Employers Get Leeway on Health Incentives
Published: May 29, 2013 - New York Times
WASHINGTON — The Obama administration issued a final
rule on Wednesday that gives employers greater leeway to use employee wellness
programs, with financial rewards and penalties for workers worth up to 50
percent of the premium as an incentive to exercise, quit
smoking, lose weight, eat more healthful food and lower cholesterol
and blood
pressure.
Tens of millions of workers could be affected. More
than 90 percent of employers with 200 or more employees have programs to promote
healthful behavior or prevent disease, the Labor Department says.
The rule allows employers to reward or penalize
employees who meet specific standards related to their health. Such
“outcome-based wellness programs” could, for example, reward employees who do
not use tobacco or who achieve a specific cholesterol level, weight or body mass
index.
However, an employer-sponsored health plan must
provide “a reasonable alternative standard” so that employees can qualify for
rewards if they fail to meet the initial standard.
For example, an employer could charge higher premiums
to employees who smoke. But the employer would have to offer an alternative
means for employees to avoid the surcharge — for instance, by participating in a
smoking cessation program, regardless of whether they actually stop smoking.
The rule applies to group health
insurance coverage for “plan years” starting on or after Jan. 1, 2014.
Administration officials said they struggled to
balance incentives for healthful behavior with the need to prevent
discrimination against employees who might have medical conditions that make it
difficult or impossible for them to achieve specific clinical goals.
The rules carry out the 2010 health
care law, the Affordable Care Act, which says that wellness programs must
not be “a subterfuge for discriminating based on a health status factor.”
Since 2006, the maximum permissible reward has been
set at 20 percent of the cost of coverage, defined as the premiums or
contributions paid by employer and employee. The new rule increases that figure
to 30 percent and further increases the maximum reward to 50 percent for
wellness programs intended to prevent or reduce tobacco
use.
As employers strive to rein in health costs, wellness
programs have become increasingly common. Federal officials said research
indicated that such programs produced health benefits for workers. They said the
effects on costs would take longer to demonstrate.
But Judith L. Lichtman, a senior adviser at the
National Partnership for Women and Families, said that penalties in wellness
programs could have “an unjustified disparate impact” in violation of civil
rights laws.
Older people tend to have more medical problems than
the young, and “many health conditions, like obesity,
diabetes
and hypertension,
disproportionately affect members of racial minorities,” Ms. Lichtman said this
month at a hearing of the Equal
Employment Opportunity Commission.
The new rule, issued by the Labor, Treasury and Health
and Human Services departments, gives this example of a permissible wellness
program: The annual premium for coverage in an employer’s group health plan is
$6,000, of which the employer pays $4,500 and the employee $1,500. The employer
offers a $600 discount to employees who participate in a wellness program
focused on exercise, blood sugar, weight, cholesterol and blood pressure.
In addition, the employer imposes a $2,000 surcharge
on premiums for employees who used tobacco in the last 12 months. The
combination of rewards and penalties, $2,600, is less than half of the total
premium and is acceptable, if employees can avoid the surcharge by participating
in a tobacco cessation program.
If an employee’s doctor says the standard is not
appropriate for that worker, the employer-sponsored insurance plan “must provide
a reasonable alternative standard that accommodates the recommendations of the
individual’s personal physician,” the rule says.
Compliance with the rule does not free employers from
obligations they may have under other laws like the Americans With Disabilities
Act of 1990.