Concerns
Brokers and
Employers
Have About
the Reform in
2013
[The Following FAQ is correct according
to the Employee Benefit Institute of
America, a Thomson Reuters Company,
as of the day this is written January 15,
2013. However, much guidance and
regulation is coming out from the IRS,
HHS, and DOL as the days go by toward
January 1, 2014. Note: This FAQ is not
intended to be comprehensive and
thoroughly cover all topics. Call us for
further information or questions about a
particular topic.]
i|Page
Concerns Brokers and Employers
Have about Reform in 2013
CONCERNS BROKERS AND EMPLOYERS
HAVE ABOUT REFORM IN 2013
TABLE OF CONTENTS
I. Issues Employers Should Be Informed About Now
 What All Employers Should Be Doing Now
 Groups with fewer than 50 full time equivalent
employees
 Groups with over 50 full time equivalent employees
 Summary of Benefits and Coverage
 Notice of Health Benefit Exchange
 W-2 Reporting for Cost of Benefits
 FSA Contribution Limit
 Employer Shared Responsibility (Play or Pay)
 Questions about Health Insurance Subsidies
II. Other Issues of Concern and Interest
 Assembly Bill 1083 (AB 1083) California Conforming
Law
 90/60 Day Waiting Period
 Rating and Underwriting
 Essential Benefits Package (including deductible, and
coinsurance maximum)—Applicable only in Individual
and Small Group
 More about the Exchange
 Medical Loss Ratio (MLR)
 Nondiscrimination
III. Fees under PPACA
 Medicare Withholding for High Income Employees
 Comparative Effectiveness Research Fee (CERF)
 Health Plan Fees
 Cadillac Tax
 Automatic Enrollment
 Wellness Programs
1|Page
……… 2 – 6
….………. 2
….………. 2
……..…… 3
……… 3 – 4
...………... 4
..………… 4
……… 4 – 5
………….. 5
………….. 6
…….. 6 – 14
………….. 6
………….. 7
…....… 7 – 9
…….. 9 – 12
……..12 - 13
…….…... 13
…… 13 – 14
…… 14 – 17
….……... 14
………….14
………… 15
………… 15
………….16
…… 16 – 17
Concerns Brokers and Employers
Have about Reform in 2013
CONCERNS BROKERS AND EMPLOYERS
HAVE ABOUT REFORM IN 2013
Issues employers should be informed about now:
What All Employers Should Be Doing Now:
Every employer should determine whether they are a group with fewer than 50 full
time and full time equivalent employees or a group with 50 or more full time and
“full time equivalent employees” (FTE’s). Full time employees are those that
work 30 or more hours a week. (130 hours for a calendar month.) To determine
the number of full time equivalent employees, count the total hours worked per
week (plus paid time off) by non full time employees (not more than 120 hours
for any one employee) then divide by 120 to come up with the number of full
time equivalent employees (FTE) round the result down if a fraction. Adding full
time and part time employees determines an employer group’s size.
Groups with fewer than 50 full time equivalent employees:
1. Distribute Summaries of Benefits and Coverage as required.
2. Notification to employees of the availability of the Exchange, subsidized coverage
through the Exchange, and loss of tax benefits if the employee obtains coverage
through the Exchange, must be provided to employees before March 1, 2013.
Note: The March 1 date for notification has been informally pushed back pending
Guidance and a Model Notice.
3. Groups with fewer than 50 full time equivalent employees are not required to offer
coverage to employees and are not required to obtain coverage for their employees
in the Exchange.
4. The FSA contribution limit is $2500 per employee except for dependent care FSA’s
to which the $2500 limit does not apply.
5. Increase in the Medicare payroll tax for employees over a certain income level.
6. As the weeks and months go by the IRS, HHS and DOL will issue additional
guidance and regulations about provisions in effect January 1, 2014.
2|Page
Concerns Brokers and Employers
Have about Reform in 2013
Back to Top
Groups with over 50 full time equivalent employees
1. Begin to become familiar with their options under the “Employer Shared
Responsibility” provision, which requires employers with 50 or more full time
equivalent employees to offer a minimum level of affordable coverage to their full
time employees or possibly pay a penalty. (described in more detail below, and in
the IRS link is included here) http://www.irs.gov/uac/Newsroom/Questions-andAnswers-on-Employer-Shared-Responsibility-Provisions-Under-the-AffordableCare-Act Groups subject to Employer Shared Responsibility should be prepared to
categorize and count their employees prior to 7/1/13 in anticipation of their open
enrollment period in 2014.
