentage is increased by an additional 20 percentage points (to 50
percent) to the extent that the additional percentage is in connection
with a program designed to prevent or reduce tobacco use.
(ii) The rules of this paragraph (f)(5) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan.
The annual premium for employee-only coverage is $6,000 (of which
the employer pays $4,500 per year and the employee pays $1,500 per
year). The plan offers employees a health-contingent wellness
program with several components, focused on exercise, blood sugar,
weight, cholesterol, and blood pressure. The reward for compliance
is an annual premium rebate of $600.
(ii) Conclusion. In this Example 1, the reward for the wellness
program, $600, does not exceed the applicable percentage of 30
percent of the total annual cost of employee-only coverage, $1,800.
($6,000 x 30% = $1,800.)
Example 2. (i) Facts. Same facts as Example 1, except the
wellness program is exclusively a tobacco prevention program.
Employees who have used tobacco in the last 12 months and who are
not enrolled in the plan's tobacco cessation program are charged a
$1,000 premium surcharge (in addition to their employee contribution
towards the coverage). (Those who participate in the plan's tobacco
cessation program are not assessed the $1,000 surcharge.)
(ii) Conclusion. In this Example 2, the reward for the wellness
program (absence of a $1,000 surcharge), does not exceed the
applicable percentage of 50 percent of the total annual cost of
employee-only coverage, $3,000. ($6,000 x 50% = $3,000.)
Example 3. (i) Facts. Same facts as Example 1, except that, in
addition to the $600 reward for compliance with the health-
contingent wellness program, the plan also imposes an additional
$2,000 tobacco premium surcharge on employees who have used tobacco
in the last 12 months and who are not enrolled in the plan's tobacco
cessation program. (Those who participate in the plan's tobacco
cessation program are not assessed the $2,000 surcharge.)
(ii) Conclusion. In this Example 3, the total of all rewards
(including absence of a surcharge for participating in the tobacco
program) is $2,600 ($600 + $2,000 = $2,600), which does not exceed
the applicable percentage of 50 percent of the total annual cost of
employee-only coverage ($3,000); and, tested separately, the $600
reward for the wellness program unrelated to tobacco use does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage ($1,800).
Example 4. (i) Facts. An employer sponsors a group health plan.
The total annual premium for employee-only coverage (including both
employer and employee contributions towards the coverage) is $5,000.
The plan provides a $250 reward to employees who complete a health
risk assessment, without regard to the health issues identified as
part of the assessment. The plan also offers a Healthy Heart
program, which is a health-contingent wellness program, with an
opportunity to earn a $1,500 reward.
(ii) Conclusion. In this Example 4, even though the total reward
for all wellness programs under the plan is $1,750 ($250 + $1,500 =
$1,750, which exceeds the applicable percentage of 30 percent of the
cost of the annual premium for employee-only coverage ($5,000 x 30%
= $1,500)), only the reward offered for compliance with the health-
contingent wellness program ($1,500) is taken into account in
determining whether the rules of this paragraph (f)(5) are met. (The
$250 reward is offered in connection with a participatory wellness
program and therefore is not taken into account.) Accordingly, the
health-contingent wellness program offers a reward that does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage.
(6) Sample language. The following language, or substantially
similar language, can be used to satisfy the notice requirement of
paragraphs (f)(3)(v) or (f)(4)(v) of this section: ``Your health plan
is committed to helping you achieve your best health. Rewards for
participating in a wellness program are available to all employees. If
you think you might be unable to meet a standard for a reward under
this wellness program, you might qualify for an opportunity to earn the
same reward by different means. Contact us at [insert contact
information] and we will work with you (and, if you wish, with your
doctor) to find a wellness program with the same reward that is right
for you in light of your health status.''
* * * * *
Subpart C--Other Requirements
0
6. Section 2590.715-2705 is added to read as follows:
Sec. 2590.715-2705 Prohibiting discrimination against participants
and beneficiaries based on a health factor.
(a) In general. A group health plan and a health insurance issuer
offering group health insurance coverage must comply with the
requirements of Sec. 2590.702 of this part.
(b) Applicability date. This section is applicable to group health
plans and health insurance issuers offering group health insurance
coverage for plan years beginning on or after January 1, 2014.
