Vol. 78 Monday, 

No. 106 June 3, 2013 

Part II 

Department of the Treasury 

Internal Revenue Service 

26 CFR Part 54 

Department of Labor 

Employee Benefits Security Administration 

29 CFR Part 2590 

Department of Health and Human Services 

45 CFR Parts 146 and 147 

Incentives for Nondiscriminatory Wellness Programs in Group Health Plans; 

Final Rule 


sroberts on DSK5SPTVN1PROD with RULES
33158 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

1The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act, part 7 of ERISA, and chapter 

100 of the Code, and is distinct from the term 

‘‘health plan,’’ as used in other provisions of title 

I of the Affordable Care Act. The term ‘‘health plan’’ 

does not include self-insured group health plans. 

2The HIPAA nondiscrimination provisions set 

forth eight health status-related factors, which the 

December 13, 2006 final regulations refer to as 

‘‘health factors.’’ Under HIPAA and the 2006 

regulations, as well as under PHS Act section 2705 

(as added by the Affordable Care Act), the eight 

health factors are health status, medical condition 

(including both physical and mental illnesses), 

claims experience, receipt of health care, medical 

history, genetic information, evidence of 

insurability (including conditions arising out of acts 

of domestic violence), and disability. See 66 FR 

1379, January 8, 2001. 

3Note, however, that in the Economic Analysis 

and Paperwork Burden section of this preamble, in 

sections under headings listing only two of the 

three Departments, the term ‘‘Departments’’ 

generally refers only to the two Departments listed 

in the heading. 

4See 26 CFR 54.9802–1; 29 CFR 2590.702; 45 

CFR 146.121. Prior to issuance of the final 2006 

regulations, the Departments published interim 

final regulations with request for comment 

implementing the HIPAA nondiscrimination 

provisions on April 8, 1997 at 62 FR 16894, 

followed by proposed regulations regarding 

wellness programs on January 8, 2001 at 66 FR 

1421. 

5Under the 2006 regulations, a participatory 

wellness program is generally a program under 

which none of the conditions for obtaining a reward 

is based on an individual satisfying a standard 

related to a health factor or under which no reward 

is offered. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[TD 9620] 

RIN 1545–BL07 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB55 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 146 and 147 

[CMS–9979–F] 

RIN 0938–AR48 

Incentives for Nondiscriminatory 

Wellness Programs in Group Health 

Plans 

AGENCIES: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Final rule. 

SUMMARY: This document contains final 

regulations, consistent with the 

Affordable Care Act, regarding 

nondiscriminatory wellness programs in 

group health coverage. Specifically, 

these final regulations increase the 

maximum permissible reward under a 

health-contingent wellness program 

offered in connection with a group 

health plan (and any related health 

insurance coverage) from 20 percent to 

30 percent of the cost of coverage. The 

final regulations further increase the 

maximum permissible reward to 50 

percent for wellness programs designed 

to prevent or reduce tobacco use. These 

regulations also include other 

clarifications regarding the reasonable 

design of health-contingent wellness 

programs and the reasonable 

alternatives they must offer in order to 

avoid prohibited discrimination. 

DATES: Effective Date: August 2, 2013. 

Applicability Date: These final 

regulations generally apply to group 

health plans and group health insurance 

issuers for plan years beginning on or 

after January 1, 2014. These final 

regulations generally apply to 

individual health insurance issuers for 

policy years beginning on or after 

January 1, 2014. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Beth Baum, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Karen Levin, Internal Revenue Service, 

Department of the Treasury, at (202) 

927–9639; or Jacob Ackerman, Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, at (410) 786–1565. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (www.cciio.cms.gov) and 

information on health reform can be 

found at www.HealthCare.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Introduction 

The Patient Protection and Affordable 

Care Act, Pub. L. 111–148, was enacted 

on March 23, 2010; the Health Care and 

Education Reconciliation Act, Pub. L. 

111–152, was enacted on March 30, 

2010 (these are collectively known as 

the ‘‘Affordable Care Act’’). The 

Affordable Care Act reorganizes, 

amends, and adds to the provisions of 

part A of title XXVII of the Public 

Health Service Act (PHS Act) relating to 

group health plans and health insurance 

issuers in the group and individual 

markets. The term ‘‘group health plan’’ 

includes both insured and self-insured 

group health plans.1 The Affordable 

Care Act adds section 715(a)(1) to the 

Employee Retirement Income Security 

Act (ERISA) and section 9815(a)(1) to 

the Internal Revenue Code (the Code) to 

incorporate the provisions of part A of 

title XXVII of the PHS Act into ERISA 

and the Code, and to make them 

applicable to group health plans and 

health insurance issuers providing 

health insurance coverage in connection 

with group health plans. The PHS Act 

sections incorporated by these 

references are sections 2701 through 

2728. 

B. Wellness Exception to HIPAA 

Nondiscrimination Provisions 

Prior to the enactment of the 

Affordable Care Act, titles I and IV of 

the Health Insurance Portability and 

Accountability Act of 1996 (HIPAA), 

Pub. L. 104–191, added section 9802 of 

the Code, section 702 of ERISA, and 

section 2702 of the PHS Act (HIPAA 

nondiscrimination and wellness 

provisions). These provisions generally 

prohibit group health plans and group 

health insurance issuers from 

discriminating against individual 

participants and beneficiaries in 

eligibility, benefits, or premiums based 

on a health factor.2 An exception to the 

general rule allows premium discounts 

or rebates or modification to otherwise 

applicable cost sharing (including 

copayments, deductibles, or 

coinsurance) in return for adherence to 

certain programs of health promotion 

and disease prevention. 

The Departments of Labor, Health and 

Human Services (HHS), and the 

Treasury (collectively, the 

Departments 3) published joint final 

regulations implementing the HIPAA 

nondiscrimination and wellness 

provisions on December 13, 2006 at 71 

FR 75014 (the 2006 regulations).4 The 

2006 regulations divided wellness 

programs into two general categories: 

Participatory wellness programs and 

health-contingent wellness programs. 

Under the 2006 regulations, 

participatory wellness programs 5 are 

considered to comply with the HIPAA 

nondiscrimination requirements 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33159 

6Under the 2006 regulations, a health-contingent 

wellness program is generally a program under 

which any of the conditions for obtaining a reward 

is based on an individual satisfying a standard 

related to a health factor (such as not smoking, 

attaining certain results on biometric screenings, or 

meeting targets for exercise). 

7Section 1201 of the Affordable Care Act also 

moved the guaranteed availability provisions that 

were previously codified in PHS Act section 2711 

to PHS Act section 2702, and extended those 

requirements to the individual market. 

without having to satisfy any additional 

standards if participation in the program 

is made available to all similarly 

situated individuals, regardless of 

health status. Paragraph (d) of the 2006 

regulations provided that, generally, 

distinctions among groups of similarly 

situated participants in a health plan 

must be based on bona fide 

employment-based classifications 

consistent with the employer’s usual 

business practice. A plan may also 

distinguish between beneficiaries based 

on, for example, their relationship to the 

plan participant (such as spouse or 

dependent child) or based on the age of 

dependent children. Distinctions are not 

permitted to be based on any of the 

health factors listed in the 2006 

regulations. 

Under the 2006 regulations, plans and 

issuers with health-contingent wellness 

programs 6 were permitted to vary 

benefits (including cost-sharing 

mechanisms), premiums, or 

contributions based on whether an 

individual has met the standards of a 

wellness program that meets the 

requirements of paragraph (f)(2), which 

outlined five specific criteria. 

C. Amendments Made by the Affordable 

Care Act 

The Affordable Care Act (section 

1201) amended the HIPAA 

nondiscrimination and wellness 

provisions of the PHS Act (but not of 

ERISA section 702 or Code section 

9802). (Affordable Care Act section 1201 

also moved those provisions from PHS 

Act section 2702 to PHS Act section 

2705.) As amended by the Affordable 

Care Act, the nondiscrimination and 

wellness provisions of PHS Act section 

2705 largely reflect the 2006 regulations 

(except as discussed later in this 

preamble), and extend the HIPAA 

nondiscrimination protections to the 

individual market.7 The wellness 

program exception to the prohibition on 

discrimination under PHS Act section 

2705 applies with respect to group 

health plans (and any health insurance 

coverage offered in connection with 

such plans), but does not apply to 

coverage in the individual market. 

D. Proposed Regulations Implementing 

PHS Act Section 2705 and Amending 

the 2006 Regulations 

On November 26, 2012, the 

Departments published proposed 

regulations at 77 FR 70620, to 

implement PHS Act section 2705 and 

amend the 2006 regulations regarding 

nondiscriminatory wellness programs in 

group health coverage. Like the 2006 

regulations, the proposed regulations 

continued to divide wellness programs 

into participatory wellness programs 

and health-contingent wellness 

programs. Examples of participatory 

wellness programs provided in the 

proposed regulations included a 

program that reimburses for all or part 

of the cost of membership in a fitness 

center; a diagnostic testing program that 

provides a reward for participation and 

does not base any part of the reward on 

outcomes; and a program that provides 

a reward to employees for attending a 

monthly, no-cost health education 

seminar. Examples of health-contingent 

wellness programs in the proposed 

regulations included a program that 

imposes a premium surcharge based on 

tobacco use; and a program that uses a 

biometric screening or a health risk 

assessment to identify employees with 

specified medical conditions or risk 

factors (such as high cholesterol, high 

blood pressure, abnormal body mass 

index, or high glucose level) and 

provides a reward to employees 

identified as within a normal or healthy 

range (or at low risk for certain medical 

conditions), while requiring employees 

who are identified as outside the normal 

or healthy range (or at risk) to take 

additional steps (such as meeting with 

a health coach, taking a health or fitness 

course, adhering to a health 

improvement action plan, or complying 

with a health care provider’s plan of 

care) to obtain the same reward. 

The proposed regulations re-stated 

that participatory wellness programs are 

not required to meet the five 

requirements applicable to healthcontingent wellness programs. The 

proposed regulations also outlined the 

conditions for health-contingent 

wellness programs, as follows: 

1. The program must give eligible 

individuals an opportunity to qualify for 

the reward at least once per year. 

2. The reward for a health-contingent 

wellness program, together with the 

reward for other health-contingent 

wellness programs with respect to the 

plan, must not exceed 30 percent of the 

total cost of employee-only coverage 

under the plan, or 50 percent to the 

extent the program is designed to 

prevent or reduce tobacco use. 

3. The reward must be available to all 

similarly situated individuals. For this 

purpose, a reasonable alternative 

standard (or waiver of the otherwise 

applicable standard) must be made 

available to any individual for whom, 

during that period, it is unreasonably 

difficult due to a medical condition to 

satisfy the otherwise applicable 

standard (or for whom it is medically 

inadvisable to attempt to satisfy the 

otherwise applicable standard). 

4. The program must be reasonably 

designed to promote health or prevent 

disease. For this purpose, it must have 

a reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and not be 

overly burdensome, not be a subterfuge 

for discriminating based on a health 

factor, and not be highly suspect in the 

method chosen to promote health or 

prevent disease. The proposed 

regulations also stated that, to the extent 

a plan’s initial standard for obtaining a 

reward (or a portion of a reward) is 

based on results of a measurement, test, 

or screening that is related to a health 

factor (such as a biometric examination 

or a health risk assessment), the plan is 

not reasonably designed unless it makes 

available to all individuals who do not 

meet the standard based on the 

measurement, test, or screening, a 

different, reasonable means of 

qualifying for the reward. 

5. The plan must disclose in all plan 

materials describing the terms of the 

program the availability of other means 

of qualifying for the reward or the 

possibility of waiver of the otherwise 

applicable standard. 

II. Overview of the Final Regulations 

A. General Overview 

The Departments believe that 

appropriately designed wellness 

programs have the potential to 

contribute importantly to promoting 

health and preventing disease. After 

consideration of all the comments, the 

Departments are issuing these final 

regulations to provide comprehensive 

guidance with respect to the general 

requirements for wellness programs. At 

the same time, the Departments 

recognize that each wellness program is 

unique and questions may remain 

regarding the application of these 

requirements. The Departments 

anticipate issuing future subregulatory 

guidance to provide additional clarity 

and potentially proposing modifications 

to this final rule as necessary. These 

final regulations generally implement 

standards for group health plans and 

health insurance issuers offering group 

health insurance coverage with respect 


sroberts on DSK5SPTVN1PROD with RULES
33160 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

8See section 1251 of the Affordable Care Act and 

interim final regulations at 26 CFR 54.9815–1251T, 

29 CFR 2590.715–1251, and 45 CFR 147.140 for the 

definition of a grandfathered health plan. 

