When a Plan Ties a Benefit to a Wellness Program

Answer first: a target attached to a price is a regulated thing

A plan is generally not allowed to charge one person more than a similar person because of a health factor.

Wellness programs are the written exception to that. The rule that creates the exception also fences it.

Programs split in two. If nothing about the reward depends on meeting a health standard, the program sits in the easy category.

If the reward does depend on a health standard, five requirements attach, and one of them is a second route to the same reward.

That second route is the part almost nobody is told about, and the rule says it has to be disclosed in the materials describing the program.

What the rule calls a wellness program

The definition is one sentence. A wellness program is a program of health promotion or disease prevention.

The regulation lists the health factors it protects: health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.

Weight is not on that list as a word. It arrives through medical condition and health status, and through the screening the rule names in its own example.

Everything after the definition is about what a plan may attach to those factors, and on what terms.

A penalty and a reward are the same thing here

The rule refuses the distinction most plan materials rely on.

A reward is defined to include both obtaining a reward and avoiding a penalty. Its examples of a reward are a discount or rebate of a premium or contribution, and a waiver of all or part of a cost-sharing mechanism. The list closes with an additional benefit, or any financial or other incentive.

The examples it gives for a penalty are the absence of a premium surcharge or other financial or nonfinancial disincentive.

So a program that adds a charge for missing a target and a program that gives a discount for hitting one are the same instrument, measured the same way.

That matters for the size limit further down, because both count against it.

The two kinds, and where a body measurement sits

A participatory program is one where none of the conditions for getting the reward depends on meeting a standard related to a health factor.

Its listed examples are a fitness center reimbursement and a diagnostic testing program that rewards participation without regard to outcomes. It also names a program waiving cost sharing for preventive care, a smoking cessation program that pays regardless of quitting, and a reward for attending a health education seminar.

A reward for completing a health risk assessment is also participatory, so long as no further action is required about whatever the assessment turns up.

A health-contingent program is the other kind. It requires an individual to satisfy a standard related to a health factor to obtain the reward.

Health-contingent programs then split again into activity-only and outcome-based.

An activity-only program asks you to perform an activity but not to reach a result, and its examples are walking, diet, or exercise programs.

An outcome-based program asks you to attain or maintain a specific health outcome. The rule's own illustration is a program that screens for high cholesterol, high blood pressure, abnormal body mass index, or high glucose level, and rewards the people inside the normal range.

The five requirements on the harder kind

A health-contingent program has to satisfy all five, in the rule's own order.

First, frequency. The program must give eligible individuals the chance to qualify for the reward at least once per year.

Second, size. The reward, together with the reward for other health-contingent programs under the plan, must not exceed the applicable percentage of the total cost of employee-only coverage.

That percentage is thirty, raised by twenty percentage points to fifty to the extent the extra amount is connected to a program designed to prevent or reduce tobacco use.

The cost being measured is the total of employer and employee contributions, not the employee's share alone.

Third, reasonable design. The program must be reasonably designed to promote health or prevent disease. The rule defines that as having a reasonable chance of improving health or preventing disease, and not being overly burdensome. It also requires that the program not be a subterfuge for discriminating based on a health factor, and not be highly suspect in the method chosen.

Fourth, uniform availability and a reasonable alternative standard. That one has its own section below.

Fifth, notice. The availability of the alternative has to be disclosed, and the rule says where.

The alternative standard, and who gets one

This is where the two kinds of health-contingent program stop behaving the same way, and the difference is large.

Under an activity-only program, the alternative has to be available to anyone for whom the standard is unreasonably difficult due to a medical condition, or for whom attempting it is medically inadvisable.

Under an outcome-based program, the alternative has to be available to any individual who does not meet the initial standard. There is no medical-difficulty test at all.

In both cases the plan does not have to decide the alternative in advance. It has to furnish one on request, or waive the condition.

The rule then lists what counts as furnishing one. If the alternative is an educational program, the plan must make it available or help find it, and may not charge for it.

The time commitment has to be reasonable, and the rule's example of an unreasonable one is nightly attendance at an hour-long class.

If the alternative is a diet program, the plan is not required to pay for food but must pay any membership or participation fee.

The example the regulation chose is a weight one

Where the alternative to an outcome-based standard is itself outcome-based, the rule adds two special provisions, and it illustrates the first with a body mass index.

The alternative cannot be a requirement to meet a different level of the same standard without additional time that takes the individual's circumstances into account.

Its worked case: if the initial standard is a body mass index under thirty, the alternative cannot be a body mass index under thirty-one on the same date.

What it says would be reasonable is reducing the measurement by a small amount or small percentage over a realistic period, such as within a year.

That is a federal regulation writing, in its own text, that a target is only meaningful with a timescale attached.

Where a personal physician enters, and where verification stops

The rule gives a treating clinician a defined role, and it is not the same role in both program types.

In deciding whether an alternative has been furnished, the rule counts this. Where an individual's personal physician states that a plan standard is not medically appropriate for that individual, the plan must provide an alternative that accommodates the physician's recommendations on medical appropriateness.

Standard cost sharing may still apply to whatever the physician then recommends.

Under an outcome-based program, a second alternative is available on the physician's recommendations, but only if the physician joins in the request. The request can be made at any time, and the recommendations can be adjusted at any time.

Verification runs the other way. Under an activity-only program a plan may, where reasonable, ask for a statement from the personal physician that a health factor makes the standard unreasonably difficult.

Under an outcome-based program the rule says it is not reasonable to seek that verification as a condition of providing an alternative to the initial standard.

So on an outcome-based program the door opens on a request, not on a note.

The notice, and the sentence the agencies wrote for it

The disclosure duty is specific about placement.

For an activity-only program, all plan materials describing the terms must disclose the availability of an alternative, include contact information for obtaining one, and state that recommendations of an individual's personal physician will be accommodated.

For an outcome-based program, the same disclosure is required in all plan materials describing the terms and in any disclosure that an individual did not satisfy the initial standard.

If plan materials merely mention that a program exists without describing its terms, the disclosure is not required.

The regulation then supplies sample language, which is worth reading because it is the wording a plan is most likely to use.

It reads, in part, that if you think you might be unable to meet a standard for a reward, you might qualify for an opportunity to earn the same reward by different means. The plan then says it will work with you and, if you wish, with your doctor.

A reader who sees that paragraph is looking at the notice this rule requires, not at marketing.

What this rule does not decide

The regulation is careful about its own reach, twice, and both sentences are worth carrying.

In its benefits paragraph it says, in a parenthesis, that whether a plan provision complies with that paragraph does not affect whether the provision is permitted under other statutes. It names the Americans with Disabilities Act among them.

At the end of the section it says compliance with the section is not determinative of compliance with any other provision or any other state or federal law, and names that statute again.

So a program can satisfy every one of the five requirements above and still be measured against a different law by a different agency.

The section also applies for plan years beginning on or after a date in 2007, and there is a parallel version of the same text written for the group insurance market by a second agency.

None of that decides anything about a particular employer, a particular program, or a particular person.