[[Page 33187]]
Department of Health and Human Services
45 CFR Subtitle A
For the reasons stated in the preamble, the Department of Health
and Human Services amends 45 CFR Parts 146 and 147 as follows:
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
7. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791,
and 2792 of the Public Health Service Act (42 U.S.C. 300gg-1 through
300gg-5, 300gg-11 through 300gg-23, 300gg-91, and 300gg-92) (1996).
Section 146.121 is also issued under secs. 2701 through 2763,
2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, and 300gg-92), as amended (2010).
0
8. In Sec. 146.121, paragraph (f) is revised to read as follows:
Sec. 146.121 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
* * * * *
(f) Nondiscriminatory wellness programs--in general. A wellness
program is a program of health promotion or disease prevention.
Paragraphs (b)(2)(ii) and (c)(3) of this section provide exceptions to
the general prohibitions against discrimination based on a health
factor for plan provisions that vary benefits (including cost-sharing
mechanisms) or the premium or contribution for similarly situated
individuals in connection with a wellness program that satisfies the
requirements of this paragraph (f).
(1) Definitions. The definitions in this paragraph (f)(1) govern in
applying the provisions of this paragraph (f).
(i) Reward. Except where expressly provided otherwise, references
in this section to an individual obtaining a reward include both
obtaining a reward (such as a discount or rebate of a premium or
contribution, a waiver of all or part of a cost-sharing mechanism, an
additional benefit, or any financial or other incentive) and avoiding a
penalty (such as the absence of a premium surcharge or other financial
or nonfinancial disincentive). References in this section to a plan
providing a reward include both providing a reward (such as a discount
or rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism, an additional benefit, or any financial or
other incentive) and imposing a penalty (such as a surcharge or other
financial or nonfinancial disincentive).
(ii) Participatory wellness programs. If none of the conditions for
obtaining a reward under a wellness program is based on an individual
satisfying a standard that is related to a health factor (or if a
wellness program does not provide a reward), the wellness program is a
participatory wellness program. Examples of participatory wellness
programs are:
(A) A program that reimburses employees for all or part of the cost
for membership in a fitness center.
(B) A diagnostic testing program that provides a reward for
participation in that program and does not base any part of the reward
on outcomes.
(C) A program that encourages preventive care through the waiver of
the copayment or deductible requirement under a group health plan for
the costs of, for example, prenatal care or well-baby visits. (Note
that, with respect to non-grandfathered plans, Sec. 147.130 of this
subchapter requires benefits for certain preventive health services
without the imposition of cost sharing.)
(D) A program that reimburses employees for the costs of
participating, or that otherwise provides a reward for participating,
in a smoking cessation program without regard to whether the employee
quits smoking.
(E) A program that provides a reward to employees for attending a
monthly, no-cost health education seminar.
(F) A program that provides a reward to employees who complete a
health risk assessment regarding current health status, without any
further action (educational or otherwise) required by the employee with
regard to the health issues identified as part of the assessment. (See
also Sec. 146.122 for rules prohibiting collection of genetic
information.)
(iii) Health-contingent wellness programs. A health-contingent
wellness program is a program that requires an individual to satisfy a
standard related to a health factor to obtain a reward (or requires an
individual to undertake more than a similarly situated individual based
on a health factor in order to obtain the same reward). A health-
contingent wellness program may be an activity-only wellness program or
an outcome-based wellness program.
(iv) Activity-only wellness programs. An activity-only wellness
program is a type of health-contingent wellness program that requires
an individual to perform or complete an activity related to a health
factor in order to obtain a reward but does not require the individual
to attain or maintain a specific health outcome. Examples include
walking, diet, or exercise programs, which some individuals may be
unable to participate in or complete (or have difficulty participating
in or completing) due to a health factor, such as severe asthma,
pregnancy, or a recent surgery. See paragraph (f)(3) of this section
for requirements applicable to activity-only wellness programs.
