On November 20, 2012, the federal government released a number of important and long-awaited proposed rules implementing the Affordable Care Act. Earlier posts examined proposed rules on market reform and rate review and essential health benefits, actuarial value, and accreditation. A third set of proposed regulations released by the Departments of Health and Human Services, Treasury, and Labor on November 20 relate to employee wellness programs. The agencies also released a study of wellness programs and a wellness program fact sheet.
Wellness programs are authorized under the Affordable Care Act as an exception to the general prohibition on health status underwriting. As of January 1, 2014, no health plan in any market will be able to underwrite based on health status. A limited exception, however, is authorized for wellness programs, which can grant rewards or impose surcharges based on an enrollee’s medical condition if certain requirements are met. This proposed rule sets out those conditions in greater detail.
Wellness programs were initially authorized by the Health Insurance Portability and Accountability Act of 1996. HIPAA prohibited group health plans from determining eligibility or varying premiums based on health status; however, it allowed premium discounts or rebates or modification of cost sharing of up to 20 percent of the cost of an employee’s coverage for participation in a health promotion or disease prevention program if certain requirements were met.
The Departments published final HIPAA wellness program rules in 2006. These in turn formed the basis for a wellness program exception to the ACA prohibition on health status discrimination for group health plans, which will, effective January 1, 2014, allow rewards or surcharges of up to 30 percent of the total cost of plan coverage (or 50 percent with approval of the HHS Secretary) for approved wellness programs. The proposed rules implement this provision.
The ACA does not allow wellness programs in the individual market, but it does authorize a 10-state demonstration project for wellness programs in the individual market beginning no later than July of 2014. The proposed rule does not address this program. The ACA amendment does not apply to grandfathered plans, but since it merely extends the HIPAA program, the proposed rule will apply to ACA grandfathered plans as well, since they are subject to HIPAA.
Wellness Programs: Popular Among Employers …
Wellness programs are tremendously popular with employers. Sixty-three percent of employers who offer health benefits now offer wellness programs, although wellness programs are more common among large than small employers. Only a minority of employees however — 20 percent of eligible employees according to one 2010 survey — actually participate in these programs. Employers overwhelmingly believe that wellness programs improve employee health and reduce program costs, although empirical support for their beliefs is weak.
Only a minority of employers offer incentives in wellness programs — 14 percent of all firms and 27 percent of large firms. Incentives often take the form of cash or cash-equivalents; only 11 percent of firms offer lower premiums and two percent offer lower deductibles to program participants, according to one survey. The average value of incentives varies from 3 to 11 percent of plan premiums and most employers are nowhere near the 20 percent HIPAA maximum, much less the 30 percent ACA maximum.
… But Consumer Advocates Are Wary
Nonetheless, many consumer advocates find wellness programs deeply problematic. One of the most significant victories of the ACA was the elimination of health status underwriting. Allowing employers to vary the cost to employees of health coverage by as much as 30 percent because an employee has a high body mass index, blood pressure, or cholesterol seems to simply bring health status underwriting in through the back door. Moreover, wellness program activity requirements are often time consuming and take place on unpaid time. This is a major imposition on lower-income employees who may have to work two jobs to make ends meet or have major family responsibilities.
Participatory Versus Health-Contingent Wellness Programs
The proposed regulation attempts to balance these concerns. First, like the HIPAA rule, it distinguishes between two types of wellness programs. Participatory programs (which currently constitute the majority of programs) are programs made available to all similarly situated individuals and either do not offer a reward or do not condition a reward on an individual satisfying a health status requirement. Examples would include an employer paying for gym memberships or smoking cessation programs, with no requirement of program success. These programs are not limited by the ACA or the proposed regulation.
By contrast, health-contingent wellness programs condition the receipt of a reward on meeting a health status standard, such as a BMI or blood pressure measure or not smoking. Under the proposed regulations rewards can include premium discounts or rebates, reductions or waivers of cost-sharing, or the absence of a surcharge.
