Health care reform
Recent proposed rules from the Internal Revenue Service (IRS) will not allow the cost of most wellness programs to be counted toward the “minimum value” that employer-sponsored health insurance plans must provide. Businesses that had hoped to avoid penalties by including wellness programs in their coverage are viewing this new guidance as a setback.
When determining if an employer-sponsored health insurance plan is a “minimum value” (MV) plan, the Patient Protection and Affordable Care Act (PPACA) requires that the plan cover, on average, at least 60% of the cost of health benefits. This new proposed rule would prohibit employers from including the cost of wellness programs in calculating the plan’s value.
An exception to this rule is the cost of smoking cessation programs, which would be included in determining a plan’s value.
The proposed IRS rule will not impact most employers. However, some employers may have been constructing plans that would exceed the 60% minimum threshold only if the value of their wellness program were included. In these cases, the new guidance will mean that employers will have to redesign their plans.
The proposed rules allow for comments until July 2. So watch for updated guidance.
In late May 2013, the U.S. Departments of the Treasury, Labor (DOL) and Health and Human Services (HHS) issued final regulations amending the 2006 HIPAA nondiscrimination wellness regulations, in order to implement the employer wellness provisions of the PPACA. The final rules list two categories of wellness programs: “participatory wellness programs” and “health-contingent wellness programs.”
The current participatory wellness program rules remain essentially unchanged from the 2006 regulations. These programs comply with the HIPAA nondiscrimination requirements if (a) the participant does not have to meet any additional standards, and (b) involvement in the program is open to all similarly situated individuals, regardless of health status.
For health-contingent wellness programs, however, the final rules update and build upon the 2006 requirements. One new rule requires that participants earn a reward once they have met a standard related to a health factor. The final rule also outlines two types of health-contingent wellness programs: “activity-only” programs and “outcome-based” programs:
Applicable to both grandfathered and non-grandfathered group health plans in the insured and self-insured markets, the final rules are effective for plan years beginning on or after January 1, 2014. Employers and health insurance companies should review their current wellness offerings and related communications in light of these final rules.
Employers may decide not to invest in wellness programs if that investment is needed to add other benefits that bring them to the 60% minimum value. As a result, employees could lose access to valuable wellness programs, which could negatively impact their health and well-being.
Employers should review their wellness plan offerings and determine whether they will continue to invest in the wellness program or shift funding elsewhere to ensure they meet the 60% minimum value requirement. If an employer stops funding a wellness program, the consequences could include the increased risk of a less healthy, less productive workforce. Additionally, employees would likely view the lack of access to these programs as benefit reductions.