(v) Outcome-based wellness programs. An outcome-based wellness
program is a type of health-contingent wellness program that requires
an individual to attain or maintain a specific health outcome (such as
not smoking or attaining certain results on biometric screenings) in
order to obtain a reward. To comply with the rules of this paragraph
(f), an outcome-based wellness program typically has two tiers. That
is, for individuals who do not attain or maintain the specific health
outcome, compliance with an educational program or an activity may be
offered as an alternative to achieve the same reward. This alternative
pathway, however, does not mean that the overall program, which has an
outcome-based component, is not an outcome-based wellness program. That
is, if a measurement, test, or screening is used as part of an initial
standard and individuals who meet the standard are granted the reward,
the program is considered an outcome-based wellness program. For
example, if a wellness program tests individuals for specified medical
conditions or risk factors (including biometric screening such as
testing for high cholesterol, high blood pressure, abnormal body mass
index, or high glucose level) and provides a reward to individuals
identified as within a normal or healthy range for these medical
conditions or risk factors, while requiring individuals who are
identified as outside the normal or healthy range (or at risk) to take
additional steps (such as meeting with a health coach, taking a health
or fitness course, adhering to a health improvement action plan,
complying with a walking or exercise program, or complying with a
health care provider's plan of care) to obtain the same reward, the
program is an outcome-based wellness program. See paragraph (f)(4) of
this section for requirements applicable to outcome-based wellness
programs.
(2) Requirement for participatory wellness programs. A
participatory wellness program, as described in paragraph (f)(1)(ii) of
this section, does not violate the provisions of this section only if
participation in the program is
[[Page 33188]]
made available to all similarly situated individuals, regardless of
health status.
(3) Requirements for activity-only wellness programs. A health-
contingent wellness program that is an activity-only wellness program,
as described in paragraph (f)(1)(iv) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the activity-only wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(3)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the activity-only wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(3)(iv), a reward under an activity-
only wellness program is not available to all similarly situated
individuals for a period unless the program meets both of the following
requirements:
(1) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is unreasonably difficult due
to a medical condition to satisfy the otherwise applicable standard;
and
(2) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is medically inadvisable to
attempt to satisfy the otherwise applicable standard.
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in either
paragraph (f)(3)(iv)(A)(1) or (2) of this section, a reasonable
alternative standard must be furnished by the plan or issuer upon the
individual's request or the condition for obtaining the reward must be
waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
activity-only wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of this paragraph (f)(3)
in the same manner as if it were an initial program standard. (Thus,
for example, if a plan or issuer provides a walking program as a
reasonable alternative standard to a running program, individuals for
whom it is unreasonably difficult due to a medical condition to
complete the walking program (or for whom it is medically inadvisable
to attempt to complete the walking program) must be provided a
reasonable alternative standard to the walking program.) To the extent
that a reasonable alternative standard under an activity-only wellness
program is, itself, an outcome-based wellness program, it must comply
with the requirements of paragraph (f)(4) of this section, including
paragraph (f)(4)(iv)(D).
(E) If reasonable under the circumstances, a plan or issuer may
seek verification, such as a statement from an individual's personal
physician, that a health factor makes it unreasonably difficult for the
individual to satisfy, or medically inadvisable for the individual to
attempt to satisfy, the otherwise applicable standard of an activity-
only wellness program. Plans and issuers may seek verification with
respect to requests for a reasonable alternative standard for which it
is reasonable to determine that medical judgment is required to
evaluate the validity of the request.
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an activity-only wellness program the availability of a reasonable
alternative standard to qualify for the reward (and, if applicable, the
possibility of waiver of the otherwise applicable standard), including
contact information for obtaining a reasonable alternative standard and
a statement that recommendations of an individual's personal physician
will be accommodated. If plan materials merely mention that such a
program is available, without describing its terms, this disclosure is
not required. Sample language is provided in paragraph (f)(6) of this
section, as well as in certain examples of this section.
(vi) Example. The provisions of this paragraph (f)(3) are
illustrated by the following example:
Example. (i) Facts. A group health plan provides a reward to
individuals who participate in a reasonable specified walking
program. If it is unreasonably difficult due to a medical condition
for an individual to participate (or if it is medically inadvisable
for an individual to attempt to participate), the plan will waive
the walking program requirement and provide the reward. All
[[Page 33189]]
materials describing the terms of the walking program disclose the
availability of the waiver.
