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Health Care Reform: Agencies Issue Final Regulations on Wellness Programs Under ACA


May 2013

The Internal Revenue Service (IRS), Department of Labor (DOL), and the Department of Health and Human Services (HHS) finalized regulations on wellness program incentives, revising earlier guidance issued in November of 2012. As in the proposed regulations, the final regulations increase the maximum reward that may be offered by a health-contingent wellness program from 20 percent to 30 percent and the maximum reward for reducing tobacco use from 30 to 50 percent.

Like the proposed regulations, these final regulations divide wellness programs into participatory wellness programs and health-contingent wellness programs. The final regulations, however, further divide health-contingent wellness programs into two subcategories: activity-only wellness programs and outcome-based wellness programs. An activity-only wellness program rewards individuals for performing or completing certain activities related to one or more health factors; it does not require individuals to achieve a particular health outcome. Outcome-based wellness programs, on other hand, reward individuals for attaining or maintaining a particular health outcome (e.g. abstaining from smoking or attaining certain results on biometric screenings). If either activity-only or outcome-based wellness programs are offered, the employer must also offer reasonable alternative methods to those individuals for whom it is unreasonably difficult to meet the standards due to a medical condition, and to those individuals for whom it is otherwise medically inadvisable to meet the standards. The final regulations also provide that a plan may seek verification from an individual’s physician that the individual would be unable to satisfy a standard for activity-based wellness programs, but it may not for outcome-based wellness programs. These final regulations take effect January 1, 2014.  

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