Final Rules on Employment-Based Wellness Programs Issued

On May 29, 2013, the U.S. Department of Labor, U.S. Department of Health and Human Services, and the Internal Revenue Service issued final rules on employment-based wellness programs. The final rules support workplace health promotion and prevention as a means to reduce the burden of chronic illness, improve health, and limit growth of health care costs, while ensuring that individuals are protected from unfair underwriting practices that could otherwise reduce benefits based on health status.

The final rules continue to support participatory wellness programs, which generally are available without regard to an individual’s health status. These include programs that reimburse for the cost of membership in a fitness center; that provide a reward to employees for attending a monthly, no-cost health education seminar; or that reward employees who complete a health-risk assessment, without requiring them to take further action.

Clarifications have been made about what constitutes a reasonable design for health-contingent wellness programs (distinct from participatory wellness programs), and the reasonable alternatives these programs must offer to avoid prohibited discrimination. The final regulations have also been rearranged to clarify that different requirements apply based on whether a health-contingent wellness program is an “activity-only” wellness program (requiring that an individual perform or complete an activity related to a health factor, such as dieting or exercising, to obtain a reward) or “outcome-based” wellness program (requiring that an individual attain or maintain a specific health outcome, such as not smoking or attaining certain results on biometric screenings, to obtain a reward).

The final rules also ensure flexibility for employers by increasing the maximum permissible reward under a health-contingent wellness program from 20 to 30 percent of the cost of individual coverage under the group health plan, and up to 50 percent for programs designed to prevent or reduce tobacco use.

Access the final rules here. These rules will be effective for plan years beginning on or after January 1, 2014.