New HIPAA Wellness Program Rule Issued Under the Affordable Care Act

Author: Tracy Morley, XpertHR Legal Editor

June 7, 2013

The maximum permissible financial rewards that can be offered in conjunction with employment-based wellness programs has been increased under a new rule regarding wellness programs under the Affordable Care Act (ACA). The rule, which was jointly issued on May 29 by three federal agencies, also addresses the design of both participatory and health-contingent wellness programs.

The rule updates existing HIPAA wellness rules and specifically:

  • Increases the maximum permissible financial reward an employer may offer under health-contingent wellness programs from 20% to 30% of the cost of health coverage, and to 50% of the cost of coverage for wellness programs designed to prevent or reduce tobacco use.
  • Continues to support participatory wellness programs (e.g., reimbursement for the cost of membership in a fitness center), which are generally available without regard to an individual's health status.
  • Subdivides health-contingent wellness programs, which are programs that require an individual to meet a specific standard or goal related to his or her health in order to obtain a reward, into:
    • Activity-only wellness programs that require an individual to perform or complete an activity related to a health factor to receive a reward, but do not require the individual to satisfy or maintain any specific health outcome; and
    • Outcome-based wellness programs that require an individual to attain or maintain a specific health outcome in order to receive a reward.

The final rule essentially retains the provisions in the proposed regulations, but clarifies how the reasonable alternative standard requirement differs for activity-only and outcome-based wellness programs.

According to the new rule, "the intention of the Departments in these final regulations is that, regardless of the type of wellness program, every individual participating in the program should be able to receive the full amount of any reward or incentive, regardless of any health factor."

The final rule applies to group health plans and health insurance issuers providing group policies including grandfathered plans, and is applicable to plan years beginning on or after January 1, 2014.