Friday, I laid out the nuts and bolts of the final government regulations on wellness programs. They go into effect on the first of the new year, and finalized most of the regulations that were proposed late last year.
Here’s a quick review:
- Wellness programs are split between participatory wellness programs (PWPs) and health-contingent wellness programs (HWPs).
- There are two types of health-contingent programs: activity-only (AWPs) and outcome-based (OWPs).
- Participatory programs are largely unchanged from the 2006 regulations.
- Health-contingent programs have five criteria they must meet in order to fulfill the nondiscrimination rules of HIPAA.
- The most important criterion for HWPs is likely to be structuring their programs to provide reasonable alternative standards (RAS’s) that satisfy the regulatory language and aren’t smokescreens for health factor-based discrimination.
The third section of the OFR document speculates on economic, paperwork, and federalism impacts of these regulations. Let’s get the easiest part out of the way first.
The final regulations require group health plans and group health insurance issuers to disclose the availability of reasonable alternative standards and waivers in all plan materials that describe the terms of a health-contingent wellness program. (See Friday’s section on disclosure for full details.)
If your company already has a wellness program in place, and doesn’t plan on making any drastic changes, your paperwork shouldn’t change much. Most of the information required at the federal level is already mandated either by typical business practices of health plans and health insurance issuers, or by state or local regulations.
On the flip side, let’s say your company doesn’t currently have a wellness program in place. Senior management decides to begin a program at the start of 2014. Well, now you’ll have some work to do.
Once the nuts and bolts of the proposed wellness program are confirmed, management will have to work with its group health plan / health insurance issuer to change the health plan’s summary plan description (SPD) and issue a summary of the material modifications (SMM). Right now, when the materials of a health plan are changed, SPDs must be provided every five years. SMMs, on the other hand, have to be issued within 210 days after the end of the plan year in which the change was adopted. They must also be given to plan participants and beneficiaries by the plan administrator.
This has been the standard process since at least 2000, when the last substantive change to OMB #1210-0039 was made. The new wellness program regulations should not change this process much, if at all.
The new wellness program regulations aren’t likely to require more state oversight by the Department of Health and Human Services. This is partly because most states have laws meeting or exceeding the HIPAA nondiscrimination standards as they pertain to health insurance issuers. Of the states that don’t have such laws, HIPAA provisions will take effect. The idea, according to HIPAA’s conference report, is to as narrowly preempt individual state laws as possible.
In addition, states can keep applying their own laws as long as they don’t prevent the application of portability, access, and renewability requirements of HIPAA. Unsurprisingly, this also includes the nondiscrimination requirements.
In truth, this is arguably the most troubling storyline of the OFR document. The statistics and information presented regarding the prevalence of wellness programs, and the incentives associated with those programs, were shocking and disappointing. There are enough statistics in there to fuel several discussions, but I’ll save them for another time.
Currently, health-contingent wellness programs rarely come close to meeting the 20% limit of benefits cost reduction. In fact, the typical range is 3-11%. On a macro level, the report speculates that few plans will decide to increase their reward percentages, partly because so few come within shouting distance of the maximum reduction. The increase in reward limit does not look to increase how many companies institute health-contingent programs, and the regulations are not believed to have a significant impact because the economic impact is not expected to reach $100 million.
The impact on individual companies, naturally, depends on the efficacy of the individual wellness programs. This is a conversation that could span months of discussion – nutrition education, incentives, exercise, etc. – and can’t be treated properly in a paragraph.
At the individual employee level, the most likely effect is that costs will transfer from those who meet health-contingent wellness program standards to those who don’t.
If you have any questions or comments, please leave them in the comment section.