(ii) Conclusion. In this Example, the program satisfies the
requirements of paragraph (f)(3)(iii) of this section because the
walking program is reasonably designed to promote health and prevent
disease. The program satisfies the requirements of paragraph
(f)(3)(iv) of this section because the reward under the program is
available to all similarly situated individuals. It accommodates
individuals for whom it is unreasonably difficult to participate in
the walking program due to a medical condition (or for whom it would
be medically inadvisable to attempt to participate) by providing
them with the reward even if they do not participate in the walking
program (that is, by waiving the condition). The plan also complies
with the disclosure requirement of paragraph (f)(3)(v) of this
section. Thus, the plan satisfies paragraphs (f)(3)(iii), (iv), and
(v) of this section.
(4) Requirements for outcome-based wellness programs. A health-
contingent wellness program that is an outcome-based wellness program,
as described in paragraph (f)(1)(v) of this section, does not violate
the provisions of this section only if all of the following
requirements are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the outcome-based wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the
total cost of employee-only coverage under the plan. However, if, in
addition to employees, any class of dependents (such as spouses, or
spouses and dependent children) may participate in the wellness
program, the reward must not exceed the applicable percentage of the
total cost of the coverage in which an employee and any dependents are
enrolled. For purposes of this paragraph (f)(4)(ii), the cost of
coverage is determined based on the total amount of employer and
employee contributions towards the cost of coverage for the benefit
package under which the employee is (or the employee and any dependents
are) receiving coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances. To ensure that an outcome-based wellness program is
reasonably designed to improve health and does not act as a subterfuge
for underwriting or reducing benefits based on a health factor, a
reasonable alternative standard to qualify for the reward must be
provided to any individual who does not meet the initial standard based
on a measurement, test, or screening that is related to a health
factor, as explained in paragraph (f)(4)(iv) of this section.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the outcome-based wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(4)(iv), a reward under an outcome-
based wellness program is not available to all similarly situated
individuals for a period unless the program allows a reasonable
alternative standard (or waiver of the otherwise applicable standard)
for obtaining the reward for any individual who does not meet the
initial standard based on the measurement, test, or screening, as
described in this paragraph (f)(4)(iv).
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an
individual's request for one, if an individual is described in
paragraph (f)(4)(iv)(A) of this section, a reasonable alternative
standard must be furnished by the plan or issuer upon the individual's
request or the condition for obtaining the reward must be waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be
unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of paragraph (f)(3) of
this section in the same manner as if it were an initial program
standard. To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, another outcome-based
wellness program, it must comply with the requirements of this
paragraph (f)(4), subject to the following special rules:
(1) The reasonable alternative standard cannot be a requirement to
meet a different level of the same standard without additional time to
comply that takes into account the individual's circumstances. For
example, if the initial standard is to achieve a BMI less than 30, the
reasonable alternative standard cannot be to achieve a BMI less than 31
on that same date. However, if the initial standard is to achieve a BMI
less than 30, a reasonable alternative standard for the individual
could be to reduce the individual's BMI by a small amount or small
percentage, over a realistic period of time, such as within a year.
(2) An individual must be given the opportunity to comply with the
recommendations of the individual's personal physician as a second
reasonable alternative standard to meeting the reasonable alternative
standard defined by the plan or issuer, but only if the physician joins
in the request. The individual can make a request to involve a personal
physician's recommendations at any time and the personal physician can
adjust the physician's recommendations at any time, consistent with
medical appropriateness.
(E) It is not reasonable to seek verification, such as a statement
from an individual's personal physician, under an outcome-based
wellness program that a health factor makes it
[[Page 33190]]
unreasonably difficult for the individual to satisfy, or medically
inadvisable for the individual to attempt to satisfy, the otherwise
applicable standard as a condition of providing a reasonable
alternative to the initial standard. However, if a plan or issuer
provides an alternative standard to the otherwise applicable
measurement, test, or screening that involves an activity that is
related to a health factor, then the rules of paragraph (f)(3) of this
section for activity-only wellness programs apply to that component of
the wellness program and the plan or issuer may, if reasonable under
the circumstances, seek verification that it is unreasonably difficult
due to a medical condition for an individual to perform or complete the
activity (or it is medically inadvisable to attempt to perform or
complete the activity). (For example, if an outcome-based wellness
program requires participants to maintain a certain healthy weight and
provides a diet and exercise program for individuals who do not meet
the targeted weight, a plan or issuer may seek verification, as
described in paragraph (f)(3)(iv)(D) of this section, if reasonable
under the circumstances, that a second reasonable alternative standard
is needed for certain individuals because, for those individuals, it
would be unreasonably difficult due to a medical condition to comply,
or medically inadvisable to attempt to comply, with the diet and
exercise program, due to a medical condition.)
