Highlights of Proposed Rules on Wellness Programs

On Nov. 20, 2012, the Department of Health and Human Services, the IRS and the Department of Labor jointly issued a proposed rule that addresses how wellness programs may operate under PPACA beginning in 2014.

The proposed rule would largely carry forward the rules that have been in effect for wellness programs since 2006.  (The agencies view “wellness programs” as virtually any program that is designed to improve employees’ health.) Under both the current and the proposed rule, if a wellness program either has no reward (such as providing free flu shots) or simply rewards participation (such as a program that reimburses the cost of a smoking cessation program, regardless whether the employee actually quits smoking), and the program is equally offered to all similar employees, no limits apply to the program.

In contrast, programs that are results-based (which would be called “health-contingent wellness programs” in the future) would still be required to meet several conditions to be legal.  (For details on the requirements, CLICK HERE.)

The proposed rule would:

  • Increase the maximum reward or penalty beginning with the 2014 plan year to 30 percent of the total cost of coverage (up from the current 20 percent limit)
  • Provide an exception to the 30 percent maximum reward / penalty for tobacco use and would instead allow a penalty of 50 percent of the total cost of coverage for smoking or a 50 percent reward for not smoking (for an example,CLICK HERE)
  • Require that the employer pay many of the costs of the alternative standard program (such as a membership fee)
  • Require the employer to locate an acceptable educational program if that is the alternate standard
  • Prohibit limits on the number of times an employee could use an alternative standard (meaning, for example, that an employee would be eligible for the nonsmoker discount if he continues to smoke but participates in a smoking cessation program multiple times)
  • Provide new sample language to notify an employee that an alternate standard may be available (to view the new sample language, CLICK HERE)
The proposed rule may be found HERE.

Important: This rule is still in the “proposed” stage, which means that there may be changes when the final rule is issued.  The public may make suggestions until Jan. 25, 2013, on how the proposed rule should be changed before it is finalized.  Employers should view the proposed rule as an indication of how wellness plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.


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