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New wellness rules allow premium incentives

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in Compensation and Benefits,Human Resources

Employers will be able to offer rich incentives for employees to participate in workplace wellness programs under final rules issued May 29 by the Obama administration.

They will also be allowed to make smokers pay a premium surcharge.

The rules—which go into effect Jan. 1, 2014—clarify that the Affordable Care Act (ACA) health care reform law permits employers to reduce the cost of employees’ health insurance premiums if they participate in programs that encourage:

  • Exercise
  • Smoking cessation
  • Weight loss
  • Health screenings for such conditions as high blood pressure and cholesterol.

The decision to offer wellness incentives will be up to employers; they won’t be required to.

Participating in a wellness program could dramatically cut employee premiums. Employers could offer premium reductions of up to 30% for employees who take part in most wellness programs. Current rules only allow for incentives that trim 20% from employee premiums.

On the flip side, the rules allow employers to charge smokers up to 50% more for health insurance.

Employers would have great discretion to design wellness initiatives as they see fit, as long as the programs have “a reasonable chance” of improving employee health.

Wellness programs must be structured so “every individual participating” can “receive the full amount of any reward or incentive, regardless of any health factor.” That means participation is the key, not employee success in actually improving their health.

The rules address wellness incentives for two kinds of programs:

  • Those in which all employees become eligible for incentives simply by participating. Examples include completing a health assessment or taking a wellness class.
  • Programs that aim for achieving a specific health goal, such as trying to lose weight or reduce blood pressure. Those programs are further divided into activities that are “outcomes-based”—lowering cholesterol levels, for example—and “activity-based” programs that involve physical effort, such as a lunchtime walking club.

If an employer offers monetary incentives for activity-based programs, it must offer an alternative way to cash in for employees who are medically unable to participate.

Note: View the final rules at the DOL's website.

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