CWA HEALTH CARE REFORM UPDATE: Limits on Wellness Programs

Under the ACA, wellness programs can now reimburse up to 30% of the cost of coverage. How is “cost of coverage” defined?

The Affordable Care Act includes new regulations on the limits of employer wellness programs. The maximum “reward” that a plan can offer for meeting a health related target is increased from 20% to 30% of the cost of the plan (and 50% if the program is geared towards tobacco use). This “reward” can mean either a positive reward (such as a lower premium or higher HRA contribution) or avoiding a penalty.

The “cost of coverage” or “cost of the plan” means the total price paid (contributions by both employer and employee) to purchase coverage. Costs that covered employees pay out-of-pocket (copays, deductibles, coinsurance) do not count towards this amount. For a fully insured plan, this is the total premium paid to the insurance company. For a self-insured plan, this corresponds to the COBRA rate offered to former employees.

In order to receive the award, employees must meet a “health related target,” such as weight goals, exercise goals, or the results of a cholesterol or blood sugar test. Importantly, the regulations require that employers must offer a “reasonable” alternative method for earning the reward to employees who don’t meet the defined goal. Such as taking a smoking cessation class or following a health improvement plan.