9 26 CFR 54.9802–1(b)(2)(ii) and (c)(3); 29 CFR 

2590.702(b)(2)(ii) and (c)(3); and 45 CFR 

146.121(b)(2)(ii) and (c)(3). 10See 77 FR 70625. 

11The ‘‘reasonable alternative standard’’ is 

separate and distinct from the standard for 

‘‘reasonable accommodations’’ under the Americans 

with Disabilities Act of 1990 (ADA) and related 

laws, regulations and guidance. See section II.H 

later in this preamble for a discussion of how 

compliance with the nondiscrimination rules 

(including the wellness program provisions) is not 

determinative of compliance with any other law. 

to the wellness program exception from 

the HIPAA nondiscrimination 

provisions in PHS Act section 2705, 

ERISA section 702, and Code section 

9802, as amended by the Affordable 

Care Act. These final regulations replace 

the wellness program provisions of 

paragraph (f) of the 2006 regulations and 

are applicable to both grandfathered and 

non-grandfathered group health plans 

and group health insurance coverage for 

plan years beginning on or after January 

1, 2014.8 These regulations also 

implement the nondiscrimination 

provisions of PHS Act section 2705 

applicable to non-grandfathered 

individual health insurance coverage for 

policy years beginning on or after 

January 1, 2014. This rulemaking does 

not modify provisions of the 2006 

regulations other than paragraph (f). 

Stakeholder feedback suggested that 

there is some degree of confusion 

regarding the scope of the HIPAA and 

Affordable Care Act rules governing 

wellness programs, which is clarified in 

these final regulations. Specifically, 

these final regulations do not establish 

requirements for all types of programs 

or information technology platforms 

offered by an employer, health plan, or 

health insurance issuer that could be 

labeled a wellness program, disease 

management program, case management 

program, or similar term. Instead, these 

final regulations set forth criteria for a 

program of health promotion or disease 

prevention offered or provided by a 

group health plan or group health 

insurance issuer that must be satisfied 

in order for the plan or issuer to qualify 

for an exception to the prohibition on 

discrimination based on health status 

under paragraphs (b)(2)(ii) and (c)(3) of 

the 2006 regulations (which provide 

exceptions to the general prohibition 

against discrimination based on a health 

factor in benefits and premiums or 

contributions, respectively).9 That is, 

these rules set forth criteria for an 

affirmative defense that can be used by 

plans and issuers in response to a claim 

that the plan or issuer discriminated 

under the HIPAA nondiscrimination 

provisions. 

These final regulations are 

restructured, as compared to the 

proposed regulations, to help clarify this 

relationship and how the five statutory 

requirements apply to different types of 

programs, including different types of 

health-contingent wellness programs 

(described below as activity-only 

wellness programs and outcome-based 

wellness programs). The final 

regulations also reorganize the 

presentation of the steps a plan or issuer 

must take to ensure a wellness program: 

is reasonably designed to promote 

health or prevent disease; has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals; is not overly 

burdensome; is not a subterfuge for 

discriminating based on a health factor; 

and is not highly suspect in the method 

chosen to promote health or prevent 

disease. To meet these standards, 

health-contingent wellness programs 

that are outcome-based wellness 

programs must offer a ‘‘reasonable 

alternative standard’’ (or waiver of the 

otherwise applicable standard) to a 

broader group of individuals than is 

required for activity-only wellness 

programs. Specifically, for activity-only 

wellness programs, a reasonable 

alternative standard for obtaining the 

reward must be provided for any 

individual for whom, for that period, it 

is either unreasonably difficult due to a 

medical condition to meet the otherwise 

applicable standard, or for whom it is 

medically inadvisable to attempt to 

satisfy the otherwise applicable 

standard. For outcome-based wellness 

programs, which generally provide 

rewards based on whether an individual 

has attained a certain health outcome 

(such as a particular body mass index 

(BMI), cholesterol level, or non-smoking 

status, determined through a biometric 

screening or health risk assessment), a 

reasonable alternative standard must be 

provided to all individuals who do not 

meet the initial standard, to ensure that 

the program is reasonably designed to 

improve health and is not a subterfuge 

for underwriting or reducing benefits 

based on health status.10 These 

requirements are generally intended to 

be the same as those included in the 

proposed rules, but the terminology has 

changed (for example, the term 

‘‘different, reasonable means,’’ which 

was used side by side with the term 

‘‘reasonable alternative standard,’’ has 

been dropped to reduce confusion). 

These changes help to clarify that the 

group of individuals that must be 

offered a reasonable alternative standard 

differs when comparing the 

requirements for an activity-only 

wellness program to the requirements 

for an outcome-based wellness program. 

The requirements that the alternative be 

reasonable taking into account an 

individual’s medical condition, and the 

option of waiving the initial standard, 

remain the same. The term ‘‘reasonable 

alternative standard’’ is used in these 

final rules as it is in the statute.11

The intention of the Departments in 

these final regulations is that, regardless 

of the type of wellness program, every 

individual participating in the program 

should be able to receive the full 

amount of any reward or incentive, 

regardless of any health factor. The 

reorganized requirements of the final 

regulations explain how a plan or issuer 

is required to provide such an 

opportunity for each category of 

wellness program. 

B. Definitions 

Paragraph (f)(1) provides several 

definitions that govern for purposes of 

these final regulations. 

Reward. References in these final 

regulations to an individual obtaining a 

reward include both obtaining a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism 

(such as a deductible, copayment, or 

coinsurance), an additional benefit, or 

any financial or other incentive) and 

avoiding a penalty (such as the absence 

of a surcharge or other financial or 

nonfinancial disincentives). References 

in the final regulations to a plan 

providing a reward include both 

providing a reward (such as a discount 

or rebate of a premium or contribution, 

a waiver of all or part of a cost-sharing 

mechanism, an additional benefit, or 

any financial or other incentive) and 

imposing a penalty (such as a surcharge 

or other financial or nonfinancial 

disincentive). 

Participatory wellness programs. 

Consistent with the 2006 regulations 

and PHS Act section 2705(j), these final 

regulations continue to divide wellness 

programs into two categories: 

‘‘participatory wellness programs,’’ 

which are a majority of wellness 

programs (as noted below), and ‘‘healthcontingent wellness programs.’’ 

Participatory wellness programs are 

defined under the final regulations as 

programs that either do not provide a 

reward or do not include any conditions 

for obtaining a reward that are based on 

an individual satisfying a standard that 

is related to a health factor. Several 

examples of participatory wellness 

programs are provided in these final 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33161 

12 26 CFR 54.9802–1(b)(2)(ii) and (c)(3); 29 CFR 

2590.702(b)(2)(ii) and (c)(3); and 45 CFR 

146.121(b)(2)(ii) and (c)(3). 

13Until these final regulations are effective and 

applicable, the provisions of the 2006 regulations, 

at 26 CFR 54.9802–1(f), 29 CFR 2590.702(f), and 45 

CFR 146.121(f), generally remain applicable to 

group health plans and group health insurance 

issuers. 

regulations, including: (1) A program 

that reimburses employees for all or part 

of the cost of membership in a fitness 

center; (2) a diagnostic testing program 

that provides a reward for participation 

and does not base any part of the reward 

on outcomes; and (3) a program that 

provides a reward to employees for 

attending a monthly, no-cost health 

education seminar. 

Health-contingent wellness programs. 

In contrast, health-contingent wellness 

programs require an individual to 

satisfy a standard related to a health 

factor to obtain a reward (or require an 

individual to undertake more than a 

similarly situated individual based on a 

health factor in order to obtain the same 

reward). This standard may be 

performing or completing an activity 

relating to a health factor, or it may be 

attaining or maintaining a specific 

health outcome. In these final 

regulations, the category of healthcontingent wellness programs is 

subdivided into: (1) Activity-only 

wellness programs, and (2) outcomebased wellness programs. Under 

paragraphs (b)(2)(ii) and (c)(3) of the 

2006 regulations (which remain 

unchanged),12 both of these types of 

health-contingent wellness programs are 

permissible only if they comply with 

the criteria of these final regulations.13

Activity-only wellness programs. 

Activity-only wellness programs are a 

subcategory of health-contingent 

wellness programs. Under an activityonly wellness program, an individual is 

required to perform or complete an 

activity related to a health factor in 

order to obtain a reward. Activity-only 

wellness programs do not require an 

individual to attain or maintain a 

specific health outcome. Examples of 

activity-only wellness programs include 

walking, diet, or exercise programs. 

Some individuals participating in an 

activity-only wellness program may be 

unable to participate in or complete (or 

have difficulty participating in or 

completing) the program’s prescribed 

activity due to a health factor. For 

example, an individual may be unable 

to participate in a walking program due 

to a recent surgery or pregnancy, or may 

have difficulty participating due to 

severe asthma. The final regulations, 

therefore, provide safeguards to ensure 

these individuals are given a reasonable 

opportunity to qualify for the reward. 

Outcome-based wellness programs. 

Outcome-based wellness programs are a 

subcategory of health-contingent 

wellness programs. Under an outcomebased wellness program, an individual 

must attain or maintain a specific health 

outcome (such as not smoking or 

attaining certain results on biometric 

screenings) in order to obtain a reward. 

Generally, these programs have two 

tiers: (a) A measurement, test, or 

screening as part of an initial standard; 

and (b) a larger program that then targets 

individuals who do not meet the initial 

standard with wellness activities. For 

individuals who do not attain or 

maintain the specific health outcome, 

compliance with an educational 

program or an activity may be offered as 

an alternative to achieve the same 

reward. However, this alternative 

pathway does not mean that the overall 

program, which has an outcome-based 

initial standard, is not an outcomebased wellness program. That is, if a 

measurement, test, or screening is used 

as part of an initial standard and 

individuals who meet the standard are 

granted the reward, the program is 

considered an outcome-based wellness 

program. Examples of outcome-based 

wellness programs include a program 

that tests individuals for specified 

medical conditions or risk factors (such 

as high cholesterol, high blood pressure, 

abnormal BMI, or high glucose level) 

and provides a reward to employees 

identified as within a normal or healthy 

range (or at low risk for certain medical 

conditions), while requiring employees 

who are identified as outside the normal 

or healthy range (or at risk) to take 

additional steps (such as meeting with 

a health coach, taking a health or fitness 

course, adhering to a health 

improvement action plan, or complying 

with a health care provider’s plan of 

care) to obtain the same reward. 

C. Requirement for Participatory 

Wellness Programs 

Paragraph (f)(2) of these final 

regulations requires a participatory 

wellness program to be made available 

to all similarly situated individuals, 

regardless of health status. Participatory 

wellness programs are not required to 

meet the requirements applicable to 

health-contingent wellness programs 

under these final regulations. Some 

comments requested that the 

Departments impose additional 

requirements with respect to 

participatory wellness programs. Other 

commenters proposed that the 

Departments require that plans and 

issuers take into account an individual’s 

income or other personal circumstances 

in determining whether a participatory 

wellness program is available or 

accessible to all similarly situated 

individuals. 

As discussed earlier, the HIPAA 

nondiscrimination provisions generally 

prohibit group health plans and health 

insurance issuers from discriminating 

against individual participants and 

beneficiaries in eligibility, benefits, or 

premiums based on a health factor. To 

the extent a plan or issuer establishes a 

wellness program that does not adjust 

benefits or premiums based on a health 

factor, these wellness program 

provisions are generally not implicated. 

These final rules make clear that such 

‘‘participatory’’ wellness programs (in 

contrast to ‘‘health-contingent wellness 

programs’’) are permissible under the 

HIPAA nondiscrimination rules, as 

amended by the Affordable Care Act, 

provided they are available to all 

similarly situated individuals regardless 

of health status. 

Availability regardless of health status 

ensures that the general prohibition 

against discrimination based on a health 

factor is not implicated. If factors other 

than health status (such as scheduling 

limitations) limit an individual’s ability 

to take part in a program, that does not 

mean that the plan has violated the 

general rule prohibiting discrimination 

based on a health factor because the 

program was not discriminatory under 

the HIPAA nondiscrimination rules to 

begin with. For example, if a plan made 

available a premium discount in return 

for attendance at an educational 

seminar, but only healthy individuals 

were provided the opportunity to 

attend, the program would discriminate 

based on a health factor because only 

healthy individuals were provided the 

opportunity to reduce their premiums. 

