Action Items for the Patient Protection and Affordable Care Act

Merit Resources is providing a list of action items to consider as you implement the different requirements of The Patient Protection and Affordable Care Act (or PPACA) for your business.
This checklist and subsequent timeline, may help you make sure that your business is keeping compliant with the Patient Protection and Affordable Care Act.  Learn more in this  article provided by Merit Resources.

As the Patient Protection and Affordable Care Act moves forward, the final regulations released this month regarding wellness programs are the “carrot and stick” that most employers have been looking for.

Already, more than 80 percent of the nation’s large employers are moving to penalties or rewards to put their employees on a path to better health, according to a recent survey the Midwest Business Group on Health. Under the Affordable Care Act, employers are allowed to increase the incentives they provide to workers in order to get them into a wellness program.

The final Obamacare wellness rules have been released, at least as they pertain to further reducing employees’ health plan premiums for enrolling in a wellness plan.  They’re not too different from the rules proposed last November, though they have more clearly delineated between participatory and health-contingent wellness programs.  Regarding the premium reduction incentives, the rules apply for health plans, grandfathered and non-grandfathered, beginning or renewing on or after January 1, 2014.

(To download a free Health Care Reform Timeline PPACA checklist on what your business needs to know RIGHT NOW, click here.)


Under the 2006 the Health Insurance Portability and Accountability Act (HIPAA) rules, effective January 1, 2007, participatory wellness programs complied with the HIPAA nondiscrimination requirements as long as the participant does not have to satisfy any additional standards and participation in the program is made available to all similarly situated individuals, regardless of health status.  Regarding health-contingent wellness plans, there were five specific requirements for rewarding individuals for satisfying standard(s) related to health related factors.

  1. The total reward for all the plan’s wellness programs requiring satisfaction of a standard related to a health factor must not exceed 20% of the cost of employee-only coverage under the plan. If dependents may participate in the wellness program, the reward must not exceed 20% of the cost of the coverage in which an employee and any dependents are enrolled.
  2. The program must be reasonably designed to promote health and prevent disease.
  3. The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
  4. The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard.
  5. The plan must disclose in all materials describing the terms of the program the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard).

Further, for offering a premium differential between smokers and non-smokers, the rules added any such wellness plan would be providing an acceptable alternative to smokers who found it unreasonably difficult to quit by rewarding them for such things as trying a nicotine patch or attending a smoking cessation program. So you could say that you can breathe easy. 🙂

Activity-Only vs. Outcome-Based Programs

Under the “new” rules, the regulations further delineate health-contingent programs into two categories; activity-only and outcome-based programs.  As one might conclude, the activity-only programs would not require an individual to satisfy any specific outcome, but provides a reward simply for performing or completing activities related to a health factor.  Examples include exercise programs or participating in a health risk assessment, without requiring further action.  Outcome-came based programs, as one might guess, requires individuals to attain and/or maintain a specific health outcome, such as not smoking or achieving specific results in biometric screenings to qualify for a reward.

As before, participatory wellness plans do not have additional requirements to providing rewards to employees.  However, there continues to be an evolved version of the five specific requirements when rewarding individuals based upon health-contingent wellness plans, whether their activity-based or outcome-based programs.

  1. Eligible individuals must be given an opportunity to qualify for the reward at least once per year.
  2. Absent a program designed to reduce or prevent tobacco use, the reward may not exceed 30% of the total cost of employee-only.  If dependents are permitted to participate, the reward can be calculated on the basis of 30% of the cost of coverage in which the employee and any dependents are enrolled. In the case of solely offering a program designed to reduce or prevent tobacco use, the maximum reward amount is 50% of the total cost of coverage.  In instances where there are both a specific-outcome based program and a smoking cessation program, the total reward cannot exceed the 50% threshold.
  3. The program must be reasonably designed to promote health or prevent disease.
  4. For an activity-based wellness program, the full reward must be available to all individuals who are similarly situated.  In instances where it is either unreasonable due to a medical condition or medically inadvisable to attempt to participate in a required activity an otherwise reasonable alternative must be provided to attain the reward.  An employer may require verification from a physician the unreasonableness or that it would be medically inadvisable for the employee to attempt to satisfy regular participatory requirements.

For an outcome-based wellness program, the full reward must be available to anyone who does not meet the standard based on the initial screening measurement. An employer cannot have the alternative standard requirement to meet a different level of the same standard without additional time to comply.  If the employee’s physician joins in the request for an alternative standard, the physician may be involved in setting and adjusting a second alternative standard, as may medical necessity may require.

An alternative standard is not reasonable under either type of program unless the time commitment required to satisfy the standard is reasonable. If the alternative standard requires completion of an educational or diet program, the employer must assist the individual in finding the program, and the individual cannot be required to pay for the cost of the program. The alternative standard must accommodate the recommendations of an employee’s physician as to medical appropriateness.

The terms of the wellness plan must include the availability of a reasonable alternative standard to qualify for the reward and must be disclosed in all materials describing the terms of the wellness program. For an outcome-based wellness program, a similar statement must be included in a notice that the individual did not satisfy the standard. “Model” language is provide in the final rule.