Employers that offer an outcome-based wellness program are required by federal law to also offer a reasonable alternative standard (RAS), such as an educational class or health program, but advisers and employers need to know the RAS must continue to be offered annually even to employees who continuously fail to meet the desired health outcome.

Under the Health Insurance Portability and Accountability Act of 1996 all outcome-based wellness programs, those that offer a reward under a group health plan for individuals who attain or maintain a specific health outcome such as not smoking, must also offer an RAS to obtain the reward. This can include allowing employees to complete a smoking cessation program to earn the reward or avoid a surcharge to their premium. But, HIPAA rules also require employers to offer the RAS annually and allow employees to qualify for the reward through the RAS regardless of whether they fail to meet the health outcome, such as quitting smoking.

“Even if a participant continues to fail to meet the desired health outcome … [like] smoking cessation, healthy cholesterol level, healthy BMI … year after year, the participant must be able to continue obtaining the reward, avoiding any surcharge, by completing an appropriate RAS,” say attorneys Amy Ciepluch and Sarah Fowles of the Milwaukee, Wisc.-based Quarles and Brady law firm.

Completion of the program results in receiving the reward or avoiding the premium surcharge, regardless of whether the employee has stopped smoking or achieved a healthier BMI or cholesterol level. And the next year, the employer must offer the employee the same opportunity to complete the program (and possibly fail) to avoid the surcharge, the lawyers say in a blog posted this week on the subject.

Compliance for the RAS does not end there, however, Ciepulch and Fowles add, the RAS must also meet the following HIPAA requirements:

  • If the RAS is completion of an educational program, the employer must make the educational program available to the individual or assist the individual in finding such a program. The program must be free for the individual.
  • The time commitment must be reasonable.
  • If the RAS is a diet program, the employer must pay any membership or participation fee but is not required to pay for the cost of food.
  • If an individual’s personal physician states that a plan standard is not medically appropriate for the individual, the plan must provide a RAS that accommodates the physician’s recommendations.
  • If the RAS is another outcome-based wellness program, it must comply with the outcome-based wellness program rules.
  • The RAS cannot be a requirement to meet a different level of the same standard without providing an individual with additional time to comply with the RAS.

Notice of the availability of an RAS must be provided in all plan materials describing the terms of an outcome-based wellness program and any disclosure that an individual did not satisfy an initial outcome-based standard.
Increasingly, Ciepulch and Fowles say they are seeing wellness program designs that offer participants a “menu” of options to obtain a specific health plan reward or avoid a surcharge. While some of the methods in these designs are outcome-based and some methods are participatory and/or activity-based, offering employees more choice and flexibility, they caution employers to have the plans reviewed for HIPAA compliance.

Additionally, they say, some wellness programs provide rewards in cash, gift cards, or other tangible goods, and do not connect the rewards with a group health plan, thus avoiding regulation as an outcome-based wellness program.

But, these programs should also be reviewed for compliance with other applicable laws, they add.


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