2. Distribute Summaries of Benefits and Coverage as required.
3. Notification to employees of the availability of the Exchange, subsidized coverage
through the Exchange, and loss of tax benefits if the employee obtains coverage
through the Exchange, must be provided to employees before March 1, 2013.
Note: The March 1 date for notification has been informally pushed back pending
Guidance and a Model Notice.
4. The FSA contribution limit is $2500 per employee except for dependent care FSA’s
to which the $2500 limit does not apply.
5. Increase in the Medicare payroll tax for employees over a certain income level.
6. As the weeks and months go by the IRS, HHS and DOL will issue additional
guidance and regulations about provisions taking effect January 1, 2014.
Back to Top
Summary of Benefits and Coverage
Q1:
When must an employer provide a Summary of Benefits and Coverage?
A1:
The SBC must be provided to employees beginning with open enrollment
in 2013. This requirement applies to fully insured and self funded plans.
SBC’s must be provided at open enrollment, when a new employee enrolls
and upon request of an employee.
3|Page
Concerns Brokers and Employers
Have about Reform in 2013
http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/20123228.pdf#page=2
Back to Top
Notice of Health Benefit Exchange
Q1:
What notice must employers give to employees?
A1:
Effective March 1, 2013, employers must provide current employees and
subsequent new hires with written notice about the health benefit
Exchange. The employers must notify employees of the existence of
the Exchange, inform them that they may be eligible for a premium tax
credit a cost-sharing reduction, and let them know that if they purchase a
qualified health plan through the Exchange they may lose any employer
contribution toward the cost of employer-provided coverage; and all or a
portion of employer contributions to employer-provided coverage may be
excludable for federal income tax purposes. The Department of Health and
Human Services has said that they will issue a “Model Notice” prior to
March 1, 2013. NOTE: The March 1 date for notification has been
informally pushed back pending Guidance and a Model Notice.
Back to Top
W-2 Reporting for Cost of Benefits
Q1:
What size employers must report the employees’ cost of their coverage on
their W2 form in 2013?
A1:
Employers who issue more than 250 W-2 forms must report. The reporting
is for informational purposes, and allows employees to see how much the
employer pay for the cost of their insurance.
http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-SponsoredHealth-Coverage
Back to Top
FSA Contribution Limit
Q1:
4|Page
What is the contribution limit for FSA’s?
Concerns Brokers and Employers
Have about Reform in 2013
A1:
The new limit beginning January 1, 2013, is $2500 per employee for a
Healthcare FSA. Dependent care FSA’s are not subject to the $2500
maximum contribution.
Back to Top
Employer Shared Responsibility (Play or Pay)
Q1:
When do the Employer Shared Responsibility Provisions begin and
who do they affect?
A1:
The Provisions begin January 1, 2014 and apply to employers with 50
or more employees, or 50 or more full time equivalent (FTE)
employees, meaning part time employees’ hours are pro-rated (hours
worked in a month divided by 120 --Congressional Research Service).
Employers must offer coverage to full time employees and their
dependents (children to age 26), the plan must cover 60% of the cost of
the benefits and the premium cannot be more than 9.5% of the
employees W-2 wages, otherwise the employer could be subject to the
Employer Shared Responsibility payment.
http://www.irs.gov/uac/Newsroom/Questions-and-Answers-onEmployer-Shared-Responsibility-Provisions-Under-the-AffordableCare-Act
Q2:
Are the Employer Shared Responsibility Provisions final?
A2:
No. The Employer Shared Responsibility Provisions are not final, they are
“Proposed” and the IRS is seeking public comment deadline March 18. The
Final regulations will be issued sometime after April 23.
Q3:
Must small employers (with fewer than 50 FT employees or FT equivalent
employees) offer coverage to their employees?
A3:
No. The Employer Shared Responsibility does not apply to employers with
fewer than 50 employees. Small group employers are not required to offer
coverage to their employees.
Back to Top
5|Page
Concerns Brokers and Employers
Have about Reform in 2013
Questions about Health Insurance Subsidies
Q1:
A1:
What types of subsidies does PPACA provide to people buying health
insurance?