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an outcome-based wellness program, and in any disclosure that an
individual did not satisfy an initial outcome-based standard, the
availability of a reasonable alternative standard to qualify for the
reward (and, if applicable, the possibility of waiver of the otherwise
applicable standard), including contact information for obtaining a
reasonable alternative standard and a statement that recommendations of
an individual's personal physician will be accommodated. If plan
materials merely mention that such a program is available, without
describing its terms, this disclosure is not required. Sample language
is provided in paragraph (f)(6) of this section, as well as in certain
examples of this section.
(vi) Examples. The provisions of this paragraph (f)(4) are
illustrated by the following examples:
Example 1--Cholesterol screening with reasonable alternative
standard to work with personal physician. (i) Facts. A group health
plan offers a reward to participants who achieve a count under 200
on a total cholesterol test. If a participant does not achieve the
targeted cholesterol count, the plan allows the participant to
develop an alternative cholesterol action plan in conjunction with
the participant's personal physician that may include
recommendations for medication and additional screening. The plan
allows the physician to modify the standards, as medically
necessary, over the year. (For example, if a participant develops
asthma or depression, requires surgery and convalescence, or some
other medical condition or consideration makes completion of the
original action plan inadvisable or unreasonably difficult, the
physician may modify the original action plan.) All plan materials
describing the terms of the program include the following statement:
``Your health plan wants to help you take charge of your health.
Rewards are available to all employees who participate in our
Cholesterol Awareness Wellness Program. If your total cholesterol
count is under 200, you will receive the reward. If not, you will
still have an opportunity to qualify for the reward. We will work
with you and your doctor to find a Health Smart program that is
right for you.'' In addition, when any individual participant
receives notification that his or her cholesterol count is 200 or
higher, the notification includes the following statement: ``Your
plan offers a Health Smart program under which we will work with you
and your doctor to try to lower your cholesterol. If you complete
this program, you will qualify for a reward. Please contact us at
[contact information] to get started.''
(ii) Conclusion. In this Example 1, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain cholesterol level) to obtain a reward. The program satisfies
the requirements of paragraph (f)(4)(iii) of this section because
the cholesterol program is reasonably designed to promote health and
prevent disease. The program satisfies the requirements of paragraph
(f)(4)(iv) of this section because it makes available to all
participants who do not meet the cholesterol standard a reasonable
alternative standard to qualify for the reward. Lastly, the plan
also discloses in all materials describing the terms of the program
and in any disclosure that an individual did not satisfy the initial
outcome-based standard the availability of a reasonable alternative
standard (including contact information and the individual's ability
to involve his or her personal physician), as required by paragraph
(f)(4)(v) of this section. Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 2--Cholesterol screening with plan alternative and no
opportunity for personal physician involvement. (i) Facts. Same
facts as Example 1, except that the wellness program's physician or
nurse practitioner (rather than the individual's personal physician)
determines the alternative cholesterol action plan. The plan does
not provide an opportunity for a participant's personal physician to
modify the action plan if it is not medically appropriate for that
individual.
(ii) Conclusion. In this Example 2, the wellness program does
not satisfy the requirements of paragraph (f)(4)(iii) of this
section because the program does not accommodate the recommendations
of the participant's personal physician with regard to medical
appropriateness, as required under paragraph (f)(4)(iv)(C)(3) of
this section. Thus, the program is not reasonably designed under
paragraph (f)(4)(iii) of this section and is not available to all
similarly situated individuals under paragraph (f)(4)(iv) of this
section. The notice also does not provide all the content required
under paragraph (f)(4)(v) of this section.
Example 3--Cholesterol screening with plan alternative that can
be modified by personal physician. (i) Facts. Same facts as Example
2, except that if a participant's personal physician disagrees with
any part of the action plan, the personal physician may modify the
action plan at any time, and the plan discloses this to
participants.
(ii) Conclusion. In this Example 3, the wellness program
satisfies the requirements of paragraph (f)(4)(iii) of this section
because the participant's personal physician may modify the action
plan determined by the wellness program's physician or nurse
practitioner at any time if the physician states that the
recommendations are not medically appropriate, as required under
paragraph (f)(4)(iv)(C)(3) of this section. Thus, the program is
reasonably designed under paragraph (f)(4)(iii) of this section and
is available to all similarly situated individuals under paragraph
(f)(4)(iv) of this section. The notice, which includes a statement
that recommendations of an individual's personal physician will be
accommodated, also complies with paragraph (f)(4)(v) of this
section.