However, if all similarly situated 

individuals were permitted to attend, 

but a particular individual could not 

attend because the seminar was held on 

a weekend day and the individual was 

unavailable to attend at that time, that 

does not mean the program 

discriminated against that individual 

based on a health factor. Because there 

is no discrimination based on a health 

factor under HIPAA, the wellness 

exception is not relevant. At the same 

time, as discussed in section II.H of this 

preamble, compliance with the HIPAA 

nondiscrimination and wellness 

provisions is not determinative of 

compliance with any other applicable 

Federal or State law, which may impose 

additional accessibility standards for 

wellness programs. 


sroberts on DSK5SPTVN1PROD with RULES
33162 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

14See 71 FR at 75018. See also 77 FR at 70623. 

15Small group market means the health insurance 

market under which individuals obtain health 

insurance coverage (directly or through any 

arrangement) on behalf of themselves (and their 

dependents) through a group health plan 

maintained by a small employer. See PHS Act 

section 2791(e)(5); 45 CFR 144.103. For this 

purpose, for plan years beginning on or after 

January 1, 2014, amendments made by the 

Affordable Care Act provide that the term ‘‘small 

employer’’ means, in connection with a group 

health plan with respect to a calendar year and a 

plan year, an employer who employed an average 

of at least 1 but not more than 100 employees on 

business days during the preceding calendar year 

and who employs at least 1 employee on the first 

day of the plan year. See PHS Act section 

2791(e)(4). In the case of plan years beginning 

before January 1, 2016, a State may elect to 

substitute ‘‘50 employees’’ for ‘‘100 employees’’ in 

its definition of a small employer. See section 

1304(b)(3) of the Affordable Care Act. 

16 45 CFR 147.102(c). 

17See www.thecommunityguide.org/index.html. 

18The preamble to the 2006 regulations stated 

that the ‘‘reasonably designed’’ standard was 

designed to prevent abuse, but otherwise was 

‘‘intended to be an easy standard to satisfy . . . 

There does not need to be a scientific record that 

the method promotes wellness to satisfy this 

standard. The standard is intended to allow 

experimentation in diverse ways of promoting 

wellness.’’ See 71 FR at 75018. The preamble also 

stated that the Departments did not ‘‘want plans 

and issuers to be constrained by a narrow range of 

programs . . . but want plans and issuers to feel 

free to consider innovative programs for motivating 

individuals to make efforts to improve their 

health.’’ See 71 FR at 75019. 

D. Requirements for Health-Contingent 

Wellness Programs 

These final regulations generally 

retain the proposed five requirements 

for health-contingent wellness 

programs, but the regulations have been 

reorganized, subdividing healthcontingent wellness programs into 

activity-only wellness programs and 

outcome-based wellness programs, to 

make it clearer to whom a plan or issuer 

is required to provide a reasonable 

alternative standard. The final 

regulations retain the proposed 

modification relating to the size of the 

reward, as well as clarifications that 

were proposed to address questions and 

issues raised by stakeholders since the 

2006 regulations were issued and to be 

consistent with the amendments made 

by the Affordable Care Act. 

(1) Frequency of Opportunity to Qualify 

These final regulations retain the 

requirement, for both activity-only and 

outcome-based wellness programs, that 

individuals eligible for the program be 

given the opportunity to qualify for the 

reward at least once per year. As stated 

in the preamble to the 2006 regulations 

and the proposed regulations, the onceper-year requirement was included as a 

bright-line standard for determining the 

minimum frequency that is consistent 

with a reasonable design for promoting 

good health or preventing disease.14

(2) Size of Reward 

Like the proposed regulations, these 

final regulations continue to limit the 

total amount of the reward for healthcontingent wellness programs (both 

activity-only and outcome-based) with 

respect to a plan, whether offered alone 

or coupled with the reward for other 

health-contingent wellness programs. 

Specifically, as in the proposed 

regulations, the total reward offered to 

an individual under all healthcontingent wellness programs with 

respect to a plan cannot exceed the 

applicable percentage (as defined in 

paragraph (f)(5) of the final regulations) 

of the total cost of employee-only 

coverage under the plan, taking into 

account both employer and employee 

contributions towards the cost of 

coverage for the benefit package under 

which the employee is (or the employee 

and any dependents are) receiving 

coverage. If, in addition to employees, 

any class of dependents (such as 

spouses, or spouses and dependent 

children) may participate in the healthcontingent wellness program, the 

reward cannot exceed the applicable 

percentage of the total cost of the 

coverage in which the employee and 

any dependents are enrolled (such as 

family coverage or employee-plus-one 

coverage). 

Several comments addressed healthcontingent wellness programs that allow 

dependents to participate, and what 

portion of the reward should be 

attributable to each participating 

dependent. For health-contingent 

wellness programs that allow a class of 

dependents to participate, some 

commenters suggested that the 

maximum allowed reward or incentive 

be prorated based on the portion of the 

premium or contribution attributable to 

that family member. These commenters 

argued that if, for example, one family 

member fails to meet the standard 

related to a health factor, the entire 

family should not be faced with the 

maximum penalty. Other commenters 

requested that the Departments not set 

forth rules for the apportionment of the 

reward where dependent coverage 

exists. These commenters argued that it 

would be an administrative challenge to 

apportion the reward to each covered 

family member. While final regulations 

issued by HHS under PHS Act section 

2701 require health insurance issuers in 

the small group market 15 to apply rating 

variations to family coverage based on 

the portion of the premium attributable 

to each family member covered under 

the coverage,16 these final regulations 

do not set forth detailed rules governing 

apportionment of the reward under a 

health-contingent wellness program. 

Instead, plans and issuers have 

flexibility to determine apportionment 

of the reward among family members, as 

long as the method is reasonable. 

Additional subregulatory guidance may 

be provided by the Departments if 

questions persist or if the Departments 

become aware of apportionment designs 

that seem unreasonable. 

(3) Reasonable Design 

Consistent with the 2006 regulations 

and PHS Act section 2705(j), these final 

regulations continue to require that 

health-contingent wellness programs be 

reasonably designed to promote health 

or prevent disease, whether activityonly or outcome-based. Some 

commenters urged that the Departments 

not impose a rigid set of pre-approved 

wellness program structures or 

guidelines, which may inhibit 

innovation in designing wellness 

programs. On the other hand, other 

commenters requested that the 

Departments require that all wellness 

programs be based on evidence-based 

clinical guidelines and national 

standards established by bodies such as 

the Centers for Disease Control and 

Prevention (CDC), Centers for Medicare 

& Medicaid Services, or the National 

Institutes of Health. These final 

regulations state that a wellness 

program is reasonably designed if it has 

a reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and is not 

overly burdensome, is not a subterfuge 

for discrimination based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. The determination of 

whether a health-contingent wellness 

program is reasonably designed is based 

on all the relevant facts and 

circumstances. While programs are not 

required to be accredited or based on 

particular evidence-based clinical 

standards, these practices, such as those 

found in CDC’s Guide to Community 

Preventive Services,17 may increase the 

likelihood of wellness program success 

and are encouraged as a best practice. 

These final regulations continue to 

provide plans and issuers flexibility and 

encourage innovation.18 Some 

commenters requested confirmation that 

plans and issuers could design wellness 

programs that are limited to targeted 

groups of individuals with adverse 

health factors. Consistent with 

paragraph (g) of the 2006 regulations, 

nothing in these final regulations 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33163 

prevents a plan or issuer from 

establishing more favorable rules for 

eligibility or premium rates (including 

rewards for adherence to certain 

wellness programs) for individuals with 

an adverse health factor than for 

individuals without the adverse health 

factor. 

Several comments requested that the 

reasonable design requirement include 

strong consumer protections to ensure 

that the opportunity for a discount is 

available in practice and accessible to 

all individuals regardless of health 

status. Some commenters argued that 

wellness programs which set clear 

markers of medical illness, disability, or 

largely non-preventable conditions as 

standards are not reasonably designed 

and should therefore be prohibited 

under the final regulations. Other 

commenters suggested that a 

‘‘reasonably designed’’ wellness 

program must include a set of programs, 

resources, and worksite policies 

designed to promote health and prevent 

disease and must include more than a 

biometric test. 

After consideration of all the 

comments, as in the proposed rules, the 

final regulations direct that an outcomebased wellness program must provide a 

reasonable alternative standard to 

qualify for the reward, for all 

individuals who do not meet the initial 

standard that is related to a health 

factor, in order to be reasonably 

designed. This approach is intended to 

ensure that outcome-based programs are 

more than mere rewards in return for 

results in biometric screenings or 

responses to a health risk assessment, 

and are instead part of a larger wellness 

program designed to promote health and 

prevent disease, ensuring the program is 

not a subterfuge for discrimination or 

underwriting based on a health factor. 

(4) Uniform Availability and Reasonable 

Alternative Standards 

An important element of these final 

regulations is the requirement that the 

full reward under a health-contingent 

wellness program, whether activity-only 

or outcome-based, be available to all 

similarly situated individuals. As stated 

earlier, the proposed regulations 

included requirements that, in certain 

circumstances, a health-contingent 

wellness program provide a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) and, to 

the extent that a plan’s initial standard 

for obtaining a reward (or a portion of 

a reward) is based on the results of a 

measurement, test, or screening that is 

related to a health factor (such as a 

biometric examination or a health risk 

assessment), provide a different, 

reasonable means of qualifying for the 

reward. Several commenters pointed out 

that the interaction between these two 

requirements was confusing and 

unclear. As discussed earlier in this 

preamble, these final regulations retain 

the same requirements contained in the 

proposed regulations, but the 

terminology has been changed to reduce 

confusion and provide clarity for the 

regulated community. 

Many clarifications regarding the 

reasonable alternative standards are 

equally applicable to activity-only 

wellness programs and outcome-based 

wellness programs. First, in order to 

satisfy the requirement to provide a 

reasonable alternative standard, the 

same, full reward must be available 

under a health-contingent wellness 

program (whether an activity-only or 

outcome-based wellness program) to 

individuals who qualify by satisfying a 

reasonable alternative standard as is 

provided to individuals who qualify by 

satisfying the program’s otherwise 

applicable standard. Accordingly, while 

an individual may take some time to 

request, establish, and satisfy a 

reasonable alternative standard, the 

same, full reward must be provided to 

that individual as is provided to 

individuals who meet the initial 

standard for that plan year. (For 

example, if a calendar year plan offers 

a health-contingent wellness program 

with a premium discount and an 

individual who qualifies for a 

reasonable alternative standard satisfies 

that alternative on April 1, the plan or 

issuer must provide the premium 

discounts for January, February, and 

March to that individual.) Plans and 

issuers have flexibility to determine 

how to provide the portion of the 

reward corresponding to the period 

before an alternative was satisfied (e.g., 

payment for the retroactive period or 

pro rata over the remainder of the year) 

as long as the method is reasonable and 

the individual receives the full amount 

of the reward. In some circumstances, 

an individual may not satisfy the 

reasonable alternative standard until the 

end of the year. In such circumstances, 

the plan or issuer may provide a 

retroactive payment of the reward for 

that year within a reasonable time after 

the end of the year, but may not provide 

pro rata payments over the following 

year (a year after the year to which the 

reward corresponds). The Departments 

may provide additional subregulatory 

guidance if questions persist or if the 

Departments become aware of payment 

designs that seem unreasonable with 

respect to individuals who satisfy the 

reasonable alternative standard. 

Other clarifications were retained 

from the proposed regulations. The final 

regulations reiterate that, in lieu of 

providing a reasonable alternative 

standard, a plan or issuer may always 

waive the otherwise applicable standard 

and provide the reward. These final 

regulations also do not require plans 

and issuers to establish a particular 

reasonable alternative standard in 

advance of an individual’s specific 

request for one, as long as a reasonable 

alternative standard is provided by the 

plan or issuer (or the condition for 

obtaining the reward is waived) upon an 

individual’s request. Plans and issuers 

have flexibility to determine whether to 

provide the same reasonable alternative 

standard for an entire class of 

individuals (provided that it is 

reasonable for that class) or provide the 

reasonable alternative standard on an 

individual-by-individual basis, based on 

the facts and circumstances presented. 

The Departments received several 

comments requesting that the final 

regulations permit employers to retain 

flexibility to make reasonable 

alternative standards health-focused and 

stringent enough so that these 

alternatives do not become a loophole 

for individuals who can meet the initial 

standard. These final regulations 

continue to permit plans and issuers 

flexibility in designing reasonable 

alternative standards (including using 

reasonable alternative standards that are 

health-contingent), while also providing 

some clarification of what constitutes 

being ‘‘reasonable’’ in the context of an 

alternative standard. 

