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Group Health Insurers Can Offer 20% Wellness Discounts

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Federal agencies have released a batch of advice that could lead to noticeable changes in some employer-sponsored health plans, such as richer aromatherapy benefits.

The Internal Revenue Service has joined with the Employee Benefits Security Administration and the Centers for Medicare & Medicaid Services to write “Nondiscrimination and Wellness Programs in Health Coverage in the Group Market,” a set of final rules aimed at the group health market.

The final rules are modified versions of interim final regulations published in January 2001. They take effect Feb. 12, 2007, for plan years beginning on or after July 1, 2007.

One section, on “source-of-injury exclusions,” will permit health plans and insurers to exclude benefits for the treatment of a variety of activities listed in the Health Insurance Portability and Accountability Act of 1996, such as motorcycling, snowmobiling, horseback riding and skiing.

Before 1996, health insurers could exclude coverage for injuries resulting from specified activities, but many commenters wrote to oppose the source-of-injury rule in the 2001 interim rules, officials write in a preamble to the final rules, which appear today in the Federal Register.

Officials decided not change the source-of-injury provision in the interim rules because “there is no reason to believe that plans and issuers will begin to impose source-of-injury exclusions with respect to the conference report activities merely because such exclusions are not prohibited under the 2001 interim rules and these final regulations,” officials write.

Other nondiscrimination provisions in the final rules permit employees to carry over unused “maximum reimbursement” capacity from year to year and spell out how to interpret prohibitions against health plan discrimination against employees simply because the employees are not actively at work on a particular day.

A section on wellness plans permits employers to encourage participation by offering health insurance discounts and other rewards with a value equal to 20% of the basic cost of coverage.

“The 20% limit on the size of the reward in the final regulations allows plans and issuers to maintain flexibility in their ability to design wellness programs, while avoiding rewards or penalties so large as to deny coverage or create too heavy a financial penalty on individuals who do not satisfy an initial wellness program standard,” officials write in the preamble.

To qualify as a reasonably designed wellness program, a program must permit employees to qualify for the reward at least once a year and have some reasonable chance of improving the health of participants, officials write.

“There does not need to be a scientific record that the method promotes wellness,” officials write. “The standard is intended to allow experimentation in diverse ways of promoting wellness. For example, a plan or issuer could satisfy this standard by providing rewards to individuals who participated in a course on aromatherapy. The requirement of reasonableness in this standard prohibits bizarre, extreme or illegal requirements in a wellness program.”

A copy of the guidance is on the Web at Document Link