Wellness Programs Get Booster Shot from Feds
With some recent proposed rules, federal agencies should make it easier for employers to get serious about wellness in the quest to cut healthcare costs.
By Tom Starner
Thanks to the latest federally issued healthcare-reform guidelines, wellness in the American workplace should end up getting a welcomed booster shot in 2014 and beyond.
Even with that positive news, however, experts say the next two years remain full of uncertainty and complexity, warning employers and HR executives to stay focused as the Affordable Care Act continues to unfold bit by bit.
Specifically on the wellness front, the Department of Health and Human Services, the Department of Labor and the Treasury Department in late November jointly released proposed rules for employer-based wellness incentives, which would apply to plan years beginning on or after Jan. 1, 2014.
The proposal, which increases the caps on employee incentives, should result in a positive impact for employers who either already are serious or are thinking about getting serious with their wellness-program strategies, according to experts.
In 2014, according to a government fact sheet, the proposed maximum financial incentive for "standards-based" wellness programs (those that have metrics or specific goals attached) will jump from the current 20 percent to 30 percent of the cost of coverage. Also, the maximum incentive for wellness programs designed with a tobacco reduction feature can be up to 50 percent of the cost coverage. Among other things, the guidelines also say "reasonable alternatives" to a standards-based wellness effort must be provided to employees with medical conditions -- or conditions where it's medically inadvisable to comply with the wellness program's requirements.
The proposed rules do not specify the types of wellness programs employers can offer, and the government is inviting comments on additional standards for wellness programs.
"Wellness programs received a big boost with the recently proposed rules," says Chicago-based Andy Anderson, a partner in Morgan Lewis and Bockius' employee benefits and executive compensation practice. "The obvious reason is the increased percentages, but the hidden reason is there was some concern that regulators might impose restrictions on wellness that these proposals do not do."
Anderson says the fear was that entities -- the Equal Employment Opportunity Commission, for example -- would make it harder through its discrimination standards for employers to offer and manage wellness programs under the ACA.
"Employers now can hope that any comments or hearings and the final regulations continue to support expanded wellness programs," Anderson says. "The EEOC is clearly the odd agency out, based on its past unsupportive Americans with Disabilities Act and Genetic Information Non-discrimination Act interpretations of wellness programs and discrimination."
Bill Mulcahy, president and CEO at Dallas-based E4 Health, which provides employee assistance and wellness programs to employers, says wellness is the "last stop on the train before we all drive off the cliff" when it comes to slowing down rising healthcare costs. As such, he believes the ACA's proposed wellness rules are critical to reduce employee healthcare insurance premiums.
"We have reached the tipping point," he says, adding that costs for an employer to provide healthcare to a family of four averages $10-$11,000 thousand annually, with 6 to 7 percent increases. "Wellness under the ACA is really an incredible opportunity to seize the moment."
Robyn Piper, founder and CEO at Piper Jordan, a national professional services firm in San Diego, which specializes in health and wellness, said the proposed rules on wellness are not a surprise, but are welcomed news.
"It is a good thing. When I speak to employers about healthcare reform, I tell them that this is one of the best results that come out of the ACA," she says. "Employers have gone through a lot the last several years. They have struggled with rate increases. Some have been aggressive and others have followed the status quo."
Piper says that while there has been a growing trend toward wellness programs, the proposed rules now put it "front and center" along with other critical factors, such as following a value-based plan design.
While the experts agree that the new ACA focus on wellness can play a major role in curtailing employer healthcare costs, Philadelphia-based John DiNone, a partner in the employment practice at Reed Smith, warns that the discriminatory aspects of the standards-based plans might still lead to litigation.
According to DiNone, the proposed rules outline amended standards for non-discriminatory "health-contingent" wellness programs.
"These plans have to be uniformly available to all employees," he says, explaining that if a group health plan wants to offer a 30-percent reward if employees participate in a walking program with specific standards/goals, anyone with a medical disability who can't walk at the standard pace must get a reasonable accommodation to earn the same reward.
"This could potentially lead to litigation," DiNone says. "There may be exposure for both the group providing the plan and the employer. The federal government's suggestion is to come up with reasonable alternatives, but it's sort of like the idea of giving everyone a trophy."
To avoid that potential for lawsuits, group health plans may choose to offer more limited type of wellness plans of the participatory type (paying for health club dues, putting a gym on the premises, providing wellness educational materials, etc.), which are not subject to the same rules.
Anderson, however, says that many medium- to large-sized employers already have been offering contingency wellness programs, so they may already be used to providing reasonable alternatives within contingency wellness programs, adding that the proposed wellness rules clearly allow both incentives and penalties, another welcomed change in that in the past employers using penalties in contingent wellness programs could run afoul of discrimination lawsuits.
"I've worked with employers who have been up against the 20 percent cap for some time, and they are excited about ACA recognition of boosting these types of wellness programs," he says.
On the same day the federal agencies released the new proposed rules on wellness, HHS also published a proposed rule that, according to an HHS fact sheet, "helps consumers shop for and compare non-grandfathered private health insurance options in the individual and small group markets by promoting consistency across plans, and protecting consumers by ensuring that plans cover a core package of items and services."
According to the HHS information, the ACA ensures Americans have access to quality, affordable health insurance. To achieve this goal, the law was crafted to ensure that health plans offered in the individual and small group markets, both inside and outside of Affordable Insurance Exchanges (exchanges), offer a core package of items and services, known as "essential health benefits." EHB must include items and services within at least the following 10 categories:
* Ambulatory patient services
* Emergency services
* Maternity and newborn care
* Mental health and substance use disorder services, including behavioral health treatment
* Prescription drugs
* Rehabilitative and habilitative services and devices
* Laboratory services
* Preventive and wellness services and chronic disease management
* Pediatric services, including oral and vision care
If a benchmark plan is missing any of the 10 statutory categories of benefits, the proposed rule has the state or HHS to supplement the benchmark plan in that category.
While EHBs are an integral part of the ACA strategy, Reed Smith's DiNone says the EHB component is not that important from the employer perspective.
"If an employer wants to provide coverage, mostly they have to make sure the healthcare plan it selects has to be certified that it's substantially equal to the 'benchmark plan' within the state exchanges. The insurance companies will be using that in their marketing," he says, adding that the EHB area remains unclear and complex, and will be more developed during the upcoming year.
"We expect more regulations and fighting within that area. There will be much more to come out on EHB during the year," he says.
For now, DiNone explains, there is a "whole host" of other, more imminent ACA-related issues that require employer and HR attention. For example, starting on Jan. 1, 2013, a single filer earning $200,000 or more annually or a married employee with $250,000 household annual income must pay an additional .9 percent Medicare payroll tax. So employers must make sure they are withholding the right amount. Also effective January 1, 2013, there will be a $2,500 limit on healthcare flexible spending contributions, and by March, employers must notify the employees of coverage available through an exchange within their state. Finally, by Dec. 31, 2013, employers must certify to HHS that their data information system complies with the HIPAA electronic rules.
"The big message for employers is keep your eyes and ears open during 2013 and 2014," DiNone says.