Example 4--BMI screening with walking program alternative. (i)
Facts. A group health plan will provide a reward to participants who
have a body mass index (BMI) that is 26 or lower, determined shortly
before the beginning of the year. Any participant who does not meet
the target BMI is given the same discount if the participant
complies with an exercise program that consists of walking 150
minutes a week. Any participant for whom it is unreasonably
difficult due to a medical condition to comply with this walking
program (and any participant for whom it is medically inadvisable to
attempt to comply with the walking program) during the year is given
the same discount if the participant satisfies an alternative
standard that is reasonable taking into consideration the
participant's medical situation, is not unreasonably burdensome or
impractical to comply with, and is otherwise reasonably designed
based on all the relevant facts and circumstances. All plan
materials describing the terms of the wellness program include the
following statement: ``Fitness is Easy! Start Walking! Your health
plan cares about your health. If you are considered overweight
because you have a BMI of over 26, our Start Walking program will
help you lose weight and feel better. We will help you enroll. (**If
your doctor says that walking
[[Page 33191]]
isn't right for you, that's okay too. We will work with you (and, if
you wish, your own doctor) to develop a wellness program that is.)''
Participant E is unable to achieve a BMI that is 26 or lower within
the plan's timeframe and receives notification that complies with
paragraph (f)(4)(v) of this section. Nevertheless, it is
unreasonably difficult due to a medical condition for E to comply
with the walking program. E proposes a program based on the
recommendations of E's physician. The plan agrees to make the same
discount available to E that is available to other participants in
the BMI program or the alternative walking program, but only if E
actually follows the physician's recommendations.
(ii) Conclusion. In this Example 4, the program is an outcome-
based wellness program because the initial standard requires an
individual to attain or maintain a specific health outcome (a
certain BMI level) to obtain a reward. The program satisfies the
requirements of paragraph (f)(4)(iii) of this section because it is
reasonably designed to promote health and prevent disease. The
program also satisfies the requirements of paragraph (f)(4)(iv) of
this section because it makes available to all individuals who do
not satisfy the BMI standard a reasonable alternative standard to
qualify for the reward (in this case, a walking program that is not
unreasonably burdensome or impractical for individuals to comply
with and that is otherwise reasonably designed based on all the
relevant facts and circumstances). In addition, the walking program
is, itself, an activity-only standard and the plan complies with the
requirements of paragraph (f)(3) of this section (including the
requirement of paragraph (f)(3)(iv) that, if there are individuals
for whom it is unreasonably difficult due to a medical condition to
comply, or for whom it is medically inadvisable to attempt to
comply, with the walking program, the plan provide a reasonable
alternative to those individuals). Moreover, the plan satisfies the
requirements of paragraph (f)(4)(v) of this section because it
discloses, in all materials describing the terms of the program and
in any disclosure that an individual did not satisfy the initial
outcome-based standard, the availability of a reasonable alternative
standard (including contact information and the individual's option
to involve his or her personal physician) to qualify for the reward
or the possibility of waiver of the otherwise applicable standard.
Thus, the program satisfies the requirements of paragraphs
(f)(4)(iii), (iv), and (v) of this section.
Example 5--BMI screening with alternatives available to either
lower BMI or meet personal physician's recommendations. (i) Facts.
Same facts as Example 4 except that, with respect to any participant
who does not meet the target BMI, instead of a walking program, the
participant is expected to reduce BMI by one point. At any point
during the year upon request, any individual can obtain a second
reasonable alternative standard, which is compliance with the
recommendations of the participant's personal physician regarding
weight, diet, and exercise as set forth in a treatment plan that the
physician recommends or to which the physician agrees. The
participant's personal physician is permitted to change or adjust
the treatment plan at any time and the option of following the
participant's personal physician's recommendations is clearly
disclosed.