States have the option of extending Medicaid to most people under 138%
of the Federal poverty threshold.
http://www.familiesusa.org/resources/tools-foradvocates/guides/federal-poverty-guidelines.html
For those with incomes up to 400% of the guidelines (about $46,000
individual, $94,000 family of four) the law provides premium tax credit.
People with incomes up to 250% of the guidelines are also eligible for
reduced cost sharing meaning coverage with lower deductibles and
copayments beginning in 2014.
Those with income between 100% and 400% of the poverty level who
obtain their insurance through the Exchange are eligible for a tax credit to
reduce their cost of coverage.
People who obtain coverage through their employer are not eligible for tax
credits unless the employer coverage does not a minimum actuarial value
of 60% or the cost of the employer coverage is more than 9.5% of an
employee’s wages. For more information go to:
http://www.kff.org/healthreform/upload/7962-02.pdf
Back to Top
Other issues of concern and interest:
Assembly Bill 1083
Q1:
What is Assembly Bill 1083 (AB 1083)?
A1:
AB 1083 is the State of California conforming legislation to PPACA. Here
is the link to AB 1083:
http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120
AB1083&search_keywords=
6|Page
Concerns Brokers and Employers
Have about Reform in 2013
Back to Top
90 Day/60 Day Waiting Period
Q1:
What is the maximum waiting period allowed under PPACA?
A1:
On or after January 1, 2014, a group health plan cannot not apply a waiting
period that exceeds 90 days. Waiting period is defined as the period that
must pass before the individual is eligible to be covered for benefits. Final
regulations have not yet been issued by the Department of Labor.
Q2. What about in California?
A2. California employers may not apply a waiting period that exceeds 60 days for
groups with 50 or fewer employees. Follow this link to a Text of AB 1083
followhttp://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=2
01120120AB1083&search_keywords=
Back to Top
Rating and Underwriting
Q1:
What about Preexisting Condition Exclusions?
A1:
The law prohibits any preexisting condition exclusion from being imposed
for group and individual health insurance coverage. This prohibition is
effective for plan years beginning on or after January 1, 2014. (For
enrollees under 19 years of age, this prohibition went into effect plan years
beginning on or after September 23, 2010. )
Q2:
What about Guaranteed Issue and Guaranteed renewability?
A2:
Each health insurance issuer in the individual or group markets (regardless
of whether the coverage is offered in the large or small group market) is
required to accept every employer and individual in the state that applies
for such coverage. HHS has issued proposed regulations to implement the
various insurance market rules under health care reform, including
guaranteed availability. Enrollment may, however, be restricted to open or
special enrollment periods. Under the proposed regulations, issuers would
7|Page
Concerns Brokers and Employers
Have about Reform in 2013
have to offer special enrollment periods to individuals experiencing a
COBRA qualifying event (e.g., divorce or death of the employee).
Q3:
What rating rules are effective January 1, 2014?
A3:
Under health care reform, an insurer in the individual or small market may
only vary premium rates based on only the following factors:




coverage category (e.g., whether the coverage is individual versus
family coverage);
rating area (states may establish one or more rating areas );
age (may not vary by more than 3 to 1 for adults---meaning the oldest
may not be charged more than 3 times the youngest); and
tobacco use (may not vary more than 1.5 to 1).
The rate is not allowed to vary by any other factor not described above.
Under the proposed regulations, age and tobacco use would have to be
rated on a per-member basis, associating those rating factors with specific
individuals, and then the per-member rates would be aggregated to
calculate the group premium. If an insurer charges a higher premium for
tobacco users in the small group market, it would be required to give
tobacco users an opportunity to avoid the higher cost by participating in a
wellness program for quitting tobacco use. HHS notes that employers can
set employee contributions based on a percentage of the per-member cost
(resulting in higher contributions for older employees and tobacco users)
or the composite cost of the group coverage (meaning all employees pay
the same contribution for the same tier of coverage, as is typically the case
today). Employers considering the first alternative should consult with
legal counsel since that approach could raise issues under other laws.
The rating limitations will not apply to health insurance issuers that offer
coverage in the large group market unless the state elects to offer large
group coverage through the state Exchange (beginning on or after 2017).
§2701 [42 USC §300gg] Fair health insurance premiums.
Q4:
8|Page
Can insurers use health status to determine eligibility for coverage?