All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has provided 

a reasonable alternative standard, 

including but not limited to the 

following factors listed in these final 

regulations: 

• If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted) and may not 

require an individual to pay for the cost 

of the program. 

• The time commitment required 

must be reasonable. 

• If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

• If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 


sroberts on DSK5SPTVN1PROD with RULES
33164 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

19See 76 FR at 37216. 

20See 71 FR 75019 (December 13, 2006) and 77 

FR 70624 (November 26, 2012). 

21See Katz DL, O’Connell M, Yeh MC, Nawaz H, 

Njike V, Anderson LM, Cory S, Dietz W: Task Force 

on Community Preventive Services. Public health 

strategies for preventing and controlling overweight 

and obesity in school and worksite settings: a report 

on recommendations of the Task Force on 

Community Preventive Services. MMWR Recomm 

Rep 2005, 7; 54 (RR–10):1–12. See also Fiore, M., 

Jaen, C., Baker, T., Bailey, W., Benowitz, N., Curry, 

S., Healton, C. (2008). Treating tobacco use and 

dependence; 2008 clinical practice guideline. 

Rockville, MD: U.S. Department of Health and 

Human Services. 

22The 2006 regulations provided that it is 

permissible for a plan or issuer to seek verification, 

such as a statement from the individual’s personal 

physician, that a health factor makes it 

unreasonably difficult for the individual to satisfy, 

or medically inadvisable for the individual to 

attempt to satisfy, the otherwise applicable 

standard. The Affordable Care Act amendments 

codified this provision with one modification: PHS 

Act section 2705(j)(3)(D)(ii) makes clear that 

verification, such as a statement from an 

individual’s personal physician, may be required by 

a plan or issuer ‘‘if reasonable under the 

circumstances.’’ 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. 

The final regulations generally retain 

the factors that were included in the 

proposed regulations with a few added 

clarifications. Specifically, in response 

to comments, the final rules clarify that 

in order for an alternative standard to be 

reasonable, the time commitment must 

be reasonable. For example, requiring 

attendance nightly at a one-hour class 

would be unreasonable. 

In addition, the proposed regulations 

stated that if a reasonable alternative 

standard is compliance with the 

recommendations of a medical 

professional who is an agent of the plan, 

and an individual’s personal physician 

states that the recommendations are not 

medically appropriate for that 

individual, the plan must provide a 

second reasonable alternative standard 

that accommodates the 

recommendations of the individual’s 

personal physician with regard to 

medical appropriateness, and that 

normal cost sharing could be imposed 

for medical items and services furnished 

pursuant to the physician’s 

recommendations. The final rules retain 

the clarification of the proposed 

regulations, and add an additional 

clarification that an individual’s 

personal physician can make 

recommendations regarding medical 

appropriateness that must be 

accommodated with respect to any plan 

standard (and is not limited to a 

situation in which a personal physician 

disagrees with the specific 

recommendations of an agent of the 

plan with respect to an individual). This 

additional clarification is consistent 

with the final regulations’ overall 

requirement that wellness programs be 

designed to promote health and prevent 

disease, and not be a subterfuge for 

discrimination or underwriting based on 

a health factor. As stated in the 

preamble to the Departments’ 

regulations implementing the internal 

claims and appeals and external review 

processes under PHS Act section 2719, 

adverse benefit determinations based on 

whether a participant or beneficiary is 

entitled to a reasonable alternative 

standard for a reward under a wellness 

program are considered to involve 

medical judgment and therefore are 

eligible for Federal external review.19

Plans and issuers may impose standard 

cost sharing under the plan or coverage 

for medical items and services furnished 

in accordance with the physician’s 

recommendations. 

The Departments continue to 

maintain that, with respect to tobacco 

cessation, ‘‘overcoming an addiction 

sometimes requires a cycle of failure 

and renewed effort,’’ as stated in the 

preamble to the proposed regulations.20

For plans with an initial outcome-based 

standard that an individual not use 

tobacco, a reasonable alternative 

standard in Year 1 may be to try an 

educational seminar. As clarified in an 

example in the final regulations, an 

individual who attends the seminar is 

then entitled to the reward, regardless of 

whether the individual quits smoking. 

At the same time, in Year 2, the plan 

may require completion of a different 

reasonable alternative standard, such as 

a complying with a new 

recommendation from the individual’s 

personal physician or a new nicotine 

replacement therapy (and completion of 

that standard would qualify the 

individual to receive the reward). 

It is the view of the Departments that 

the same can be true with respect to 

meeting any outcome-based standard. 

That is, with respect to weight loss and 

weight management, for example, 

clinical evidence suggests that a number 

of environmental factors can influence 

an individual’s ability to achieve a 

desired health outcome.21 Under these 

final regulations, plans and issuers 

cannot cease to provide a reasonable 

alternative standard under any healthcontingent wellness program merely 

because an individual was not 

successful in satisfying the initial 

standard before; plans and issuers must 

continue to offer a reasonable 

alternative standard whether it is the 

same or different and, to the extent the 

reasonable alternative standard is, itself, 

a health-contingent wellness program, it 

must meet the relevant requirements of 

these final regulations. Language in the 

final regulations clarifies that, for 

example, if a plan or issuer provides a 

walking program as a reasonable 

alternative standard to a running 

program, individuals for whom it is 

unreasonably difficult due to a medical 

condition to complete the walking 

program (or for whom it is medically 

inadvisable to attempt to complete the 

walking program) must be provided a 

reasonable alternative standard to the 

walking program. Similarly, to the 

extent a reasonable alternative standard 

is, itself, an outcome-based wellness 

program, the reasonable alternative 

standard must comply with the 

requirements for outcome-based 

wellness programs, subject to certain 

special rules, described below. 

While, as discussed earlier, many 

clarifications regarding the reasonable 

alternative standards are equally 

applicable to activity-only wellness 

programs and outcome-based wellness 

programs, some of the requirements 

apply in different ways depending on 

whether the program is an activity-only 

or an outcome-based wellness program. 

(a) Activity-Only Wellness Programs 

An activity-only wellness program 

must make the full reward under the 

program available to all similarlysituated individuals. Under paragraph 

(f)(3)(iv) of these final regulations, a 

reward under a wellness program is not 

available to all similarly situated 

individuals for a period unless the 

program allows a reasonable alternative 

standard (or waiver of the otherwise 

applicable standard) for obtaining the 

reward for any individual for whom, for 

that period, it is either unreasonably 

difficult due to a medical condition to 

meet the otherwise applicable standard, 

or for whom it is medically inadvisable 

to attempt to satisfy the otherwise 

applicable standard. 

Under an activity-only wellness 

program, it is permissible for a plan or 

issuer to seek verification, such as a 

statement from the individual’s personal 

physician, that a health factor makes it 

unreasonably difficult for the individual 

to satisfy, or medically inadvisable for 

the individual to attempt to satisfy, the 

otherwise applicable standard in an 

activity-only wellness program, if 

reasonable under the circumstances.22

Some commenters stated that it is 

common practice to require verification 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33165 

23See 45 CFR Parts 160 and 164. 

when an individual requests a 

reasonable alternative standard and 

urged the Departments to permit plans 

and issuers to require physician 

verification in all circumstances 

involving a request for a reasonable 

alternative standard. Other commenters 

supported the approach set forth in the 

proposed rules that limits plans’ and 

issuers’ ability to impose verification 

requirements to verification of claims 

that require the use of medical judgment 

to evaluate. Some of these commenters 

also asked the Departments to clarify 

that verification, when allowed, could 

be performed by any type of medical 

professional. The Departments also 

received comments on the example in 

the proposed regulations that stated it 

would not be reasonable for a plan or 

issuer to seek verification of a claim that 

is obviously valid based on the nature 

of the individual’s medical condition 

that is known to the plan or issuer. 

Many commenters had questions about 

what the Departments would consider a 

plan or issuer to know or not know, 

cited the fact that different information 

technology systems exist for wellness 

program information and claims data, 

and raised concerns regarding what 

types of situations would be ‘‘obviously 

valid’’ under this standard. 

The Departments originally included 

the example in the proposed regulations 

in the context of what these final 

regulations now refer to as outcomebased wellness programs, so that if an 

individual requested a reasonable 

alternative standard after failing to meet 

an initial standard based on a 

measurement, test, or screening, the 

plan or issuer could not then require 

physician verification of the need for a 

reasonable alternative standard. As 

described in more detail below, the 

reorganized final regulations clarify 

that, with respect to outcome-based 

wellness programs, plans and issuers 

cannot require verification by the 

individual’s physician that a health 

factor makes it unreasonably difficult 

for the individual to satisfy, or 

medically inadvisable for the individual 

to attempt to satisfy, the otherwise 

applicable standard as a condition of 

providing a reasonable alternative to the 

initial standard. While plans and issuers 

may still require such verification as a 

condition of providing a reasonable 

alternative standard in the context of an 

activity-only wellness program, the 

reorganization of the final regulations 

makes the language stating that it would 

not be reasonable for an issuer to seek 

verification of a claim which is 

obviously valid, as it was included in 

the proposed regulations, now moot. 

Therefore, after reviewing the comments 

received in response to the proposed 

regulations, the Departments have 

deleted this example from the regulatory 

text. Plans and issuers are still 

permitted under these final regulations 

to seek verification in the case of an 

activity-only wellness program with 

respect to requests for a reasonable 

alternative standard for which it is 

reasonable to determine that medical 

judgment is required to evaluate the 

validity of the request. 

In addition, with respect to which 

type of medical professional can be 

required by the plan or issuer to provide 

verification, the final regulations repeat 

the statutory language. Wellness 

programs and reasonable alternative 

standards can vary greatly, and the 

nature of the program or alternative 

standard may require different levels of 

clinical expertise to evaluate 

reasonableness with respect to any 

particular individual. These final 

regulations do not expressly prohibit 

plan provisions that require verification 

to be provided by a physician in 

clinically appropriate circumstances. 

Nor do these final regulations expressly 

require that medical professionals other 

than a physician be permitted to 

provide verification in specific 

circumstances if a physician’s expertise 

would be required to evaluate the 

validity of a request. Instead, the 

Departments generally view any plan 

requirement for verification to be 

subject to the broader standards for 

reasonable design and intend to 

examine verification requirements in 

light of all the relevant facts and 

circumstances. The Departments may 

provide future guidance on this issue. 

A number of commenters raised 

concerns about the privacy and 

confidentiality of health information 

provided to wellness programs, 

particularly with respect to employer 

access to such information and the 

potentially discriminatory results of 

such access. As noted in section II.H 

later in this preamble, these final 

regulations are implementing only the 

provisions regarding wellness programs 

in the Affordable Care Act. Other State 

and Federal laws may apply with 

respect to the privacy, disclosure, and 

confidentiality of information provided 

to these programs. For example, HIPAAcovered entities, including certain 

health plans and providers, must 

comply with the HIPAA Privacy and 

Security Rules 23 with respect to the 

confidentiality of individually 

identifiable health information, and 

employers subject to the Americans 

with Disabilities Act of 1990 (ADA) 

must comply with any applicable ADA 

requirements for disclosure and 

confidentiality of medical information 

and non-discrimination on the basis of 

disability. 

(b) Outcome-Based Wellness Programs 

Outcome-based wellness programs 

allow plans and issuers to conduct 

screenings and employ measurement 

techniques in order to target wellness 

programs effectively, as discussed 

earlier. For example, plans and issuers 

are able to target only individuals with 

high cholesterol for participation in 

cholesterol reduction programs, or 

individuals who use tobacco for 

participation in tobacco cessation 

programs, rather than the entire 

population of participants and 

beneficiaries, with the reward based on 

health outcomes or participation in 

reasonable alternatives. For outcomebased wellness programs to meet the 

requirement that the reward be available 

to all similarly situated individuals, the 

proposed regulations generally required 

that the program allow a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

who does not meet the initial standard 

based on a measurement, test, or 

screening. Several commenters asserted 

that a reasonable alternative standard 

should be required to be made available 

only to individuals who have a medical 

condition that prevents them from 

meeting the initial standard. As 

discussed earlier, programs consisting 

solely of a measurement, test, or 

screening are not reasonably designed to 

promote health and prevent disease. 