(ii) Conclusion. In this Example 5, the reasonable alternative
standard to qualify for the reward (the alternative BMI standard
requiring a one-point reduction) does not make the program
unreasonable under paragraph (f)(4)(iii) or (iv) of this section
because the program complies with paragraph (f)(4)(iv)(C)(4) of this
section by allowing a second reasonable alternative standard to
qualify for the reward (compliance with the recommendations of the
participant's personal physician, which can be changed or adjusted
at any time). Accordingly, the program continues to satisfy the
applicable requirements of paragraph (f) of this section.
Example 6--Tobacco use surcharge with smoking cessation program
alternative. (i) Facts. In conjunction with an annual open
enrollment period, a group health plan provides a premium
differential based on tobacco use, determined using a health risk
assessment. The following statement is included in all plan
materials describing the tobacco premium differential: ``Stop
smoking today! We can help! If you are a smoker, we offer a smoking
cessation program. If you complete the program, you can avoid this
surcharge.'' The plan accommodates participants who smoke by
facilitating their enrollment in a smoking cessation program that
requires participation at a time and place that are not unreasonably
burdensome or impractical for participants, and that is otherwise
reasonably designed based on all the relevant facts and
circumstances, and discloses contact information and the
individual's option to involve his or her personal physician. The
plan pays for the cost of participation in the smoking cessation
program. Any participant can avoid the surcharge for the plan year
by participating in the program, regardless of whether the
participant stops smoking, but the plan can require a participant
who wants to avoid the surcharge in a subsequent year to complete
the smoking cessation program again.
(ii) Conclusion. In this Example 6, the premium differential
satisfies the requirements of paragraphs (f)(4)(iii), (iv), and (v).
The program is an outcome-based wellness program because the initial
standard for obtaining a reward is dependent on the results of a
health risk assessment (a measurement, test, or screening). The
program is reasonably designed under paragraph (f)(4)(iii) because
the plan provides a reasonable alternative standard (as required
under paragraph (f)(4)(iv) of this section) to qualify for the
reward to all tobacco users (a smoking cessation program). The plan
discloses, in all materials describing the terms of the program, the
availability of the reasonable alternative standard (including
contact information and the individual's option to involve his or
her personal physician). Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this
section.
Example 7--Tobacco use surcharge with alternative program
requiring actual cessation. (i) Facts. Same facts as Example 6,
except the plan does not provide participant F with the reward in
subsequent years unless F actually stops smoking after participating
in the tobacco cessation program.
(ii) Conclusion. In this Example 7, the program is not
reasonably designed under paragraph (f)(4)(iii) of this section and
does not provide a reasonable alternative standard as required under
paragraph (f)(4)(iv) of this section. The plan cannot cease to
provide a reasonable alternative standard merely because the
participant did not stop smoking after participating in a smoking
cessation program. The plan must continue to offer a reasonable
alternative standard whether it is the same or different (such as a
new recommendation from F's personal physician or a new nicotine
replacement therapy).
Example 8--Tobacco use surcharge with smoking cessation program
alternative that is not reasonable. (i) Facts. Same facts as
Example 6, except the plan does not facilitate participant F's
enrollment in a smoking cessation program. Instead the plan advises
F to find a program, pay for it, and provide a certificate of
completion to the plan.
(ii) Conclusion. In this Example 8, the requirement for F to
find and pay for F's own smoking cessation program means that the
alternative program is not reasonable. Accordingly, the plan has not
offered a reasonable alternative standard that complies with
paragraphs (f)(4)(iii) and (iv) of this section and the program
fails to satisfy the requirements of paragraph (f) of this section.
(5) Applicable percentage--(i) For purposes of this paragraph (f),
the applicable percentage is 30 percent, except that the applicable
percentage is increased by an additional 20 percentage points (to 50
percent) to the extent that the additional percentage is in connection
with a program designed to prevent or reduce tobacco use.
(ii) The rules of this paragraph (f)(5) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan.
The annual premium for employee-only coverage is $6,000 (of which
the employer pays $4,500 per year and the employee pays $1,500 per
year). The plan offers employees a health-contingent wellness
program with several components, focused on exercise, blood sugar,
weight, cholesterol, and blood pressure. The reward for compliance
is an annual premium rebate of $600.
(ii) Conclusion. In this Example 1, the reward for the wellness
program, $600, does not exceed the applicable percentage of 30
percent of the total annual cost of employee-only coverage, $1,800.
($6,000 x 30% = $1,800.)
