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New Rules Allow for Increased Rewards/Penalties But Could Create More Work

Originally published by United Benefit Advisors

Late last month, federal agencies released what are being called final rules on employment-based wellness programs.

The main takeaway: organizations can increase the rewards and penalties associated with wellness programs, but they must offer a “reasonable alternative” health goal if rewards are offered.

Under the new rules, which become effective Jan. 1 and were mandated by the Patient Protection and Affordable Care Act, employers can charge workers as much as 30 percent of their medical plan premiums for failing to meet wellness incentive goals, up 10 percent from current levels.

Wellness programs can have a “big effect on workers’ and employers’ pocketbooks,” Kaiser Health News reported, noting that workers who participate can qualify for as much as thousands of dollars’ worth of premium or deductible discounts, while those who don’t take part pay much more toward their own coverage, thereby lowering the employer’s costs.

According to United Benefit Advisors’ (UBA) 2012 Health Plan Survey, the highest percentage of plans offering wellness came from employers with 1,000 or more employees (58.9 percent). The next two largest, 47.7 percent and 37.8 percent, came from organizations with 500 to 999 employees and 200 to 499 employees, respectively. The lowest percentage of plans offering wellness came from organizations employing three to 24 people (8.3 percent). Interestingly, the largest increase and fastest growth in adoption came from organizations with 500 to 999 employees and those with 50 to 99 employees (23.7 percent). Both categories increased offerings by approximately 20.5 percent — double that of any other subset.

The Department of Labor said the new rules “support workplace health promotion” and “ensure flexibility for employers” while also protecting workers by requiring that programs be reasonably designed and that they accommodate recommendations made at any time by an employee’s doctor.

And, as SmartHR Manager reported, a senior official with the Department of Labor’s Employee Benefits Security Administrator said that employees should not need to get a note from their physician to be excused from an employer’s wellness goal. Instead, “at least one alternative should be available to anybody for any reason, regardless of the requestor’s health status.”

SmartHR Manager
 added that employers with incentive programs must notify employees of their right to an alternative standard for gaining the employer’s reward, and that the notice must also inform workers of their right to get a second opinion for an alternative standard that the employer must adopt if it’s possible.

Federal officials said they decided against requiring wellness standards be evidence-based — which would have created a new burden on wellness program sponsors — and instead chose to give employers flexibility in setting wellness goals by using the standard that programs must simply have a “reasonable chance” of improving workers’ health.

As reported by Kaiser Health News, the rules describe two types of workplace wellness programs: those where all workers are eligible for a reward simply by participating in something (such as taking a wellness class) and those where rewards depend on workers meeting employer-determined goals (such as losing weight).

For activity-based programs, the rules say alternatives must be offered to those workers who couldn’t participate because it would be “unreasonably difficult” or “medically inadvisable” to do so. For example, someone who cannot run might be offered a walking program, while a worker who can’t walk must be offered some other option, Kaiser Health News reported.

For rewards based on outcomes, all workers who initially fail to meet the goal must be offered another way to get the reward “to ensure that the program is reasonably designed to improve health and is not a subterfuge for … reducing benefits based on health status,” Kaiser Health News reported, adding that workers can ask their doctors to help their employers design an appropriate alternative goal.

The rules say the administration aims to ensure 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.