Therefore, if an individual does not 

meet a plan’s target biometrics (or other, 

similar initial standards), that 

individual must be provided with a 

reasonable alternative standard 

regardless of any medical condition or 

other health status, to ensure that 

outcome-based initial standards are not 

a subterfuge for discrimination or 

underwriting based on a health factor. 

The requirement to provide a 

reasonable alternative standard to all 

individuals who do not meet or achieve 

a particular health outcome is not 

intended to transform all outcome-based 

wellness programs to participatory 

wellness programs, although plans may 

choose to utilize participatory programs, 

such as educational programs, when 

designing reasonable alternative 

standards. Plans and issuers may 

provide reasonable alternative standards 

that are themselves health-contingent 

wellness programs. To the extent a 

reasonable alternative standard under 


sroberts on DSK5SPTVN1PROD with RULES
33166 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

24For ERISA plans, wellness program terms 

(including the availability of any reasonable 

alternative standard) are generally required to be 

disclosed in the summary plan description (SPD), 

as well as in the applicable governing plan 

documents (which must be provided upon request), 

if compliance with the wellness program affects 

premiums, cost sharing, or other benefits under the 

terms of the plan. 

an outcome-based wellness program is, 

itself, an activity-only wellness 

program, the reasonable alternative 

standard must comply with the 

requirements for activity-only programs 

as if it were an initial program standard. 

Therefore, for example, as discussed in 

more detail earlier in this preamble, if 

a plan or issuer provides a walking 

program as an alternative to a running 

program, the plan must provide 

reasonable alternatives to individuals 

who cannot complete the walking 

program because of a medical condition. 

Moreover, to the extent that a 

reasonable alternative standard under 

an outcome-based wellness program is, 

itself, another outcome-based wellness 

program, it must generally comply with 

the requirements for outcome-based 

wellness programs, subject to certain 

special rules. Among other things, these 

special rules prevent a never-ending 

cycle of reasonable alternative standards 

being required to be provided by plans 

and issuers, while also ensuring that a 

reasonable alternative standard 

prescribed for an individual is, in fact, 

reasonable in light of the individual’s 

actual circumstances, as determined to 

be medically appropriate in the 

judgment of the individual’s personal 

physician. Under the first special rule, 

the final regulations provide that the 

reasonable alternative standard cannot 

be a requirement to meet a different 

level of the same standard without 

additional time to comply that takes 

into account the individual’s 

circumstances. For example, if the 

initial standard is to achieve a BMI less 

than 30, the reasonable alternative 

standard cannot be to achieve a BMI less 

than 31 on that same date. However, if 

the initial standard is to achieve a BMI 

less than 30, a reasonable alternative 

standard for the individual could be to 

reduce the individual’s BMI by a small 

amount or a small percentage over a 

realistic period of time, such as within 

a year. Second, an individual must be 

given the opportunity to comply with 

the recommendations of the individual’s 

personal physician as a second 

reasonable alternative standard to 

meeting the reasonable alternative 

standard defined by the plan or issuer, 

but only if the physician joins in the 

request. The individual can make a 

request to involve a personal 

physician’s recommendations at any 

time and the personal physician can 

adjust the physician’s recommendations 

at any time, consistent with medical 

appropriateness, as determined by the 

personal physician. 

With respect to outcome-based 

wellness programs, it is not reasonable 

to require verification, such as a 

statement from the individual’s personal 

physician, that a health factor makes it 

unreasonably difficult for the individual 

to satisfy, or medically inadvisable for 

the individual to attempt to satisfy, the 

otherwise applicable standard as a 

condition of providing a reasonable 

alternative to the initial standard. (As 

discussed in the preceding paragraph, 

however, an individual must be given 

the opportunity to comply with the 

recommendations of the individual’s 

personal physician as a second 

reasonable alternative standard to 

meeting the reasonable alternative 

standard defined by the plan or issuer, 

but only if the physician joins in the 

request.) However, if a plan or issuer 

provides an activity-only wellness 

program as an alternative to the 

otherwise applicable measurement, test, 

or screening of the outcome-based 

wellness program, then the plan or 

issuer may, if reasonable under the 

circumstances, seek verification with 

respect to the activity-only component 

of the program that it is unreasonably 

difficult due to a medical condition for 

an individual to perform or complete 

the activity (or it is medically 

inadvisable to attempt to perform or 

complete the activity). For example, if 

an outcome-based wellness program 

requires participants to maintain a 

certain healthy weight and provides a 

diet and exercise program for 

individuals who do not meet the 

targeted weight (which is an activityonly standard), a plan or issuer may 

seek verification that a second 

reasonable alternative standard is 

needed for individuals for whom it 

would be unreasonably difficult due to 

a medical condition to comply, or 

medically inadvisable to attempt to 

comply, with the diet and exercise 

program, due to a medical condition. 

(5) Notice of Availability of Reasonable 

Alternative Standard 

These final regulations, like the 

proposed regulations, require plans and 

issuers to disclose the availability of a 

reasonable alternative standard to 

qualify for the reward (and, if 

applicable, the possibility of waiver of 

the otherwise applicable standard) in all 

plan materials describing the terms of a 

health-contingent wellness program 

(both activity-only and outcome-based 

wellness programs). These final 

regulations clarify that a disclosure of 

the availability of a reasonable 

alternative standard includes contact 

information for obtaining the alternative 

and a statement that recommendations 

of an individual’s personal physician 

will be accommodated. For outcome 

based-wellness programs, this notice 

must also be included in any disclosure 

that an individual did not satisfy an 

initial outcome-based standard. 

For all health contingent wellness 

programs (both activity-only and 

outcome-based wellness programs), if 

plan materials merely mention that such 

a program is available, without 

describing its terms, this disclosure is 

not required. For example, a summary 

of benefits and coverage required under 

section 2715 of the PHS Act that notes 

that cost sharing may vary based on 

participation in a diabetes wellness 

program, without describing the 

standards of the program, would not 

trigger this disclosure. In contrast, a 

plan disclosure that references a 

premium differential based on tobacco 

use, or based on the results of a 

biometric exam, is a disclosure 

describing the terms of a healthcontingent wellness program and, 

therefore, must include this disclosure. 

The proposed regulations provided 

new sample language in the regulatory 

text and in examples that was intended 

to be simpler for individuals to 

understand and to increase the 

likelihood that those who qualify for a 

reasonable alternative standard will 

contact the plan or issuer to request one. 

Some commenters supported the new 

sample language, while others suggested 

additions and modifications. Several 

commenters proposed adding additional 

information to the notice, in most cases 

related to requests for a reasonable 

alternative standard. The model notice 

is intended to be brief and many of the 

details regarding a wellness program are 

available in other plan documents.24

Accordingly, these final regulations do 

not adopt all of the suggestions made by 

commenters (for example, the sample 

language does not provide examples of 

reasons why an employee may request 

a reasonable alternative or government 

contact information for complaints). 

However, the sample language now 

includes a statement that 

recommendations of an individual’s 

personal physician will be 

accommodated. 

E. Applicable Percentage 

Paragraph (f)(5) of the final 

regulations sets the applicable 

percentage for the size of the reward 

under a health-contingent wellness 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33167 

25See 45 CFR 147.102(a)(1)(iv), published on 

February 27, 2013 at 78 FR 13406. 

26The remedy of recouping the tobacco premium 

surcharge that should have been paid since the 

beginning of the plan or policy year is provided 

under PHS Act section 2701 and its implementing 

regulations. As stated in the preamble to those 

regulations, it is the view of the Departments 

(which share interpretive jurisdiction over section 

2712 of the PHS Act) that this remedy of 

recoupment renders any misrepresentation with 

regard to tobacco use no longer a ‘‘material’’ fact for 

purposes of rescission under PHS Act section 2712 

and its implementing regulations. See 78 FR 13414. 

27Starting in 2017, States will have the option of 

allowing health insurance issuers in the large group 

market to participate in the Exchange. In States that 

elect this option, issuers in the large group market 

will be subject to the rating requirements of PHS 

section 2701 including the prohibition against 

rescinding based on failure to report tobacco use. 

28 In these final regulations, the Departments have 

deleted language from the applicability date section 

of the proposed regulations that references the 

regulations regarding grandfathered health plans. 

This deletion was made to avoid confusion 

regarding the applicability of these final 

regulations, which apply the same wellness 

program standards to both grandfathered and nongrandfathered health plans. The HHS regulations 

continue to provide, however, that with respect to 

individual health insurance coverage, the 

nondiscrimination provisions do not apply to 

grandfathered health plans. 

program. The 2006 regulations specified 

20 percent as the maximum permissible 

reward for participation in a healthcontingent wellness program. PHS Act 

section 2705(j)(3)(A), effective for plan 

years beginning on or after January 1, 

2014, increases the maximum reward to 

30 percent and authorizes the 

Departments to increase the maximum 

reward to as much as 50 percent, if the 

Departments determine that such an 

increase is appropriate. These final 

regulations increase the applicable 

percentage from 20 percent to 30 

percent, effective for plan years 

beginning on or after January 1, 2014, 

with an increase of an additional 20 

percentage points (to 50 percent) for 

health-contingent wellness programs 

designed to prevent or reduce tobacco 

use. Examples illustrate how to 

calculate the applicable percentage. 

As described in the proposed 

regulations, the additional increase for 

programs designed to prevent or reduce 

tobacco use is warranted to conform to 

the new PHS Act section 2701, to avoid 

inconsistency across group health 

coverage, whether insured or selfinsured, or offered in the small group or 

large group market, and to provide 

grandfathered plans the same flexibility 

to promote health and prevent disease 

as non-grandfathered plans. 

Specifically, PHS Act section 2701, the 

‘‘fair health insurance premium’’ 

provision, sets forth the factors that 

issuers may use to vary premium rates 

in the individual or small group market. 

PHS Act section 2701(a)(1)(A)(iv) 

provides that issuers in the individual 

and small group markets cannot vary 

rates for tobacco use by more than a 

ratio of 1.5 to 1 (that is, allowing up to 

a 50 percent premium surcharge for 

tobacco use). HHS published a final 

regulation implementing PHS Act 

section 2701 25 stating that health 

insurance issuers in the small group 

market are permitted to implement the 

tobacco use surcharge under PHS Act 

section 2701 to employees only in 

connection with a wellness program 

meeting the standards of PHS Act 

section 2705(j) and its implementing 

regulations. 

As discussed in the proposed rule, to 

coordinate these regulations with the 

tobacco use rating provisions of PHS 

Act section 2701, these final regulations 

use the authority in PHS Act section 

2705(j)(3)(A) (and, with respect to 

grandfathered health plans, the 

preexisting authority in the HIPAA 

nondiscrimination and wellness 

provisions) to increase the applicable 

percentage for determining the size of 

the reward for participating in a healthcontingent wellness program by an 

additional 20 percentage points (to 50 

percent) to the extent that the additional 

percentage is attributed to tobacco use 

prevention or reduction. 

Several commenters requested 

clarification that an individual’s 

statement regarding tobacco use is not 

grounds for a permissible rescission 

under PHS Act section 2712 and its 

implementing regulations. Under the 

HHS final regulation implementing PHS 

Act section 2701, an issuer that must 

comply with the requirements under 

PHS Act section 2701 may not rescind 

coverage on the basis that an enrollee is 

found to have reported false or incorrect 

information about their tobacco use.26

While the HHS final regulation 

implementing PHS Act section 2701 

addresses rescission, that provision is 

only applicable to health insurance 

issuers providing coverage in the 

individual and small group markets, 

and does not apply to self-insured group 

health plans and large insured group 

health plans.27 Whether self-insured 

group health plans and large insured 

group health plans can recoup the 

otherwise applicable premiums or 

benefits is generally determined under 

the plan terms and other applicable law, 

such as ERISA. Rescission in connection 

with an individual’s statement regarding 

tobacco use under self-insured and 

large, insured group health plans may 

be addressed by the Departments in 

future regulations or subregulatory 

guidance under PHS Act section 2712. 

F. Application to Grandfathered Plans 

Under these final regulations, the 

same wellness program standards apply 

to grandfathered health plans (under 

authority in the HIPAA 

nondiscrimination and wellness 

provisions) and non-grandfathered 

plans (under the rules of PHS Act 

section 2705 governing rewards for 

adherence to certain wellness programs, 

which largely adopt the wellness 

program provisions of the 2006 

regulations with some modification and 

clarification). While section 1251 of the 

Affordable Care Act provides that 

certain amendments made by the 

Affordable Care Act (including the 

amendments to PHS Act section 2705(j)) 

do not apply to grandfathered health 

plans,28 the Departments believe that 

the provisions of these final regulations 

are authorized under both HIPAA and 

the Affordable Care Act. This approach 

is intended to avoid inconsistency 

across group health coverage and to 

provide grandfathered plans the same 

flexibility to promote health and 

prevent disease as non-grandfathered 

plans. 