Concerns Brokers and Employers
Have about Reform in 2013
A4:
A health insurance issuer offering group or individual health insurance
coverage may not establish rules for eligibility (including continued
eligibility) of any individual to enroll based on any of the following health
status-related factors in relation to the individual or a dependent of the
individual:
(1) Health status.
(2) Medical condition (including both physical and mental illnesses).
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability (including conditions arising out of acts of
domestic violence).
(8) Disability.
(9) Any other health status-related factor determined appropriate by the
Secretary.
P.L. 111-148: Law Sec. 1201. AMENDMENT TO THE PUBLIC HEALTH
SERVICE ACT.
Q5:
What rate bands are permissible?
A5:
The Secretary, in consultation with the National Association of Insurance
Commissioners, shall define the permissible age bands for rating purposes.
NOTE: Special Rule for Grandfathered Health Coverage
Insurance coverage that qualifies as a grandfathered health plan is not
required to comply with health care reform's fair health insurance premium
requirement.
Back to Top
Essential Health Benefits Package (including maximum deductible and
coinsurance)—Applicable Only in Individual and Small Group
Q1: What are Essential Health Benefits?
9|Page
Concerns Brokers and Employers
Have about Reform in 2013
A1: Effective on or after January 1, 2014, health insurance issuers, individual or
small group, must ensure that such coverage includes the “essential health
benefits package.”
To provide the essential health benefits package, a plan must—
 provide essential health benefits, described below
 limit cost sharing
 and provide either bronze, silver, gold, or platinum level coverage
(that is, benefits that are actuarially equivalent to 60%, 70%, 80%,
or 90% (respectively) of the full actuarial benefits provided under
the plan), or may offer a catastrophic plan (also known as “young
invincibles” coverage) for people under 30 years old.
Q2:
What do the actuarial values of coverage mean?
A2:
Under the law, levels of coverage are not defined by deductibles, copays
and coinsurance. Levels of coverage are defined by actuarial value (AV).
For example, a plan with an actuarial value of 70% (silver level plan)
means that for a standard population, the plan will pay 70% of an
individual’s healthcare expenses. The percentage a plan pays for a specific
individual can vary from the actuarial value depending on the services used
and the cost of those services.
For more information:
http://www.kff.org/healthreform/upload/8177.pdf
What constitutes Essential Health Benefits?
What precisely constitutes “essential health benefits” is to be specifically
defined by forthcoming regulations, but they include minimum benefits in
ten general categories and the items and services covered within those
categories—
 Ambulatory patient services
 Emergency services
 Hospitalization
 Maternity and newborn care
 Mental health and substance use disorder services, including
behavioral health treatment
 Prescription drugs
 Rehabilitative and habilitative services and devices
10 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013



Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care.
The law requires that the scope of essential health benefits must be equal
the scope of benefits provided under a “typical employer plan” and that an
appropriate balance be established among the ten benefit categories. In
November 2012, HHS issued proposed regulations that would establish the
standards for defining “essential health benefits.” Health plans in the
individual and small group markets must ensure that coverage includes the
essential health benefits package, which means providing essential health
benefits, setting limits on cost-sharing, and providing coverage at specified
actuarial levels of coverage. The basic building block for an essential
health benefits package is a benchmark plan designated by each state (or by
HHS, in the absence of state action), based on the
largest insurance products sold in the state. The proposed regulations
explain the process for states to designate their benchmarks and how
insurers in the state can incorporate the benchmark plan into a compliant
package. HHS has also finalized regulations establishing rules for
collecting data from insurers to assist in defining essential health benefits.
Q3:
What is Minimum Essential Coverage (MEC)?
A3:
Most employer-provided group health coverage will meet the very broad
definition of “minimum essential coverage.” The definition includes any
“eligible employer-sponsored plan”—a term that means a group health plan or
group health insurance coverage offered by an employer to an employee that is
(1) a governmental plan, or (2) any other plan or coverage offered in a state’s
small or large group market. Proposed IRS regulations would clarify that selfinsured employer coverage, retiree coverage, and COBRA coverage can
qualify as eligible employer-sponsored plan.
Q4:
What about limits on Cost Sharing such as deductibles, co-payments, and
co-insurance?