Requirements for health-contingent wellness programs. Health-contingent wellness programs that offer rewards or impose surcharges must meet five requirements to fall within the exception to the health status underwriting prescription. First, all persons eligible for the program must be given an opportunity at least once a year to qualify. Second, the size of the reward cannot exceed 30 percent of the total cost of coverage, including both the employer and employee’s contribution. If dependents may participate in the wellness program, the reward cannot exceed 30 percent of the cost of family coverage, although the agencies request comment on the extent to which the reward should affect the cost of family coverage depending on which dependents participate.
The proposed rule would allow a 20 percent additional reward (for a 50 percent of cost of coverage total) for smoking cessation. Apparently this is meant to offset the 1.5 to 1 tobacco use surcharge in the individual and small group market, and indeed the preamble says that small groups must offer the opportunity for smokers to avoid the surcharge by participating in a smoking cessation program. The 50 percent maximum, however, apparently applies to large group, self-insured, and grandfathered plans as well and is not explicitly limited to discounts or rebates. Indeed the examples in the rule suggest that it could take the form of a surcharge. Also, nowhere does the proposed rule explicitly require small groups to offer a smoking cessation discount, although the preambles of both the market reform and wellness rules mention this requirement. This proposal badly needs clarification.
A third critical standard that health-contingent wellness programs must meet is that they must provide a “reasonable alternative standard” or waiver of the health-contingent standard for individuals who find it unreasonably difficult to meet the otherwise applicable standard because of their medical condition, or for whom it is medically inadvisable to attempt to satisfy the standard. Such an alternative must be provided on request and cannot be refused simply because the individual has not been successful in prior attempts to address an issue. A reasonable alternative standard cannot be one that requires the participant to pay for the cost of the program or for a membership or participation fee.
If an alternative is proposed by a medical professional who is an employee or agent of the plan, but the individual’s personal physician states that the proposal is not medically appropriate, the treating physician’s judgment must prevail. A plan or insurer can require verification of a claim that it is unreasonably difficult for an individual to comply with a health standard, but only if such a request is reasonable under the circumstances. A request would be unreasonable if the plan or insurer is already aware of the individual’s medical condition.
Health-contingent wellness programs must also be reasonably designed to promote health or prevent disease, not be overly burdensome, not be a subterfuge for health status discrimination, and not use a highly suspect approach. The 2006 regulation preamble stated that these standards were intended to be easily satisfied. The current proposed regulations request comment on the extent to which these standards should be tightened up. The proposed rule does clarify that a plan is not reasonably designed if it requires compliance with a biometric measurement standard (blood pressure, glucose levels, etc.), but does not make available to an individual who cannot meet the measure an alternative means of qualifying for the reward.
Fifth, the program must require plans and insurers to disclose the availability of other means of qualifying for a reward or the possibility of waiver of a standard. This notice is not required if plan materials merely mention the availability of wellness program without describing it. The notice required under the 2006 regulations was complicated and confusing, and the new proposed regulation attempts to simplify it.
Harmonizing Medicaid And The Exchanges
Finally, on November 19 the Centers for Medicare and Medicaid Services released a FAQ on Medicaid/CHIP Affordable Care Act Implementation issues. This FAQ addresses a number of technical issues that the states are dealing with in implementing the 2014 market reforms and Medicaid program changes. It makes several important points, however.
First, although the states now have the option under the Supreme Court’s NFIB decision not to expand their Medicaid programs, they do not have the option of not proceeding with developing a seamless interface with the exchange, which may mean the federally facilitated exchange in states that decide to let the federal government operate the exchange. This interface must be up and running by the time the FFE goes online, presumably October 1, 2013.
Second, the FFE will assess Medicaid eligibility applying the state’s Medicaid eligibility requirements whether or not a state expands Medicaid. The final decision on eligibility can be left to the state. Third, states will be able to use the federal data verification hub regardless of whether or not they expand Medicaid. There will be no charge to the states for using the federal data hub.
Fourth, the enhanced 90 percent Medicaid eligibility and enrollment (APD) federal funding is only available until December 31, 2015, and states that delay upgrading their systems may have to do so at the normal Medicaid administrative cost match. The final question is, “What will happen if a state Medicaid or CHIP agency cannot successfully interface with the Federal data services hub by January 2014?” The answer, being interpreted, seems to be, don’t try to find out.