G. Application of Nondiscrimination 

Provisions to the Individual Health 

Insurance Market 

The HHS proposed regulations 

included a new 45 CFR 147.110 to apply 

the nondiscrimination protections of the 

2006 regulations to non-grandfathered 

individual health insurance coverage 

effective for policy years beginning on 

or after January 1, 2014. The proposed 

regulation, however, did not extend the 

wellness provisions to the individual 

health insurance market because the 

wellness exception of PHS Act section 

2705(j) does not apply to the individual 

health insurance market. 

Commenters requested that the 

wellness provisions be extended to the 

individual market or that states be 

allowed to authorize participatory 

programs in the individual market. 

Although the proposed rule addressing 

the individual market is being finalized 

without change, it is HHS’s belief that 

participatory wellness programs in the 

individual market do not violate the 

nondiscrimination provisions provided 

that such programs are consistent with 

State law and available to all similarly 

situated individuals enrolled in the 

individual health insurance coverage. 

This is because participatory wellness 

programs do not base rewards on 

achieving a standard related to a health 

factor, and thus do not discriminate 

based upon health status. 


sroberts on DSK5SPTVN1PROD with RULES
33168 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

29Moreover, in paragraph (b) of the 2006 

regulations, the general rule governing the 

application of the nondiscrimination rules to 

benefits clarifies that whether any plan provision or 

practice with respect to benefits complies with 

paragraph (b)(2)(i) does not affect whether the 

provision or practice is permitted under any other 

provision of the Code, ERISA, or the PHS Act, the 

Americans with Disabilities Act, or any other law, 

whether State or Federal. 

30See 71 FR 75014, 75015 (December 13, 2006). 

31 In section III of this preamble, some 

subsections have a heading listing one or two of the 

three Departments. In those subsections, the term 

‘‘Departments’’ generally refers only to the 

Departments listed in the heading. 

32The 2012 RAND Employer Survey found that 

the maximum premium differential offered in a 

survey respondent was 16 percent. 

H. No Effect on Other Laws 

Many commenters requested that the 

Departments address the interaction of 

these wellness program requirements 

with other laws. Paragraph (h) of the 

2006 regulations clarifies that 

compliance with the HIPAA 

nondiscrimination rules (which were 

later amended by the Affordable Care 

Act), including the wellness program 

requirements in paragraph (f), is not 

determinative of compliance with any 

other provision of ERISA, or any other 

State or Federal law, including the 

ADA.29 This paragraph is unchanged by 

these final regulations and remains in 

effect. As stated in the preamble to the 

2006 regulations,30 the Departments 

recognize that many other laws may 

regulate plans and issuers in their 

provision of benefits to participants and 

beneficiaries. These laws include, but 

are not limited to, the ADA, Title VII of 

the Civil Rights Act of 1964, Code 

section 105(h) and PHS Act section 

2716 (prohibiting discrimination in 

favor of highly compensated 

individuals), the Genetic Information 

Nondiscrimination Act of 2008, the 

Family and Medical Leave Act, ERISA’s 

fiduciary provisions, and State law. The 

Departments did not attempt to 

summarize the requirements of those 

laws in the 2006 regulations and do not 

attempt to do so in these final 

regulations. Employers, plans, issuers, 

and other service providers should 

consider the applicability of these laws 

to their coverage and contact legal 

counsel or other government agencies 

such as the Equal Employment 

Opportunity Commission and State 

Departments of Insurance if they have 

questions about those laws. As stated 

earlier in this preamble, this rulemaking 

does not modify paragraph (h) or any 

provisions of the 2006 regulations, other 

than paragraph (f). The Departments 

reiterate that compliance with these 

final regulations is not determinative of 

compliance with any other applicable 

requirements. 

I. Applicability Date 

These final regulations are applicable 

to group health plans and health 

insurance issuers in the group and 

individual markets for plan years (in the 

individual market, policy years) 

beginning on or after January 1, 2014, 

consistent with the statutory effective 

date of PHS Act section 2705, as well as 

PHS Act section 2701. 

III. Economic Impact and Paperwork 

Burden 

A. Executive Orders 12866 and 13563— 

Department of Labor and Department of 

Health and Human Services 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects; distributive impacts; and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. The Office of 

Management and Budget (OMB) has 

determined that this final rule is a 

‘‘significant regulatory action’’ under 

section 3(f)(4) of Executive Order 12866, 

because it raises novel legal or policy 

issues arising from the President’s 

priorities. Accordingly, the rule has 

been reviewed by the OMB. 

TABLE 1—ACCOUNTING TABLE

Benefits ............................... Quantified: Minimal due to low expected use of higher reward limits. 

Qualitative: Benefits include the ability to increase the reward based on a health factor to incentivize individuals to 

meet a health standard associated with improved health, which could improve the health of the individual and 

reduce health care costs. Improved standards could reduce the use of wellness programs as a subterfuge for 

discrimination based on a health factor. 

Costs .................................. Quantified: Minimal since employers are expected to create or expand wellness programs only if the expected 

benefit exceeds the cost as well as due to low expected use of higher reward limits. 

Qualitative: Costs of the rule include clarifications regarding what costs individuals may pay as part of an alternative means of complying with the health standard. To the extent an individual faces an increased cost for not 

meeting a health standard, the individual would have reduced resources to use for other purposes. 

Transfers ............................ Quantified: Minimal due to low expected use of higher reward limits. 

Qualitative: Transfers resulting from the rule include transfers from those who do not meet a health standard to 

those who do meet the standard or the associated alternative standard. 

Based on the Departments’ 31 review 

of the most recent literature and studies 

regarding wellness programs, as 

summarized in Table 1, the Departments 

have reached the conclusion that the 

impact of the benefits, costs, and 

transfers associated with the final rules 

will be minimal. As discussed in this 

analysis, few health-contingent wellness 

programs today come close to meeting 

the 20 percent limit (based on the data, 

the usual reward percentage ranges from 

three to 11 percent).32 Therefore, the 

Departments do not believe that 

expanding the limit to 30 percent (or 50 

percent for programs designed to 

prevent or reduce tobacco use) will 

result in significantly higher 

participation of employers in such 

programs. The Departments provide a 

qualitative discussion below and cite 

the survey data used to substantiate this 

conclusion. Moreover, most wellness 

programs appear to be participatory 

wellness programs that do not require 

an individual to meet a standard related 

to a health factor in order to obtain a 

reward. As stated earlier in this 

preamble, these participatory wellness 

programs are not required to meet the 

five requirements that apply to healthcontingent wellness programs, but they 

are required to be made available to all 

similarly situated individuals regardless 

of health status. 

Although the Departments believe few 

plans will expand the reward 

percentage, the Departments provide a 

qualitative discussion regarding the 

sources of benefits, costs, and transfers 

that could occur if plans were to expand 

the reward beyond the current 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33169 

33See 26 CFR 54.9802–1(f)(2)(i), 29 CFR 

2590.702(f)(2)(i), and 45 CFR 146.121(f)(2)(i). 

34See 45 CFR 147.102(a)(1)(iv), published on 

February 27, 2013 at 78 FR 13406. 

35On behalf of the Departments, RAND 

researchers did a review of the current literature on 

this topic. ‘‘A Review of the U.S. Workplace 

Wellness Market’’ February 2012. The report can be 

found at http://www.dol.gov/ebsa/pdf/ 

workplacewellnessmarketreview2012.pdf. 

36 Kaiser Family Foundation, Employer Health 

Benefits: 2012 Annual Survey. 2012, The Kaiser 

Family Foundation, Menlo Park, CA; Health 

Research & Educational Trust, Chicago, IL. 

37On behalf of the Departments, RAND produced 

the ‘‘Workplace Wellness Programs Study Final 

Report,’’ to submit to Congress contemporaneous 

Continued 

maximum of 20 percent. Currently, 

insufficient broad-based evidence makes 

it difficult to definitively assess the 

impact of workplace wellness programs 

on health outcomes and cost, although, 

overall, employers largely report that 

workplace wellness programs in general 

(participatory wellness programs and 

health-contingent wellness programs) 

are delivering on their intended 

objectives of improving health and 

reducing costs. 

The one source of potential additional 

cost discussed in the impact analysis is 

the clarification that plans must provide 

a reasonable alternative standard. The 

Departments present evidence that 

currently employers not only allow a 

reasonable alternative standard, but that 

most employers already pay for these 

alternatives. The Departments do not 

have an estimate of how many plans are 

not currently paying for alternatives 

consistent with the clarifications set 

forth in the final regulations, but the 

number appears to be small. The 

Departments also employ economic 

logic to conclude that employers will 

create or expand their wellness program 

and provide reasonable alternatives only 

if the expected benefits exceed the 

expected costs. Therefore, the 

Departments believe that the benefits of 

the final rule will justify the costs. 

B. Background and Need for Regulatory 

Action—Department of Labor and 

Department of Health and Human 

Services 

As discussed earlier in this preamble, 

on December 13, 2006, the Departments 

published joint final regulations 

implementing the HIPAA 

nondiscrimination and wellness 

provisions, which, among other things, 

allowed plans and issuers with healthcontingent wellness programs to vary 

benefits (including cost-sharing 

mechanisms), premiums, or 

contributions based on whether an 

individual has met the standards of a 

wellness program that met five specific 

requirements. See section I.B. of this 

preamble for a detailed discussion of the 

HIPAA nondiscrimination and wellness 

provisions and the 2006 regulations. 

C. Regulatory Alternatives—Department 

of Labor and Department of Health and 

Human Services 

The 2006 regulations outlined five 

specific criteria that must be met for 

health-contingent wellness programs to 

comply with the nondiscrimination 

requirements, including that the total 

reward for wellness programs offered by 

a plan sponsor not exceed 20 percent of 

the total cost of coverage under the 

plan.33 As amended by the Affordable 

Care Act, the nondiscrimination and 

wellness provisions of PHS Act section 

2705 largely reflect the 2006 regulations 

with some modification and 

clarification. Most notably, it increased 

the maximum reward that can be 

provided under a health-contingent 

wellness program from 20 percent to 30 

percent and authorized the Departments 

to increase the maximum reward to as 

much as 50 percent if the Departments 

determine that such an increase is 

appropriate. 

PHS Act section 2701(a)(1)(A)(iv) 

provides that issuers in the individual 

and small group markets cannot vary 

rates for tobacco use by more than a 

ratio of 1.5 to 1 (that is, allowing up to 

a 50 percent premium surcharge for 

tobacco use). PHS Act section 2701 

applies to non-grandfathered health 

insurance coverage in the individual 

and small group markets, but does not 

apply in the large group market or to 

self-insured plans. On February 27, 

2013, HHS published a final regulation 

stating that issuers in the small group 

market are permitted to implement the 

tobacco use surcharge under PHS Act 

section 2701 to employees only in 

connection with a wellness program 

meeting the standards of PHS Act 

section 2705(j) and its implementing 

regulations.34

An important policy goal of the 

Departments is to provide the large 

group market and self-insured plans and 

grandfathered health plans with the 

same flexibility as non-grandfathered 

plans in the small group market to 

promote tobacco-free workforces. The 

Departments considered several 

regulatory alternatives to meet this 

objective, including the following: 

(1) Stacking premium differentials. 

One alternative considered was to 

permit a 50 percent premium 

differential for tobacco use in the small 

group market under PHS Act section 

2701 without requiring a reasonable 

alternative standard. Under PHS Act 

section 2705, an additional 30 percent 

premium differential would also be 

permitted if the five criteria for a healthcontingent wellness program were met 

(including the offering of a reasonable 

alternative standard). Under this option, 

an 80 percent premium differential 

would have been allowable in the small 

group market based on factors related to 

health status. Large and self-insured 

plans would have been limited to the 30 

percent maximum reward. Allowing 

such a substantial difference between 

what was permissible in the small group 

market and the large group market was 

not in line with the Departments’ policy 

goal of providing consistency in 

flexibility for plans. 

