Will Your Wellness Program Be Compliant in 2014?

There are some changes set to happen on January 1, 2014 that could result in a penalty if your wellness program isn’t ready and prepared for them.

Two Types of Wellness Programs

There are generally two types of wellness programs: those that base a reward on participation only and those that base a reward on satisfying some type of health benchmark.

If your program is based on participation and provides a reward such as a premium discount or reduction in copays or deductibles, then the program must be available to all similarly situated individuals. This requirement is in place your program is in compliance with the HIPAA nondiscrimination requirements.

If your program bases the reward on satisfying some type of standard, whether it’s activity or outcomes-based, then the following five requirements MUST be met:

1. Total reward must not exceed 20 percent of the cost of coverage under the plan. The reward increases to 30 percent in 2014.
2. The program must be reasonably designed to promote health and prevent disease.
3. The program must give eligible individuals the opportunity to qualify for the reward at least once per year.
4. The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition to satisfy the initial standard.
5. The plan must provide a disclosure in all materials describing the terms of the program and the availability of a reasonable alternative standard in order to obtain the reward.

There are some exemptions from these requirements however. Self-insured church plans are exempt. Also, it’s unclear whether Indian Tribal plans are subject to HIPAA Portability Provisions.

Due Date for Changes

Final regulations were released on June 3, 2013, and apply to group health plans of all sizes that offer a wellness program to their employee population. These regulations must be adhered to for plan or policy years starting on or after Jan. 1, 2014.

Wellness program materials and employee communications should be reviewed annually to maintain compliance. Also, if your wellness program is connected with the health plan (ex. the reward relates to health plan premiums or other benefits, such as a reduction in premiums or an HRA / HSA contribution), the plan documents of the health plan must describe the wellness program’s effect on the plan.

Plan documents should be in compliance by the first day of the plan year.

The Penalty

Health and Human Services may impose a penalty of $100 per failure to comply up to a maximum of $25,000 per year.

If a violation is not corrected within 30 days, then the employer must self-report violation on IRS Form 8928, and a civil penalty of $100 per day would be assessed.