Example 2. (i) Facts. Same facts as Example 1, except the
wellness program is exclusively a tobacco prevention program.
Employees who have used tobacco in the last 12 months and who are
not enrolled in the plan's tobacco cessation program are charged a
$1,000 premium surcharge (in addition to their employee contribution
towards the
[[Page 33192]]
coverage). (Those who participate in the plan's tobacco cessation
program are not assessed the $1,000 surcharge.)
(ii) Conclusion. In this Example 2, the reward for the wellness
program (absence of a $1,000 surcharge), does not exceed the
applicable percentage of 50 percent of the total annual cost of
employee-only coverage, $3,000. ($6,000 x 50% = $3,000.)
Example 3. (i) Facts. Same facts as Example 1, except that, in
addition to the $600 reward for compliance with the health-
contingent wellness program, the plan also imposes an additional
$2,000 tobacco premium surcharge on employees who have used tobacco
in the last 12 months and who are not enrolled in the plan's tobacco
cessation program. (Those who participate in the plan's tobacco
cessation program are not assessed the $2,000 surcharge.)
(ii) Conclusion. In this Example 3, the total of all rewards
(including absence of a surcharge for participating in the tobacco
program) is $2,600 ($600 + $2,000 = $2,600), which does not exceed
the applicable percentage of 50 percent of the total annual cost of
employee-only coverage ($3,000); and, tested separately, the $600
reward for the wellness program unrelated to tobacco use does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage ($1,800).
Example 4. (i) Facts. An employer sponsors a group health plan.
The total annual premium for employee-only coverage (including both
employer and employee contributions towards the coverage) is $5,000.
The plan provides a $250 reward to employees who complete a health
risk assessment, without regard to the health issues identified as
part of the assessment. The plan also offers a Healthy Heart
program, which is a health-contingent wellness program, with an
opportunity to earn a $1,500 reward.
(ii) Conclusion. In this Example 4, even though the total reward
for all wellness programs under the plan is $1,750 ($250 + $1,500 =
$1,750, which exceeds the applicable percentage of 30 percent of the
cost of the annual premium for employee-only coverage ($5,000 x 30%
= $1,500)), only the reward offered for compliance with the health-
contingent wellness program ($1,500) is taken into account in
determining whether the rules of this paragraph (f)(5) are met. (The
$250 reward is offered in connection with a participatory wellness
program and therefore is not taken into account.) Accordingly, the
health-contingent wellness program offers a reward that does not
exceed the applicable percentage of 30 percent of the total annual
cost of employee-only coverage.
(6) Sample language. The following language, or substantially
similar language, can be used to satisfy the notice requirement of
paragraphs (f)(3)(v) or (f)(4)(v) of this section: ``Your health plan
is committed to helping you achieve your best health. Rewards for
participating in a wellness program are available to all employees. If
you think you might be unable to meet a standard for a reward under
this wellness program, you might qualify for an opportunity to earn the
same reward by different means. Contact us at [insert contact
information] and we will work with you (and, if you wish, with your
doctor) to find a wellness program with the same reward that is right
for you in light of your health status.''
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL INSURANCE MARKETS
0
9. The authority citation for Part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended (2010).
0
10. Section 147.110 is added to read as follows:
Sec. 147.110 Prohibiting discrimination against participants,
beneficiaries, and individuals based on a health factor.
(a) In general. A group health plan and a health insurance issuer
offering group or individual health insurance coverage must comply with
all the requirements under 45 CFR 146.121 applicable to a group health
plan and a health insurance issuer offering group health insurance
coverage. Accordingly, with respect to an issuer offering health
insurance coverage in the individual market, the issuer is subject to
the requirements of Sec. 146.121 to the same extent as an issuer
offering group health insurance coverage, except the exception
contained in Sec. 146.121(f) (concerning nondiscriminatory wellness
programs) does not apply.
(b) Applicability date. This section is applicable to group health
plans and health insurance issuers offering group or individual health
insurance coverage for plan years (in the individual market, policy
years) beginning on or after January 1, 2014. See Sec. 147.140, which
provides that the rules of this section do not apply to grandfathered
health plans that are individual health insurance coverage.
[FR Doc. 2013-12916 Filed 5-29-13; 11:15 am]
BILLING CODE 4830-01-4510-29-4120-01-P