(2) Concurrent premium differentials 

with no reasonable alternative required 

to be offered for tobacco use. Another 

alternative would be to read sections 

2701 and 2705 together such that, for 

non-grandfathered health plans in the 

small group market, up to a 50 percent 

premium differential would be 

permitted based on tobacco use, as 

authorized under PHS Act section 

2701(a)(1)(A)(iv), with no reasonable 

alternative standard required for the 

tobacco use program. With respect to 

non-tobacco-related wellness programs, 

a reward could be offered only to the 

extent that a tobacco use wellness 

program were less than 30 percent of the 

cost of coverage because the two 

provisions apply concurrently, and a 

reward would not be permitted under 

PHS Act section 2705 if the maximum 

reward already were exceeded by virtue 

of PHS Act section 2701. Thus, the 50 

percent tobacco surcharge under PHS 

Act section 2701 would be available 

only to non-grandfathered, insured, 

small group plans. The chosen approach 

is intended to avoid inconsistency and 

to provide grandfathered plans the same 

flexibility to promote health and 

prevent disease as non-grandfathered 

plans. 

D. Current Use of Wellness Programs 

and Economic Impacts—Department of 

Labor and Department of Health and 

Human Services 

The current use of wellness programs 

and economic impacts of these final 

regulations are discussed in this 

analysis. 

Wellness programs 35 have become 

common among employers in the 

United States. The 2012 Kaiser/HRET 

survey indicates that 63 percent of all 

employers who offered health benefits 

also offered at least one wellness 

program.36 A RAND Employer Survey 

found that 51 percent of employers offer 

wellness programs.37 The uptake of 


sroberts on DSK5SPTVN1PROD with RULES
33170 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

with the issuance of these final regulations. This 

report includes a literature review, case studies, 

analysis of an employer survey conducted by RAND 

for the Departments, and a review of Care 

Continuum Alliance data. 38Nyce, S. Boosting Wellness Participation 

Without Breaking the Bank. TowersWatson Insider. 

July, 2010:1–9. 

39The Care Continuum Alliance (CCA) is the 

trade organization of the health and wellness 

management industry. The CCA database includes 

data on health plan enrollment, medical and 

prescription claims, health risk assessment (HRA) 

responses, biometric screening information, and 

employee participation in health and wellness 

programs. 

40 Kaiser Family Foundation, Employer Health 

Benefits: 2012 Annual Survey. 2012, The Kaiser 

Family Foundation, Menlo Park, CA; Health 

Research & Educational Trust, Chicago, IL. 41Buck Consultants, Working Well: A Global 

Survey of Health Promotion and Workplace 

Wellness Strategies. 2010, Buck Consultants: San 

Francisco, CA. 

42Berry, L., A. Mirabito, and W. Baun, What’s the 

Hard Return on Employee Wellness Programs? 

Harvard Business Review, 2010. 88(12): p. 104. 

43Heirich, M. and C.J. Sieck, Worksite 

cardiovascular wellness programs as a route to 

substance abuse prevention. J Occup Environ Med, 

2000. 42(1): p. 47–56; 40; McMahon, S.D. and L.A. 

Jason, Social support in a worksite smoking 

intervention. A test of theoretical models. Behav 

Modif, 2000. 24(2): p. 184–201; Okechukwu, C.A., 

et al., MassBuilt: effectiveness of an apprenticeship 

site-based smoking cessation intervention for 

unionized building trades workers. Cancer Causes 

Control, 2009. 20(6): p. 887–94; Sorensen, G., et al., 

A comprehensive worksite cancer prevention 

intervention: behavior change results from a 

randomized controlled trial (United States). J Public 

Health Policy, 2003. 24(1): p. 5–25. Gold, D.B., D.R. 

Anderson, and S.A. Serxner, Impact of a telephonebased intervention on the reduction of health risks. 

Am J Health Promot, 2000. 15(2): p. 97–106; 

Herman, C.W., et al., Effectiveness of an incentivebased online physical activity intervention on 

employee health status. Journal of Occupational 

and Environmental Medicine, 2006. 48(9): p. 889– 

895; Ozminkowski, R.J., et al., The impact of the 

Citibank, NA, health management program on 

changes in employee health risks over time. J Occup 

Environ Med, 2000. 42(5): p. 502–11. 

44Heirich, M. and C.J. Sieck, Worksite 

cardiovascular wellness programs as a route to 

substance abuse prevention. J Occup Environ Med, 

2000. 42(1): p. 47–56; McMahon, S.D. and L.A. 

Jason, Social support in a worksite smoking 

intervention. A test of theoretical models. Behav 

Modif, 2000. 24(2): p. 184–201. 

45Heirich, M. and C.J. Sieck, Worksite 

cardiovascular wellness programs as a route to 

substance abuse prevention. J Occup Environ Med, 

2000. 42(1): p. 47–56; Okechukwu, C.A., et al., 

MassBuilt: effectiveness of an apprenticeship sitebased smoking cessation intervention for unionized 

building trades workers. Cancer Causes Control, 

2009. 20(6): p. 887–94. In the study, 42% of 

participants reduced their risk for tobacco use. See 

Gold, D.B., D.R. Anderson, and S.A. Serxner, 

Impact of a telephone-based intervention on the 

reduction of health risks. Am J Health Promot, 

2000. 15(2): p. 97–106. 

46 Gautam Gowrisankaran, Karen Norberg, Steven 

Kymes, Michael E. Chernew, Dustin Stwalley, Leah 

Kemper and William Peck ‘‘A Hospital System’s 

Wellness Program Linked To Health Plan 

Enrollment Cut Hospitalizations But Not Overall 

Costs’’ Health Affairs, 32, no.3 (2013):477–485. 

47 Jill R. Horwitz, Brenna D. Kelly, and John E. 

DiNardo ‘‘Wellness Incentives In The Workplace: 

Cost Savings Through Cost Shifting To Unhealthy 

Workers’’ Health Affairs, 32, no.3 (2013):468–476. 

wellness programs continues to be more 

common among large employers. For 

example, the Kaiser/HRET survey found 

that health risk assessments are offered 

by 38 percent of large employers 

offering health benefits, but only 18 

percent of employers with fewer than 

200 workers. 

The Kaiser/HRET survey indicates 

that 27 percent of all firms and 65 

percent of large firms offered weight 

loss programs, while 29 percent and 65 

percent, respectively, offered gym 

memberships or on-site exercise 

facilities. Meanwhile, 30 percent of all 

employers and 70 percent of large 

employers offered smoking cessation 

resources. Despite widespread 

availability, actual participation of 

employees in wellness programs 

remains limited. While no nationally 

representative data exist, a 2010 nonrepresentative survey suggests that 

typically less than 20 percent of eligible 

employees participate in wellness 

interventions such as smoking 

cessation.38

Currently, insufficient broad-based 

evidence makes it difficult to 

definitively assess the impact of 

workplace wellness on health outcomes 

and cost; however, available evidence 

suggests that wellness programs may 

have some effect on improving health 

outcomes. The RAND Corporation’s 

analysis of the Care Continuum Alliance 

(CCA) database 39 found statistically 

significant and clinically meaningful 

improvements in exercise frequency, 

smoking behavior, and weight control 

between wellness program participants 

and non-participants. 

Overall, employers largely report that 

workplace wellness programs are 

delivering on their intended benefit of 

improving health and reducing costs. 

According to the 2012 Kaiser/HRET 

survey, 73 percent of respondents that 

offered wellness programs stated that 

these programs improved employee 

health, and 52 percent believed that 

they reduced costs. Larger firms 

(defined as those with more than 200 

workers in the Kaiser/HRET survey) 

were more positive in believing that 

wellness programs reduced costs, as 68 

percent said that it reduced cost, as 

opposed to 51 percent among smaller 

firms.40 Forty percent of respondents to 

a survey by Buck Consultants indicated 

that they had measured the impact of 

their wellness program on the growth 

trend of their health care costs, and of 

these, 45 percent reported a reduction in 

that growth trend. The majority of these 

employers, 61 percent, reported that the 

reduction in growth trend of their health 

care costs was between two and five 

percentage points per year.41 There are 

numerous accounts of the positive 

impact of workplace wellness programs 

in many industries, regions, and types 

of employers. For example, RAND 

determined in their analysis that 

available data are suggestive that 

incentives above $50 are effective to 

encourage participation in wellness 

programs, and that incentives above 

$200 have a small, but statistically 

significant, effect on weight loss, 

exercise, and smoking outcomes. 

Additionally, a recent article published 

by the Harvard Business Review cited 

positive outcomes reported by privatesector employers along several different 

dimensions, including health care 

savings, reduced absenteeism, and 

employee satisfaction.42

Several studies that looked at the 

impact of smoking cessation programs 

found significantly higher quit rates or 

less tobacco use.43 Smoking cessation 

programs typically offered education 

and counseling to increase social 

support.44 RAND found notable 

evidence of the effectiveness of smoking 

cessation programs in its analysis of the 

CCA database and case studies. The 

CCA database analysis found that 

participation in a program targeting 

smoking cessation decreases the 

smoking rate among participating 

smokers by 30 percent in the first year. 

Employer D in RAND’s case studies 

reported that a smoking cessation 

program helped 33 employees quit 

smoking, which resulted in a onepercentage point decrease in the total 

number of smokers. Two other studies 

reported that individuals in the 

intervention group quit smoking at a 

rate approximately 10 percentage points 

higher than those in the control group, 

and another reported that participants 

were almost four times as likely as 

nonparticipants to reduce tobacco use.45

Overall, evidence on the effectiveness 

of wellness programs is promising, but 

it is not yet conclusive. An in-depth 

evaluation of an extensive wellness 

program involving a St. Louis hospital 

system found that the wellness program 

brought down inpatient hospitalization 

costs, but these cost savings were 

cancelled out by increased outpatient 

costs.46 Additionally, a recent article 

published by Health Affairs found that 

employer savings from wellness 

programs may result more from cost 

shifting, rather than from healthier 

outcomes and reduced health care 

usage.47 Finally, a study investigating 

the effectiveness of a smoking cessation 

program showed significant differences 

in smoking rates at a one-month followup, but showed no significant 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33171 

48 Kechukwu, C.A., et al., MassBuilt: effectiveness 

of an apprenticeship site-based smoking cessation 

intervention for unionized building trades workers. 

Cancer Causes Control, 2009. 20(6): p. 887–94. 

49Buck Consultants, Working Well: A Global 

Survey of Health Promotion and Workplace 

Wellness Strategies. 2010, Buck Consultants: San 

Francisco, CA. 

50Mercer, National Survey of EmployerSponsored Health Plans: 2011 Survey Report. 2012, 

Mercer. 

51 ‘‘Employers accelerate efforts to bring health 

benefit costs under control,’’ Mercer: November 16, 

2011; Available from: http://www.mercer.com/ 

press-releases/national-survey-employer-sponsoredhealth-plans. 

52 ‘‘Employer Survey on Purchasing Value in 

Health Care,’’ 17th Annual Towers Watson/National 

Business Group on Health Employer Survey on 

Purchasing Value in Health Care. 

53 ‘‘Guidance for a Reasonably Designed, 

Employer-Sponsored Wellness Program Using 

Outcomes-Based Incentives,’’ joint consensus 

statement of the Health Enhancement Research 

Organization, American College of Occupational 

and Environmental Medicine, American Cancer 

Society and American Cancer Society Cancer 

Action Network, American Diabetes Association, 

and American Heart Association. 

54Mercer, National Survey of EmployerSponsored Health Plans: 2009 Survey Report. 2010, 

Mercer. 

55Mercer, National Survey of EmployerSponsored Health Plans: 2009 Survey Report. 2010, 

Mercer. 

56TowersWatson, Raising the Bar on Health Care: 

Moving Beyond Incremental Change. 

differences in quit rates at six months, 

highlighting the need to investigate the 

sustainability of results.48

While employer plan sponsors 

generally are satisfied with the results, 

more than half stated in a recent survey 

that they do not know their programs’ 

return on investment.49 In the RAND 

Employer Survey, only about half of 

employers with wellness programs 

stated that they had formally evaluated 

program impact, and only two percent 

reported actual cost savings. When 

RAND conducted their case studies, 

they found that none of their employers 

had formally evaluated their programs, 

although three of the five case studies 

did examine some data metrics to 

conduct some level of assessment. 

The Departments are mindful that the 

peer-reviewed literature, while 

predominantly positive, covers only a 

small proportion of the universe of 

programs, limiting the generalizability 

of the reported findings. Evaluating 

such complex interventions is difficult 

and poses substantial methodological 

challenges that can invalidate findings. 

Further, although correlations often can 

be easily demonstrated, it can be 

difficult to show causal relationships. 

