Health Care Reform and Employer Sponsored Wellness Programs

Sweeping health care reform was signed into law by President Barack Obama on March 23, 2010. The health care reform law contains new provisions regarding wellness programs that will hopefully result in renewed and increased interest in such programs. Two such provisions may be of particular interest to employers and employees:

• Beginning in 2011, certain smaller employers can take advantage of a $200 billion grant program for assistance in establishing wellness programs.

• Currently, an employer may offer a reward to an employee for participation in a wellness program worth up to 20% of the cost of coverage under the employer’s health insurance plan. As of 2014, the maximum reward permitted will rise to 30% of the cost of coverage. That percentage may even be raised to 50%.

This latest attention to wellness programs should serve as further incentive for employers to establish such programs, which generally contribute to an employer’s financial well-being. According to one study, wellness programs may save an employer over $3 for each $1 dollar spent on a program. Therefore, the present time is as good a time as any for employers who currently offer wellness programs, or who plan to begin offering such programs, to review the law regarding legally viable programs to be sure they are considered “nondiscriminatory.” The following is a brief summary of the requirements of a nondiscriminatory wellness program.

The first step an employer must take is to determine whether its wellness program is subject to the nondiscrimination rules to begin with. If the wellness program is not a part of the group health plan offered by the employer to its employees, the program is not subject to the nondiscrimination rules (although it may still be subject to other federal and/or state laws). The employer also must consider whether the wellness program discriminates on the basis of a “health factor.” A health factor means, among other things, a medical condition, medical history, or disability. If an employee must meet a standard related to a health factor in order to receive a reward under the wellness program, such as a discount on the employee’s health insurance premium, then the program discriminates on the basis of a health factor. An example would be a wellness program that provides a waiver of insurance premiums for employees whose cholesterol is under a certain level.

If an employer’s wellness program does not relate to the employer’s group health plan or does not discriminate based on a health factor, the nondiscrimination rules do not apply. Assuming that the rules do apply, though, the employer must take the next step of determining whether its wellness program complies with the rules. In order to comply with the nondiscrimination rules, a wellness program must have the following characteristics:

• The reward offered to employees under the program must not exceed 20% of the cost of health coverage. (Remember that this figure will rise to 30% or higher in 2014.)

• The program must promote health or prevent disease.

• Individuals who participate in the program must be given a chance to qualify for the reward offered under the program at least once per year.

• The reward offered under the program must be available to all “similarly situated individuals.” Also, the program must offer a reasonable alternative method for obtaining the reward to a person for whom it is unreasonably difficult or medically inadvisable to attempt to meet the program’s general standard.

• The program must disclose the availability of a reasonable alternative of obtaining the reward in all materials describing the program.

By tailoring wellness programs to comply with the above rules, employers can offer their employees a healthy and constructive means of saving money, while also benefitting financially in their own right. With health care reform providing for greater rewards than ever before, now is the time for employers who have not yet taken the wise step of implementing a mutually beneficial wellness program to strongly consider doing so.

The above merely summarizes and paraphrases certain portions of the law concerning employer sponsored wellness programs and does not constitute legal advice. The statutes and regulations governing wellness programs are complex. Employers should always consult legal counsel when constructing and implementing such programs.