The Departments of Labor, Health and Human Services (HHS), and the Treasury have issued FAQs Part 74 guidance providing enforcement relief for health-contingent wellness programs that fail to meet the “full-reward” requirement under HIPAA wellness rules, as amended by the Affordable Care Act (ACA).
In addition, the FAQs reiterate that plans and issuers must disclose when a reasonable alternative standard (RAS) (and possible waiver of the otherwise applicable standard) is available in all plan materials describing a health-contingent wellness program. This disclosure is not required if the plan materials merely mention that such a program is available without describing its terms.
Background
HIPAA/ACA wellness rules generally prohibit a group health plan from discriminating between similarly situated individuals based on their health status; however, these wellness rules do not necessarily prevent employers from giving premium discounts or imposing premium penalties based on an employee’s participation in programs intended to promote health and prevent disease.
Wellness programs that require a participant to meet a standard related to a health factor to be eligible for a health plan reward (such as tobacco surcharge programs) are considered “health-contingent wellness programs.” These programs must comply with the following five requirements:
- Frequency of opportunity to qualify: Individuals must have the opportunity to qualify for the full reward at least once per year
- Size of the reward: The total amount of the reward cannot exceed 30% of the total cost of coverage for programs that do not include a tobacco-related incentive/surcharge, or 50% of the total cost of coverage for programs that have a tobacco-related incentive/surcharge
- Reasonable design: The program must be designed to promote health and must not act as a subterfuge for underwriting or reducing benefits
- Uniform availability and RAS: The wellness program may not seek verification that is unreasonably difficult for an employee to provide due to a medical condition or that is medically inadvisable to attempt to meet the standard. In addition, all employees or dependents covered by the wellness program must be provided with a RAS (or a waiver of the otherwise applicable standard) upon request regardless of any medical condition or other health factor. Note that the full reward must be provided if the RAS is completed, even if the individual’s health outcome did not improve (e.g., even if the individual did not actually stop smoking after completing a tobacco cessation program)
- Notice of availability of RAS: This notice must be included in all materials describing the terms of a wellness program, including contact information for obtaining the RAS and a statement that recommendations of an individual’s personal physician will be accommodated. Note that a specific RAS does not need to be provided in this notice, but the contact information where the individual can receive RAS information must be provided
FAQ guidance
In FAQs Part 74, the Departments announce they will not take enforcement action against a plan or issuer for failure to provide a reward for satisfying a RAS under a health-contingent wellness program retroactively to the beginning of the plan year when it instead provides the reward for the period after the RAS is satisfied (and meets the requirements discussed above).
The FAQ guidance addresses some of the issues that are central to the recent tobacco surcharge litigation where dozens of lawsuits have been filed against employer-sponsored group health plans alleging their tobacco surcharge programs violate the HIPAA/ACA wellness program requirements. Among other things, these lawsuits allege that employees cannot qualify for the full reward upon completion of a RAS (i.e., employees can only avoid the surcharge prospectively) at least once per year, and that the RAS was not adequately disclosed to employees.
Going forward
It is unclear at the time of this writing how the FAQ guidance will affect any pending tobacco surcharge lawsuits. Employers imposing a tobacco surcharge in connection with their group health plan should continue to consult with legal counsel to ensure the program’s design complies with wellness program requirements.