The Future for Wellness Programs with Incentives
Who: All self-insured health group plans, fully insured groups, and individual policies
What: Federal law (HIPAA) generally prohibits plans from differentiating benefits or premiums based on health status. However, employers can design and implement outcome-based wellness programs with financial incentives.
Only a "bona fide wellness program" can provide an incentive based on a health standard or health outcome. To be a "bona fide wellness program," the law specifies that the wellness program must meet four requirements:
1. Limit the incentive to a percentage of the cost of coverage (not to exceed 20% increasing to 30% under PPACA in 2014).
2. Be reasonably designed to promote health or prevent disease.
3. Be available to all similarly situated individuals. There must be a feasible alternative for those that cannot reach the health standard because of a medical condition.
4. Inform employees that individual accommodations and alternatives are available.
An employer can require a statement from a physician that a health factor makes it unreasonably difficult or medically unadvisable to meet a particular standard. A personalized physician supported alternative program can then be established.
PPACA: Under PPACA an incentive may be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing feature, the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan.
Maximum incentives increase to 30% of the cost of coverage on January 1, 2014. Incentives may increase to up to 50 percent of the cost of coverage at the discretion of the Secretary of HHS.
Beyond PPACA: If PPAA incentive provisions are voided as a part of any court rulings ERISA and HIPAA laws for self-insured plan incentives will continue to allow the health status incentives. State rebate laws regulating fully insured individual and group plans will be reinstated. Unfortunately, state laws generally prevent insurers the flexibility to provide direct financial incentives for fully insured plans. Look for states to change existing rebate laws to allow for expanding use of insurer provided health status incentives. HHS and the DOL could still allow an increase from 20% to 30% for incentives in 2014.
When: Key dates are:
· June/July 2012 – The United States Supreme Court will likely rule on the partial or complete constitutionality of PPACA. PPACA includes expansion of the amount of allowed rewards (20% to 30% and allows incentive for fully insured groups and individual plans)
· November 2013 – The national elections of both Congress and the President may change the regulatory direction of health reform and federally allowed provisions for wellness incentives.
· January 2014 – Effective date of PPACA increases for health status incentives to 30%.
Executive Summary: Within set requirements, rewards and incentives can be provided to plan participants that are not a violation of HIPAA non-discrimination standards. Health status incentives are growing in popularity. They are proving successful in changing employee health and healthcare habits, lowering costs, and improving outcomes.
A recent study showed 60% of employees who participate in wellness programs report that the incentive is a deciding factor in their choice to participate. Approximately two-thirds of wellness plans use an incentive to drive employee participation. Bio-metrics (e.g. blood pressure, cholesterol, body mass index, waist size, and A1(c)) are popular as measuring standards for improved outcomes. Other experience studies and actuarial analysis indicate that a plan can expect to save at least 5–8% annually over the next five years and enjoy a 2% reduction in trend each year. Actual annual savings have in many cases have topped 10%.
The growth in the use of incentives will likely continue with or without PPACA. Employers wanting to establish wellness programs should meet legal standards and move forward as health status incentives seem to be working to lower costs and improve outcomes. Incentives will likely be a part of any future federal or state health reform legislation.
Actions: Individuals and employers should check with their insurance brokers, agents, consultants, and insurers in preparation for all potential legal outcomes and plan offerrings. Check with legal counsel and business financial advisors on the design and implementation of any wellness program.
The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult your legal advisors to determine the laws and regulations impacting your business. Any opinions expressed within this document are solely the opinion of the individual author.