11 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
A4:
Effective January 1, 2014, the cost-sharing (total of deductible and other out of
pocket expenses), for individuals and other than individuals cannot exceed the
maximum out-of-pocket expense limits for coverage on HSA-compatible high
deductible health plans (HDHPs) for the 2013 tax year. Because the amount is
adjusted for increases in the cost of living, the maximum out-of-pocket
expense limits for HDHPs for taxable years beginning in 2014 is not currently
available. For 2013, the HDHP maximum out-of-pocket expense limit (such as
co-payments and co-insurance for an HDHP) cannot exceed $6,250 for selfonly coverage and $12,500 for family coverage.
Q5:
What is the limit on deductible?
A5:
The deductible cannot exceed $2,000 for a plan covering a single
individual, or $4,000 for any other plan (does not apply to large group
plans). Additional guidance/regulations on increasing deductible amounts
will be released at a future date.
https://www.federalregister.gov/articles/2012/11/26/201228362/patient-protection-and-affordable-care-act-standards-relatedto-essential-health-benefits-actuarial#h-33
Back to Top
More about the Exchange
Q1:
What is the SHOP (Small Health Options Program) Exchange?
A1:
The SHOP Exchange is the acronym for the Exchange designed to be a
marketplace for small group employers to purchase their insurance as an
alternative to the private market.
Q2:
Is information available about the SHOP Exchange?
A2:
The name of the Exchange in California is “Covered California.” The Covered
California SHOP Exchange expects to be up and running in the fourth quarter
of 2013. However, it is in the formative stages and many details have not yet
12 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
been determined. Here is the Covered California website:
http://www.coveredca.com/
Q3:
Are employers forced into the Exchange, particularly employers with Non
Grandfathered plans?
A3:
No. Employers are not forced or required to go into the Exchange for any
reason.
Back to Top
Medical Loss Ratio (MLR)
Q1: Will there be Medical Loss Ratio Rebates this year?
A1: The carriers will follow the same procedure as last year. When the MLR
threshold is not met, carriers are required to rebate.
Back to Top
Nondiscrimination
Q1: Does Reform require group health plans to satisfy Non Discrimination
rules?
A2: Group health plans (other than grandfathered plans) are required to satisfy the
nondiscrimination rules of Code § 105(h)(2) which prohibit discrimination in
favor of highly compensated individuals and previously applied only to selfinsured plans. Compliance with the rules will not be required until the agencies
have issued regulations or other guidance. The agencies expect that when
regulations or other guidance is issued, its effective date will be delayed to
allow for time to implement any required changes. (Note: Nondiscrimination
rules will continue to apply to self-insured plans, including those that are
grandfathered.)
A plan that treats all employees the same (all are eligible; the waiting periods
(if any) are the same; no one is treated differently on the basis of age, years of
service, or compensation; there are no differences in maximum reimbursement
amounts, types of expenses reimbursed, etc.) generally needn’t be concerned
13 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
about the Code § 105(h)(2) rules. Treating employees differently in any way
raises red flags that should checked by a lawyer.
PUBLIC HEALTH SERVICE ACT §2716 [42 USC §300gg-16] Prohibition on
discrimination in favor of highly compensated individuals.
Back to Top
Fees under PPACA:
Medicare Withholding for High Income Employees
Beginning January 1, 2013, the employer must withhold 2.35% on wages over
$200,000 for single people and on wages over $250,000 for those filing joint tax
returns. For married couples who file separately the withholding is for wages over
$125,000. The amount prior to 2013 was 1.45%. For more information:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questionsand-Answers-for-the-Additional-Medicare-Tax
Back to Top
Comparative Effectiveness Research Fee (CERF)
This new annual fee applies to insured and self-insured plans with plan years beginning
on or after 10/2/11. The annual fee will partially fund research and evaluations
performed by the Patient-Centered Outcomes Research Institute, established under the
PPACA. Insurers will pay the fee on insured plans, and will build the fee into their
rates. Employers will be responsible for paying the fee on self-insured plans.
 Applies for plan years beginning on or after 10/2/11.
 First payments are due July 31, 2013
 Fee continues through 2019.
 Initial annual fee begins at $1 per participant
 Increases to $2 for plan years beginning on or after 10/2/12
 Amount for future years is indexed to national health expenditures
 Tax is self-reported on Excise Tax Form 720
Read the CERF Fact Sheet for more details
14 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
Back to Top
Health Plan Fees
Beginning in 2014, insurers will be required to pay two new fees.
