ACA Wellness Rules Finalized
While the new Affordable Care Act's wellness rules clarify much, employers still need an EEOC opinion to take full advantage of outcomes-based wellness programs.
By Tom Starner
After much debate and discussion, the Departments of Health and Human Services, Labor and Treasury recently issued final regulations on implementing and expanding employment-based wellness programs as they relate to the Affordable Care Act.
Mainly, the final wellness rules -- which go into effect for plan years beginning on or after Jan. 1, 2014 -- give employers additional examples of compliant wellness plans or policies that employers can use to tailor their own plans to their unique workforces.
"Employers know best their own workforces, business models, cost structures and cultures, making them the most knowledgeable regarding how wellness programs should be designed and administered to succeed," says Cara Woodson Welch, vice president, public policy, news and publications for WorldatWork, of the Scottsdale, Ariz.-based nonprofit global HR association. "Fortunately, the final rules take into account many of our recommendations for ensuring employers retain this needed flexibility."
Woodson says that WorldatWork submitted comments on the proposed rules earlier this year, urging regulators against setting absolute guidelines for wellness programs that would deter flexibility and the overall success of specific wellness programs.
"We appreciate that the final rules for the most part refrain from establishing rigid requirements for wellness plans and instead will allow employers to determine the appropriate design for rewards that employers deem will work best to incent their workforce," Welch said.
The most significant specific change potentially could cause an added layer of regulatory steps (and costs) for outcomes-based programs, which involve rewards that are given when an employee meets a specific metric, such as weight reduction or lowered blood pressure. According to Steve Wojcik, vice president, public policy, at the National Business Group on Health, the Washington-based nonprofit organization that represents large employers on national health-policy issues, under the final rules, outcomes-based programs must provide a "reasonable alternative" to employees who are not physically capable of meeting the reward metric. In short, the wellness plan must give them an alternative way of receiving the reward.
The tricky part is that previously, the only way you could "opt out" and still get the incentive was to have a doctor say it was so. Now, an employee can go to the employer and say he or she wants a reasonable alternative, whether it is medically driven or not.
"While the rule is clear, what is unclear is how that will play out and work ultimately, since it is an added cost," he says. "Depending on how employees see it and take advantage of it, that will determine how effective the original wellness program turns out to be."
Under the terms of HIPAA, the reasonable alternative option may sink or swim on how reasonable employees approach it, Wojcik says.
"If they are taking this step in droves, it could be difficult to operate an outcomes-based wellness program," he says.
Washington-based employment attorney Austen Townsend, an associate at Proskauer and a member of the law firm's healthcare reform task force, says the biggest takeaway of the final rules is that, in practice, not all that much is changing for large employers, because these are the same rules that have been followed successfully over the past few years.
"The final rules are very similar to the proposed rules, with some clarifications," she says.
For example, she says, as provided for in the proposed rules, the final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20 percent to 30 percent of the cost of coverage. The final regulations also increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use.
To Townsend and others, the biggest uncertainty is what the Equal Employment Opportunity Commission will have to say about the new rules. She explains that uncertainty remains for employers designing wellness programs, given that the EEOC still has not provided more definitive guidance on permissible incentives in the wellness program context.
"The intention of the new rules is that every individual participating in a wellness program should be able to receive the full amount of any reward or incentive, regardless of any health factor," she says. "Just because you act in accordance with final regulations doesn't protect you as long as the EEOC hasn't weighed in, though they have been asked in several forms to provide guidance and hopefully they will soon."
Employers, she adds, are doing what they can do -- trying to provide legitimate ways to incentivize wellness for their employers and, at the same time, trying to abide by ADA regulations.
"There is a concern that we could see a never-ending cycle of reasonable alternatives," Townsend says. "If an employer is acting in good faith, it should not get to the point that they will be hit with six different standards."
Wojcik says if everyone operates on good faith, in fact, such programs could work out well. But if it is viewed by employees as a way to get the incentive without trying or doing the program, then it will not achieve good results and could make any program more costly and less effective.
"I would hope that, if an employer is going through the effort," he says, "that employees will respond in kind to this of alternative, or else the employer might reconsider a wellness program [overall]."
When it comes to designing and administering wellness programs, Townsend says, employers typically try to fit within the HIPAA standards.
"Now that the regulations are finalized, it will be easier to implement these programs," he says. "At the same time, employers need to be mindful of any future guidance from the EEOC on wellness programs, as well as any additional guidance from the Federal agencies as employers establish wellness incentives."