The ACA’s ban on using health status to set health insurance premiums is a key consumer protection in the new law and will bring relief to tens of millions of Americans who face discrimination in today’s health insurance market. Proponents argued the ban would make the individual and small group markets work more like large employer plans, where everyone is charged the same premium regardless of their health status. But just in case you haven’t been paying attention to one particular provision of the ACA, employers can vary employee premiums by as much as 50% based on meeting health goals like a target weight or cholesterol level. The final rule implementing this provision – “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans” – was published in the Federal Register this week.

In an earlier post we summarized the exception to HIPAA nondiscrimination rules for group health plans and the proposed rule for implementing the ACA provision that codifies that exception. Workplace programs include those that focus on participation in health promotion activities, as well as those that require individuals to meet certain goals, known as “health contingent programs.” The final rule focuses exclusively on health contingent programs and provides clarity and some additional protections for consumers who would be subject to a penalty because they cannot meet a program’s health targets.

First, the final rule clears up some confusion created by the proposed rule, which talked about both “reasonable alternative standards” and “different, reasonable means “ for meeting a standard – either or both of which may be available for employees who fail to meet the initial program standards. It seemed everyone was left to wonder who was entitled to what protections. So the final rule uses only “reasonable alternative standard” to identify the option available to employees who cannot meet a goal.

Second, the final rule divides “health contingent programs” into two subgroups: activity-only programs and outcome-based programs. Activity only programs require an individual to perform or complete an activity related to a health factor in order to get a reward, whereas outcome-based programs require an individual to meet or maintain a specific health outcome, such as not smoking or maintaining a healthy weight. An activity-only program must make a reasonable alternative standard available to anyone who cannot meet a standard because it is medically inadvisable or unreasonably difficult to meet based on a health condition. An outcome-based program must make a reasonable alternative standard available to anyone who cannot meet a standard, without requiring verification of a medical reason.

Outcome-based programs are where most consumers have the greatest concerns, since failure to meet or maintain an outcome can mean up to 50% higher premiums, deductibles or other cost-sharing and make coverage or getting care too expensive for some of the very individuals who need care most. In recognition of these concerns, the final rule strengthens the right of individuals to get a “reasonable alternative standard” if they cannot meet the initial goal. In addition to providing the reasonable alternative standard without medical verification, outcome-based programs must allow an individual’s doctor to recommend an appropriate reasonable alternative standard, allow the individual additional time to comply with the reasonable alternative standard, and allow for doctor-recommended updates or modifications to the reasonable alternative standard.

Requiring outcome-based programs to recognize and accommodate the recommendation of the individual’s personal doctor is a far better approach to promoting health and wellness than requiring individuals to meet non-personalized and static goals. However, it remains to be seen if this approach raises new challenges for individuals and their doctors in personalizing an individual’s reasonable alternative standard and documenting and monitoring their progress toward the goal.

One significant area of concern in the final rule is the implications for the dependents of an employee subject to workplace wellness requirements. The final rule allows health-contingent programs that include dependents to base the penalty on the cost of family coverage. While the preamble notes that some commenters suggested that the penalty should be apportioned to covered family members, as they will be for age and tobacco use under the market reform rules, the final rule rejects that suggestion. The preamble says the final regulations “do not set forth detailed rules governing apportionment of the reward under a health-contingent wellness program,” instead allowing programs and health plans the flexibility to determine apportionment “as long as the method is reasonable.” However, the final rule itself doesn’t even mention “apportionment,” let alone doing so in a reasonable method. Without further guidance, consumers are concerned that a whole family can be hit with the full penalty even if just one member fails to meet a standard. The cost implications of that could make coverage or access to care completely unaffordable.

Finally, the rule raises a potential other path for consumers that sought additional protections in the final rule. The ACA allows states to apply state requirements so long as they don’t “prevent the application of” the ACA. The final rule notes that state non-discrimination laws “that are more stringent than the federal requirements are unlikely to ‘prevent the application of’ the HIPAA provisions and therefore are not preempted.” This seems to open the door to state-level efforts to enact more consumer-protective rules for workplace wellness programs, such as tighter restrictions on the allowable penalty, making a reasonable alternative standard available for non-medical reasons, and requiring evidence-based programs. However, state laws are limited to fully insured products sold to group health plans and cannot reach self-insured group health plans. To date, the use of workplace wellness programs has been greatest among large employer plans, where coverage is more likely to be self-insured. But the final rule may open a new path for advocacy.

Workplace wellness programs take many forms – from rewarding employees who take a health risk assessment with a gift card to setting an individual’s deductible based on meeting the right cholesterol, weight, and blood pressure targets. Surveys indicate relatively few programs in use now tie premiums and cost-sharing to meeting health targets. And of those that do, few are anywhere near the current allowed penalty of up to 20% of the premium. It is unclear if these rules will prompt big changes in the number and type of workplace wellness programs. But with such significant potential cost implications for employees that fail to meet the tests, this growing field is worth watching.