News outlets have offered up a smorgasbord of statistics highlighting America’s weight problem based on the upward trend of the average Body Mass Index (BMI). The annual cost to employers of obesity is estimated to exceed $13 billion leading some large employers to announced plans to fight obesity among employees. The primary vehicles for employers to proactively combat employee health issues take the form of education or premium discounts offered in connection with wellness programs. I have posted on wellness programs before by highlighting successful programs and providing commentary on the process for adopting one.
Typical stand alone wellness program focuses on education as a means of changing employee lifestyles from unhealthy to healthy. The typical incentive plans tie health premium discounts to participation in wellness initiatives. Such actions by insurers have been applauded in the Health Care Policy and Marketplace Review which noted new program announced by United Health, in which health plan participants who take tests and other evaluations to prove they are meeting goals for blood pressure, cholesterol, height/weight ratio, and smoking status would be eligible to receive $500 reductions in their health plan deductible ($1,000 family) for every goal met. However, many others refer to such actions as fining employees for poor health screening scores.
Nonetheless, legal restrictions curb an employer’s flexibility in utilizing healthy living incentives. Under HIPAA regulations that became effective on July 1, 2007, wellness programs that give rewards for healthy conduct or that penalize unhealthy activities must meet all of the five following standards:
- Limited Reward: All rewards offered under the program must not exceed 20% of the cost of coverage (total amount of employee and employer contribution). The reward can be in the form of a discount or rebate of premium or contribution; waiver of deductible, co-payment or coinsurance; or the value of a benefit provided under the plan.
- Reasonably Designed to Promote Health or Prevent Disease: The plan must have a reasonable chance of improving health or preventing disease in a way that is not overly burdensome.
- No More that Annual Qualification for Award: Individuals eligible to participate must be given the opportunity to qualify at least once a year.
- Uniform Reward Availability for "Similarly Situated" Individuals: The reward must be available to all similarly situated individuals and there must be a reasonable alternative for receiving the reward for any individual for whom it is unreasonably difficult due to a medical condition or for whom it is medically inadvisable to attempt to obtain the applicable standard. Physician verification may be required.
- Plan Material must Describe all Terms: The plan must describe all terms of the program and the availability of a reasonable alternative. The following language may be used to satisfy the alternative:
"If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at and we will work with you to develop another way to qualify for the reward."