Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
June 3, 2013 Volume 4 Issue 11
The final wellness-programs rule released by three federal departments May 29 attempts to ease some employer concerns about what they must do if they offer wellness incentive programs. But there were two changes in the rule that could pose problems, albeit ones that perhaps could be worked around, for plan sponsors, according to one employee benefits expert.
The rule, which takes effect for plan years beginning on or after Jan. 1, 2014, implements provisions of the Affordable Care Act related to what rewards employers may give their workers for participating in and achieving specific results in wellness programs they sponsor (HRW 12/3/12, p. 6). There are two kinds of wellness programs covered: those that are participation-based (i.e., open to everyone) and those that are “health-contingent,” which are further broken down in the final rule into “activity-based” and “outcome-based” rewards programs.
Like the original rule, the final rule outlines standards for nondiscriminatory “health-contingent wellness programs” that give certain breaks to individuals based on meeting a specific standard related to their health. As in the preliminary rule, the maximum reward would be 30% of the cost of health coverage, up from 20% previously, except for tobacco cessation, for which the maximum reward is 50% of premium costs.
Senior-level Obama administration officials, who briefed news reporters on the final rule under the condition that they could not be identified, contended that the rule gives employers flexibility by not specifying the types of wellness programs employers can offer.
The two “most meaningful” changes in the final rule, however, could lead to some rejiggering by employers, according to Ed Fensholt, an attorney who is director of compliance services for consulting firm Lockton Benefits. In one of the changes, Fensholt tells HRW, if an employee doesn’t satisfy the wellness program’s initial standards for an award but does subsequently meet the alternative standard the rule allows for, the employer would have to pay him or her the reward retroactively.
“I don’t think employers will want to do that,” he says, so they instead may decide to announce in advance the standard needed to earn the reward and then also deal with the alternative standard before the reward due date so that there is no retroactive reward involved. He adds that the change in the final rule will “frustrate” some employers that want to, in effect, penalize right away workers who don’t even try to meet wellness standards.
The other significant change in the final rule, continues Fensholt, involves an employer conducting an “outcomes-based” rewards program, such as one that rewards workers who have a body mass index (BMI) within certain parameters. Since the rule requires an alternative standard for workers who cannot achieve this BMI, the employer might come up with an alternative outcome-based standard, such as losing one pound of weight per week.
Fensholt says the final rule complicates such a strategy by saying that the employee’s physician can ask to participate in the final crafting of a medically appropriate alternative standard and that the employer must accept this any time during the plan year involved. This might dissuade some employers from using outcomes-based rewards programs, he says. But he questions whether the reality will be a problem for employers, since not many individuals will go to their physicians for aid in crafting alternative reward standards.
The administration officials emphasized that the final rule does not require employers to provide an unlimited number of alternative standards if employees keep failing to meet the standards. Such an unending cycle was one of the fears employer groups had voiced when the preliminary rule was released Nov. 20, 2012.
View the final rule at www.ofr.gov/inspection.aspx.
http://aishealth.com/archive/nref060313-04
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