We’ve handled the government’s wellness program regulations themselves. We’ve discussed the potential impacts. We’ve even gone over some examples of legal and illegal wellness programs under the new rules. So what’s left?
When I discussed the examples of wellness programs in the regulations, the one thing I didn’t include was how cost structures work. All we have left is a little discussion about applicable benefit percentages, then we’ll be done with the regulations. (Finally.)
Recall that the new wellness regulations bump up employee discount percentages from 20% to 30%. When smoking cessation programs are part of the program, that percentage can jump up to 50%.
Let’s say Widgets International sponsors a group health plan. The annual premium for employee-only coverage is $5,500: the employer pays 75% (or $4,125) and the employee covers the balance ($1,375). Widgets International has a health-contingent wellness program that focuses on exercise, blood sugar, weight, and blood pressure. Employees who meet the standards get an annual premium rebate of $600.
Does the program comply with regulations? Yes, with room to spare. Since the total cost is $5,500, and the wellness program doesn’t include a no-smoking provision, the maximum reward is 30% of the total cost, or $1,650. The $600 premium rebate comes in well shy of the maximum allowed.
Now let’s say that Widgets International offers a wellness program devoted solely to tobacco prevention, but with the same employee-only coverage costs ($5,500/year). Any employee who has used tobacco in the past year, and who aren’t enrolled in the tobacco cessation program, are charged an extra $1,000 as a premium surcharge in addition to what they already contribute. (In other words, they have to pay $2,375 total for the year.) Any employee who participates in the tobacco cessation program doesn’t have to pay that surcharge.
For this program, the discount is also legal, since the wellness program reward ($1,000) doesn’t come close to the maximum of $2,750 (which is 50% of $5,500).
Okay, that takes care of singly directed programs. What happens when you mix and match programs?
Granite Gods has decided to implement a wellness program with the same basic costs for employee-only coverage as Widgets International: $5,500 per year, with $4,125 paid by the employer and $1,375 paid by the employee. They have both a health-contingent wellness program and a tobacco cessation program. They give a $600 reward for those who comply with the health program, and impose a $2,000 surcharge on those who’ve used tobacco in the past year and aren’t enrolled in the tobacco cessation program.
Is this program legal? Look at the math. The total of all rewards (which includes not being assessed a surcharge!) is $2,600. Since the wellness program includes provisions against tobacco use, the most reward that can be given is half of the $5,500 yearly cost — $2,750. The $2,600 reward comes in just shy of the maximum allowed reward under the new regulations, so yes, the program is legal. But we’re not done yet. When examined separately, the $600 reward for the health wellness program doesn’t exceed the 30% maximum of $1,650, so the health-contingent wellness program is also legal.
Meanwhile, on the other side of the city, McDowell Corporation sponsors a group health plan with a total annual premium for employee-only coverage of $6,000. This plan offers a $275 reward for those who complete an HRA, without any bearing on what the outcomes are. In addition, the plan has a Healthy Heart (health-contingent) wellness program that offers a $1,750 reward.
Is this legal? At first glance, no. After all, the total reward is $2,000. The maximum allowed reward for a $6,000 plan is $1,800 (30% of $6,000). However, only the reward associated with adhering to the health-contingent wellness program matters here. Remember, the HRA completion is a participatory wellness program! So, when we take off the $275 reward for completing the HRA, our total reward comes to $1,750, which does come in just shy of the $1,800 limit. The program is legal.
With all these provisions and rules that now surround health-contingent wellness programs, it’s important to take care of the analytical and mathematical sides of program implementation. Make sure your rewards are structured legally, and double check the regulations!
Have you discovered that program benefits were too high, and had to change program rewards because they weren’t legal? Or has your company mistakenly thought its benefits package was illegal because of a mix-up in participation and health-contingent programs? Leave suggestions and comments below!