The Health Insurance Industry Fee affects health insurers (including HMOs) and is
estimated to start at $8 billion in 2014. It increases year over year before reaching an
estimated $14.3 billion in 2018. After 2018, it will continue to increase with
premium growth. The fee applies only to insured business, and will be based on each
insurer’s share of the taxable health insurance premium base (among all health
insurers of U.S. health risks).
The Reinsurance Assessment on health plans total $25 billion, which will be
collected over a three-year period from 2014 through 2016. The majority of the
money will be used to lessen the impact of high-risk individuals entering the
individual market. The assessment applies to both insured and self-insured
commercial medical plans. Health insurers will be responsible for the assessment on
insured plans. For self-insured plans, the third party administrator is required to
make the payment on behalf of the plan.
Read the Health Plan Annual Fees Fact Sheet for more details on both of these new
Fees.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-andAnswers-for-the-Additional-Medicare-Tax
Back to Top
Cadillac Tax
Q1: What is the “Cadillac Tax”?
A1:
It is a 40% nondeductible excise tax on high-cost health coverage. This
provision, taxes the amount, by which the monthly cost of an employee's
health coverage exceeds a certain threshold amount. If the coverage is
insured, the insurance company must pay the tax. For other coverage, the
coverage provider may be the employer or the plan administrator. This
goes into effect January 1, 2018.
15 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
Back to Top
Automatic Enrollment
Q1:
What is automatic enrollment?
A1:
Effective January 1, 2014, employers with more than 200 full time
employees must automatically enroll new full time employees in one of the
employers’ health benefit plans. The Department of Labor has not yet
issued regulations for Automatic enrollment. Until regulations are issued,
employers are not required to comply.
Back to Top
Wellness Programs
The final regulations divide wellness programs into two categories. First, programs that
do not require an individual to meet a standard related to a health factor in order to
obtain a reward are not considered to discriminate under the HIPAA nondiscrimination
regulations and therefore, are permissible without conditions (“participatory wellness
programs”). Examples in the regulations include a fitness center reimbursement
program, a diagnostic testing program that does not base rewards on test outcomes, a
program that waives cost-sharing for prenatal or well-baby visits, a program that
reimburses employees for the cost of smoking cessation aids regardless of whether the
employee quits smoking, and a program that provides rewards for attending health
education seminars.
The second category of wellness programs under the final rules consists of programs
requiring individuals to satisfy a standard related to a health factor in order to obtain a
reward (“health-contingent wellness programs”). Examples include a program that
requires an individual to obtain or maintain a certain health outcome in order to obtain a
reward (such as being a non-smoker, attaining certain results on biometric screenings, or
exercising a certain amount). Although such a premium or benefit reward may
discriminate based on a health factor, an exception outlined in the final rules permits
such programs if the program provides the following safeguards:
1. The total reward for such wellness programs offered by a plan sponsor is limited
to 20 percent of the total cost of employee-only coverage under the plan.
16 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013
2.
3.
4.
5.
(However, if any class of dependents can participate in the program, the limit on
the reward is modified so that the 20 percent is calculated with respect to the total
cost of coverage in which the employee and any dependents are enrolled.)
The program must be reasonably designed to promote health or prevent disease.
For this purpose, it must: have a reasonable chance of improving health or
preventing disease, not be overly burdensome, not be a subterfuge for
discriminating based on a health factor, and not be highly suspect in method.
The program must give eligible individuals an opportunity to qualify for the
reward at least once per year.
The reward must be available to all similarly situated individuals. For this
purpose, a reasonable alternative standard (or waiver of the original standard)
must be made available to individuals for whom it is unreasonably difficult due to
a medical condition to satisfy the original standard during that period (or for
whom a health factor makes it unreasonably difficult or medically inadvisable to
try to satisfy the original standard).
In all plan materials describing the terms of the program, the availability of a
reasonable alternative standard (or waiver of the original standard) is disclosed.
The Affordable Care Act added a new section regarding nondiscrimination and
wellness regulations with a few clarifications and changes the maximum reward
that can be provided from 20 percent to 30 percent. This change is effective in
2014.
The Departments are also considering what accompanying consumer protections
may be needed to prevent the program from being used as a subterfuge for
discrimination based on health status.
Back to Top
17 | P a g e
Concerns Brokers and Employers
Have about Reform in 2013