Employment Law Blog

News, trends and analysis in employment law and HR

Jul 23, 2013

Final wellness program rules issued

Employee Benefits 

The Departments of Health and Human Services (HHS), the Treasury (IRS) and Labor (DOL) have jointly issued final rules governing employee incentives offered under a group health plan’s nondiscriminatory wellness program.

The Departments of Health and Human Services (HHS), the Treasury (IRS) and Labor (DOL) have jointly issued final rules governing employee incentives offered under a group health plan’s nondiscriminatory wellness program. The rules, which apply to plan years beginning on or after January 1, 2014, divide employee wellness programs into two types: “participatory” wellness programs and “health-contingent” wellness programs.

Participatory wellness programs are those that either do not provide a reward, or that do not set conditions for obtaining a reward that are based on an individual meeting a standard related to a health factor (such as weight, blood pressure, body mass index (BMI), tobacco use, etc.) Examples include a program that reimburses employees for the cost of a gym membership, or a diagnostic testing program that provides a reward for participation only, regardless of results. These kinds of workplace health programs are permitted as long as they are made available to all similarly-situated individuals.

Health-contingent wellness programs are further divided into “activity-only” programs and “outcome-based” programs. Activity-only employee wellness programs are those that require an individual to complete an activity related to a health factor in order to obtain a reward, but that don’t require a certain outcome (e.g., a walking, diet, or exercise program). “Outcome-based” employee wellness programs require an individual to achieve or maintain a specific health outcome (such as not smoking) and are designed to target only individuals in certain at-risk categories (e.g., high cholesterol). In order to be compliant under employment law, these kinds of programs must give the individual an opportunity to qualify for the reward at least once per year, the reward must not exceed 30 percent of the cost of employee-only coverage (or up to 50 percent for tobacco-use related programs), the program must be reasonably designed to promote health or prevent disease, it must be available to all similarly situated individuals, and a reasonable alternative standard must be made available to anyone for whom it is unreasonably difficult or medically inadvisable, due to a medical condition, to participate (78 Fed. Reg. 33158, June 3, 2013).

Tips: The rules, especially for health-contingent employee wellness programs, are quite complicated and compliance with these rules does not guarantee compliance with other laws, such as the federal Americans with Disabilities Act (ADA). If you currently offer an employee health and wellness program, be sure to consult with your health plan advisor at Vigilant to make sure your program complies with all applicable employment laws. For more information, see our Legal Guide, “Workplace Wellness Programs” (4417).

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