cbaReport-July13 - page 8

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July 2013 CBA REPORT
feature article
W
W
hat is PPACA’s impact on
wellness programs? In a word:
uncertain.
Wellness programs are an increas-
ingly popular tool used by employers to
encourage their employees to become
or stay healthy, with a goal of achieving
lower absenteeism, higher productivity
and lower health plan claims.
On its face, PPACA appears to
encourage wellness. However, proposed
regulations issued under PPACA may
impose an excise tax on employers who
provide certain types of wellness pro-
grams. Given the proposed treatment of
wellness programs, employers will need
to consider whether and how a wellness
program should factor into their health
benefit plan design for 2014.
Wellness Programs Defined
A “wellness program” generally is any
initiative designed to encourage employ-
ees to improve or maintain health.
Wellness programs generally fall into
two categories: participation-based pro-
grams and health-contingent programs.
A participation-based program rewards
participants for taking a certain action,
regardless of the outcome. A health-
contingent program rewards participants
for achieving certain health-related
standards.
For example, a participation-based
program may provide employees with
a reward for completing a biometric
screening to determine the employee’s
cholesterol level while a health-con-
tingent wellness program may reward
employees whose cholesterol level is
below a certain threshold.
Permitted Rewards
Employer-provided health plans are
generally not allowed to discriminate
against participants on the basis of their
health conditions. For example, an em-
ployer generally could not impose higher
health plan premiums on employees with
higher cholesterol levels.
However, an exception in the law
allows employers to provide rewards to
healthier participants under a health-
contingent wellness program that meets
certain criteria. One such criterion
requires that the amount of any financial
reward offered under the program not
exceed twenty percent of the cost of the
employer’s health coverage.
For plan years beginning on or after
January 1, 2014, PPACA increases this
reward threshold to thirty percent and
allows regulatory agencies to further
increase this reward threshold to fifty
percent. (The regulatory agencies have
issued regulations that apply the fifty
percent threshold to wellness programs
that are designed to prevent or reduce
tobacco use.)
While these provisions of PPACA
appear to encourage the use of well-
ness programs, other provisions could
discourage them.
Impact on Affordability
Under the employer “pay or play”
provisions of PPACA, an employer may
be subject to an excise tax if the health
plan coverage it offers is not affordable.
In order for health plan coverage to
be deemed affordable for an employee,
the amount the employee is required to
pay for employee-only coverage under a
certain plan option must not exceed 9.5%
of a specific measuring amount (
i.e
., the
employee’s Form W-2 wages, the em-
ployee’s rate of pay, or the federal poverty
level).
Some employers offer wellness
programs that provide lower health plan
premiums for employees who satisfy the
program’s criteria. When the amount
the employee is required to pay for
health plan coverage is dependent upon
the employee’s satisfaction of the well-
ness program criteria, which premium
amount will determine the plan’s afford-
ability?
Proposed regulations indicate that
the premium generally should be deter-
mined as if the employee satisfied the
criteria for a tobacco-related wellness
program and failed to satisfy the criteria
for any other type of wellness program.
For example, if health plan’s pre-
miums are $100 for a person with low
cholesterol and $150 for a person with
high cholesterol, the plan’s affordability
will be determined based on the $150
premium. However, if the health plan
premiums are $100 for a non-smoker and
$150 for a smoker, the plan’s affordability
will be determined based on the $100
premium.
If these rules are enacted as proposed,
employers who wish to avoid the excise
tax will need to plan carefully in order to
By Kimberly Wilcoxon
PPACA’s Impact on Wellness Programs
Ed. Note: This is the fifth in a series of articles that will be published in the CBA Report
over the next several months related to the 2014 implementation of the Patient Protection
and Affordable Care Act (“PPACA”). This information was submitted for publication on
May 29, 2013. It does not reflect guidance issued on or after this date.
1,2,3,4,5,6,7 9,10,11,12,13,14,15,16,17,18,...36
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