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Proposed Rule Sets Standards for Wellness Programs

By John Reichard, CQ HealthBeat Editor

November 20, 2012 -- Federal officials recently released a proposed rule that would increase the allowed amount of financial rewards or penalties associated with meeting certain goals in employer wellness programs designed to promote good health or prevent disease among workers.

As is proscribed in the health law (PL 111-148, PL 111-152), the maximum permissible rewards would increase in 2014 from the current ceiling of 20 percent of the cost of health coverage to 30 percent. However, the proposed regulation says that when it comes to programs designed to prevent or decrease tobacco use, the maximum reward could be increased to as much as 50 percent.

Federal officials say this proposal also would protect individuals from unfair underwriting practices that could otherwise reduce benefits based on someone's health status.

The proposal was issued jointly by the departments of Labor, Treasury and Health and Human Services. It applies to fully insured as well as self-insured plans offered by employers.

The 81-page proposal describes two distinct types of wellness programs: those that provide incentives simply for participating; and those that are "health-contingent."

Examples of the latter include programs "that provide a reward to those who do not use, or decrease their use of, tobacco," said an HHS fact sheet. Or, they include programs "that provide a reward to those who achieve a specified cholesterol level or weight as well to those who fail to meet that biometric target but take certain additional required actions," the fact sheet added.

The proposal establishes certain safeguards for employees in health-contingent programs. Programs must be "reasonably designed" to promote health or prevent disease. To meet that designation, they have to offer a "different, reasonable means of qualifying for the reward to any individual who does not meet the standard based on the measurement, test or screening."

They have to not be "overly burdensome" and offer a reasonable chance of improving health or preventing disease. They also have to be available to all "similarly situated individuals."

Various factors would come into play to determine if an employer has offered a reasonable alternative standard of performance, such as if the worker had a particular medical condition warranting such an alternative, If, for example, the alternative was defined by a medical professional designated by the employer, and the worker's own doctor determined that the alternative was not medically appropriate, the alternative would have to be redesigned to meet the recommendations of the worker's physician.

The proposal isn't playing up the potential of stronger rewards and penalties to lower health costs any time soon. For example, it says that when employers offer rewards related to a wellness program, it typically is to participate and isn't tied to performance, such as achieving a certain cholesterol level.

The proposal apparently aims to increase the number of participatory programs that provide rewards by clarifying that additional consumer safeguards do not come into play unless performance standards are involved. "The departments hope that these proposed regulations will help dispel the confusion," the preamble to the proposal states.

The departments express doubt that the ability to increase penalties and rewards from the current 20 percent standard will cause dramatic changes in wellness programs soon.

"Few health-contingent wellness programs today come close to meeting the 20 percent limit," the proposal says, adding that the usual reward percentages range from 3 percent to 11 percent. "Therefore, the departments do not believe that expanding the limit to 30 percent (or 50 percent for programs designed to prevent or reduce tobacco use) will result in significantly higher participation of employers in such programs," the proposal says.

HHS also unveiled two other proposed health law rules—one on insurance markets and another for essential health benefits in the new insurance exchanges.

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