DOL, HHS, And Treasury Answer Questions On Wellness Program Design

The Department of (DOL), Health and Human Services (HHS), and the Treasury (the Departments) have jointly issued Frequently Asked Questions (FAQs) addressing issues triggered by the publication of wellness regulations issued in accordance with the Public Health Service Act (PHS Act) in June 2013. The FAQs address the concept of “reasonable design” of health-contingent wellness programs.

What does “reasonably designed” mean? Section 2705 of the PHS Act provides that wellness programs must be reasonably designed to promote health or prevent disease. A determination of whether or not a health-contingent wellness program meets those requirements is based on all relevant facts and circumstances, state the Departments, adding that the 2013 regulations were intended to allow experimentation in diverse and innovative ways for promoting wellness.

However, wellness programs designed to dissuade or discourage enrollment by sick individuals or by those with potentially high claims will not be considered by the Departments to be reasonably designed. Reasonably designed programs must meet four requirements. First, they must have a reasonable chance of improving the health of or preventing disease in participating individuals. Second, they must not be overly burdensome. Third, they must not be a subterfuge for discrimination based on a health factor. Fourth, they must not be highly suspect with regard to methods chosen to promote health or prevent disease.

As such, programs that collect a lot of sensitive personal health information but don’t assist participants with behavioral changes, such as losing weight or stopping smoking, may fail to meet the requirements of the first of the four criteria listed above. Furthermore, programs might be considered overly burdensome if they require unreasonable time commitments or travel. The Departments warn that programs failing the necessary criteria may be subject to enforcement action.

It was further provided in the 2013 regulations that, if an outcome-based wellness program were to be considered to be reasonably designed, it had to provide a reasonable alternative standard in order for participants to qualify for a reward if they did not meet an initial standard related to a health factor. This is to ensure, say the Departments, that an outcome-based wellness program is not a subterfuge as per factor three above.

Does compliance with regulations determine compliance other laws? The Departments also state in the FAQs that, just because a wellness program complies with the 2013 regulations, that does not mean that it complies with any other laws, such as the PHS Act, the Code, ERISA, or HIPAA. Also, satisfying the provisions of the regulations does not determine the tax treatment of a wellness program’s rewards, since such tax treatment is governed by the Code.

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