The U.S. Departments of Treasury, Labor, and Health and Human Services have issued final regulations on the nondiscrimination requirements applicable to wellness programs. The new rules essentially follow the terms set forth in the proposed regulations, with several clarifications, all of which will apply to plan years beginning on and after January 1, 2014.

The final rules preserve the basic distinction between health-contingent wellness programs and participatory wellness programs. Health-contingent wellness programs at least initially provide a health plan reward based on a health factor. For example, a wellness program that reduces health plan contributions for those who have healthy blood pressure levels is considered health-contingent. A participatory wellness program either provides no incentive or an incentive that is not based on a health factor. For example, a program that offers a reduction in health plan contributions to those who complete a health survey is participatory.

However, the final regulations draw a sharper distinction between two types of health-contingent wellness programs: those that base a reward on a health outcome (such as maintaining a healthy blood pressure level or refraining from tobacco use) and those that base a reward only on an activity (such as walking 30 minutes three times a week). Even the activity-only program is health-contingent because it requires the physical ability to engage in an activity. Conditions such as asthma or heart disease may limit an individual’s ability to participate.

The distinction between two types of health-contingent programs has consequences. For example, an activity-only wellness program needs to offer a reasonable alternative when, for medical reasons, it is too difficult to qualify for the reward or inadvisable to try. A health-outcome program needs to provide a reasonable alternative whenever initial qualification is based on a measurement, test, or screening (including responses to a health risk assessment) and whenever an individual requests such an alternative. In addition, a health-outcome program must generally make a second reasonable alternative available that allows an individual to qualify for the reward by complying with the recommendations of his or her personal physician.

The final regulations make a number of other changes that will affect the design and operation of wellness programs. For example, the rules make a few modifications to the notice regarding the alternative means of qualifying for a reward, which notice must be included in all materials describing a health-contingent wellness program.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about wellness programs, contact Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com.