For example, it can be difficult to 

separate individuals’ varying levels of 

motivation to become healthier, and 

their self-selection to participate in 

wellness programs, from measures of 

the effectiveness of wellness programs 

themselves. 

In the Departments’ impact analysis 

for the proposed rules, available data 

indicated that employers’ use of 

incentives in wellness programs was 

relatively low. The Departments’ review 

of more recent literature indicates the 

use of incentives has become more 

common in wellness programs that are 

not health-contingent programs. Over 

two-thirds of RAND Employee Survey 

respondents reported using incentives 

to promote employee participation in 

wellness programs. The Kaiser/HRET 

Survey also reported that 41 percent 

offered any kind of incentive, which 

was nearly double the percent reporting 

some kind of incentive offering in 2010. 

Mercer Consulting’s 2011 National 

Survey of Employer-Sponsored Health 

Plans found similar patterns, estimating 

33 percent of those with 500 or more 

employees provided financial incentives 

for participating in at least one program, 

which was a 12 percentage point 

increase from the 2009 Survey.50

Employers, especially large ones, are 

also looking to continue to add 

incentives to their wellness programs. 

For example, the 2012 Mercer Survey 

found that as much as 87 percent of 

employers with more than 200 

employees plan to add or strengthen 

incentive programs.51 TowersWatson 

found that 17 percent of all employers 

intend to add a reward or penalty based 

on tobacco-use status.52 The use of 

incentives to promote employee 

engagement remains poorly understood, 

so it is not clear how type (for example, 

cash or non-cash), direction (reward 

versus penalty), and strength of 

incentive are related to employee 

engagement and outcomes. The Health 

Enhancement Research Organization 

and associated organizations also 

recognized this deficiency and provided 

seven questions for future research.53

There are also no data on potential 

unintended effects, such as 

discrimination against employees based 

on their health or health behaviors. 

Currently, the most commonly 

incentivized program appears to be 

associated with completion of a health 

risk assessment. According to the RAND 

Employer Survey, 30 percent of 

employers with a wellness program 

offered incentives for completing a 

health risk assessment. The 2009 Mercer 

survey found similar results, reporting 

that 10 percent of all firms and 23 

percent of large employers that offered 

a health risk assessment provided an 

incentive for completing the assessment. 

For other types of health management 

programs that the survey assessed, only 

two to four percent of all employers and 

13 to 19 percent of large employers 

offered incentives.54 The Kaiser/HRET 

survey found that 63 percent of large 

firms that offered a health risk 

assessment provided a financial 

incentive to employees who completed 

it. 

Cash and cash-equivalent incentives 

are the most popular incentive for 

completion of a health risk assessment. 

The 2009 Mercer survey reports that five 

percent of all employers and ten percent 

of those with 500 or more workers 

provided cash incentives for completion 

of a health risk assessment; one percent 

and two percent, respectively, offering 

lower cost sharing; and two percent and 

seven percent, respectively, offering 

lower premium contributions.55 Note 

that in the Mercer survey, the results 

cited reflect the incentives provided by 

all firms that offer a health risk 

assessment. 

Incentives may be triggered by a range 

of different levels of employee 

engagement. The simplest incentives are 

triggered by program enrollment—that 

is, by merely signing up for a wellness 

program. At the next level, incentives 

are triggered by program participation— 

for instance, attending a class or 

initiating a program, such as a smoking 

cessation intervention. Other incentive 

programs may require completion of a 

program, whether or not any particular 

health-related goals are achieved, to 

earn an incentive. The health-contingent 

incentive programs require successfully 

meeting a specific health outcome (or an 

alternative standard) to trigger an 

incentive, such as verifiably quitting 

smoking. Health-contingent incentive 

programs appear to be among the least 

common incentive schemes. According 

to the RAND Employer Survey, only 10 

percent of employers with more than 50 

employees that offer a wellness program 

use any incentives tied to health 

standards, only seven percent link the 

incentives to health insurance 

premiums, and only seven percent 

administer results-based incentives 

through their health plans. 

The most common form of outcomebased incentives is reported to be 

awarded for smoking cessation. The 

2010 survey by NBGH and 

TowersWatson indicated that while 25 

percent of responding employers offered 

a financial incentive for employees to 

become tobacco-free, only four percent 

offered financial incentives for 

maintaining a BMI within target levels, 

three percent did so for maintaining 

blood pressure within targets, and three 

percent for maintaining targeted 

cholesterol levels.56 The RAND 


sroberts on DSK5SPTVN1PROD with RULES
33172 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

57Mercer, National Survey of EmployerSponsored Health Plans: 2009 Survey Report. 2010, 

Mercer. 

58Linnan, L., et al., Results of the 2004 national 

worksite health promotion survey. American 

Journal of Public Health, 2008. 98(8): p. 1503–1509. 

59 Kaiser Family Foundation, Employer Health 

Benefits: 2010 Annual Survey. 

60See section II.C, earlier in this preamble for a 

more detailed discussion of these requirements. 

Employer Survey found that almost the 

same percentage of employers rewarded 

actual smoking cessation (19%) as 

rewarded mere participation in a 

smoking cessation program (21%), 

whereas employers were three to four 

times as likely to reward participation 

as outcomes for other health factors. 

When RAND conducted its case studies 

for the Departments, they found that 

four of five employers targeted smoking 

cessation outcomes with incentives, 

whereas only two of five employers had 

incentives for other outcomes. 

The value of incentives can vary 

widely. Estimates from representative 

surveys of the average value of 

incentives per year range between 

$152 57 and $557,58 or between three 

and 11 percent of the $5,049 average 

cost of individual coverage in 2010,59

among employees who receive them. 

According to the RAND Employer 

Survey, the maximum incentives 

average less than 10 percent. This 

suggests that companies typically are 

not close to reaching the 20 percent of 

the total cost of coverage threshold set 

forth in the 2006 regulations. 

The Departments lack sufficient 

information to assess how firms that 

currently are at the 20 percent limit will 

respond to the increased limits. The 

Departments received comments 

indicating that some firms may increase 

their limits, as permitted by the final 

rules; however, the number of these 

firms currently at the 20 percent limit is 

low. Furthermore, if a large number of 

firms already viewed the current 20 

percent reward limit as sufficient, then 

the Departments would not expect that 

increasing the limit would provide an 

incentive for program design changes. 

These findings indicate that, based on 

currently available data, increasing the 

maximum reward for particpating in a 

health-contingent wellness program to 

30 percent (and the Departments’ 

decision to allow an additional 20 

percentage points for programs designed 

to prevent or reduce tobacco use) is 

unlikely to have a significant impact. 

It is possible that the increased 

wellness program reward limits will 

incentivize firms without healthcontingent wellness programs to 

establish them. The Departments, 

however, do not expect a significant 

number of new programs to be created 

as a result of this change because firms 

without health-contingent wellness 

programs could already have provided 

rewards up to the 20 percent limit 

before the enactment of the Affordable 

Care Act, but did not. 

Two important elements of these final 

regulations are (1) the standard that the 

reward under a health-contingent 

wellness program be available to all 

similarly situated individuals and (2) 

the standard that a program be 

reasonably designed to promote health 

or prevent disease.60

As discussed earlier in this preamble, 

the final regulations do not prescribe a 

particular type of alternative standard 

that must be provided. Instead, they 

permit plan sponsors flexibility to 

provide any reasonable alternative. The 

Departments expect that plan sponsors 

will select alternatives that entail the 

minimum net costs (or, stated 

differently, the maximum net benefits) 

that are possible to achieve offsetting 

benefits, such as a higher smoking 

cessation success rate. 

It seems reasonable to presume that 

the net cost plan sponsors will incur in 

the provision of alternatives, including 

transfers as well as new economic costs 

and benefits, will not exceed the 

transfer cost of waiving surcharges for 

all individuals who qualify for 

alternatives. The Departments expect 

that many plan sponsors will find more 

cost effective ways to satisfy this 

requirement, should they exercise the 

option to provide incentives through a 

health-contingent wellness program, 

and that the true net cost to them will 

therefore be much smaller than the 

transfer cost of waiving surcharges for 

all plan participants who qualify for 

alternatives. The Departments have no 

basis for estimating the magnitude of the 

cost of providing alternative standards 

or of potential offsetting benefits at this 

time. 

The Departments note that plan 

sponsors will have strong motivation to 

identify and provide reasonable 

alternative standards that have positive 

net economic effects. Plan sponsors will 

be disinclined to provide alternatives 

that undermine their overall wellness 

program and worsen behavioral and 

health outcomes, or that make financial 

rewards available absent meaningful 

efforts by participants to improve their 

health habits and overall health. 

Instead, plan sponsors will be inclined 

to provide alternatives that sustain or 

reinforce plan participants’ incentive to 

improve their health habits and overall 

health, and/or that help participants 

make such improvements. It therefore 

seems likely that gains in economic 

welfare from this requirement will equal 

or outweigh losses. The Departments 

intend that the requirement to provide 

a reasonable alternative standard will 

eliminate instances where wellness 

programs serve only to shift costs to 

higher risk individuals and increase 

instances where programs succeed at 

helping high risk individuals improve 

their health. 

In considering the transfers that might 

derive from the availability of (and 

participants’ satisfaction with) 

reasonable alternative standards, the 

transfers arising from this requirement 

may take the form of transfers to 

individuals who satisfy a reasonable 

alternative standard, to such individuals 

from other individuals, or some 

combination of these. The existence of 

a health-contigent wellness program 

creates a transfer from those who do not 

meet the standard to those who do meet 

the standard. Allowing individuals to 

satisfy a reasonable alternative standard 

in order to qualify for a reward is a 

transfer to those who satisfy the 

reasonable alternative standard from 

everyone else in the risk pool. 

The reward associated with the 

wellness program is an incentive to 

encourage individuals to meet health 

standards associated with better or 

improved health, which in turn is 

associated with lower health care costs. 

If the rewards are effective, health care 

costs will be reduced as an individual’s 

health improves. Some of these lower 

health care costs could translate into 

lower premiums paid by employers and 

employees, which could offset some of 

the transfers. To the extent larger 

rewards are more effective at improving 

health and lowering costs, these final 

regulations will produce more benefits 

than the current requirements. 

Rewards also could create costs to 

individuals and to the extent the new 

larger rewards create more costs than 

smaller rewards, these final regulations 

may increase the costs relative to the 

2006 regulations. To the extent an 

individual does not meet a standard or 

satisfy a reasonable alternative standard, 

they could face higher costs. (For 

example, in the case of an individual 

participating in a wellness program with 

a tobacco cessation program, a plan or 

issuer is permitted to apply premium 

surcharge of up to 50 percent for 

tobacco use if certain conditions are 

met.) 

Based on the foregoing discussion, the 

Departments expect the benefits, costs, 

and transfers associated with these final 

regulations to be minimal. However, the 

Departments are not able to provide 

aggregate estimates, because they do not 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33173 

61Under ERISA section 104(a)(2), the Secretary 

may also provide exemptions or simplified 

reporting and disclosure requirements for pension 

plans. Pursuant to the authority of ERISA section 

104(a)(3), the Department of Labor has previously 

issued at 29 CFR 2520.104–20, 2520.104–21, 

2520.104–41, 2520.104–46, and 2520.104b–10 

certain simplified reporting provisions and limited 

exemptions from reporting and disclosure 

requirements for small plans, including unfunded 

or insured welfare plans, that cover fewer than 100 

participants and satisfy certain other requirements. 

62 Kaiser Family Foundation, Employer Health 

Benefits: 2012 Annual Survey. 2012, The Kaiser 

Family Foundation, Menlo Park, CA; Health 

Research & Educational Trust, Chicago, IL. 63 78 FR 13405. 

have sufficient data to estimate the 

number of plans that will take 

advantage of the new limits. 

E. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) applies to most 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.). 

Unless an agency certifies that such a 

rule will not have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

the RFA requires the agency to present 

an initial regulatory flexibility analysis 

at the time of the publication of the 

rulemaking describing the impact of the 

rule on small entities. Small entities 

include small businesses, organizations 

and governmental jurisdictions. 

For purposes of analysis under the 

RFA, the Departments consider a small 

entity to be an employee benefit plan 

with fewer than 100 participants. The 

basis of this definition is found in 

section 104(a)(3) of ERISA, which 

permits the Secretary of Labor to 

prescribe simplified annual reports for 

welfare benefit plans that cover fewer 

than 100 participants.61 While some 

large employers may have small plans, 

in general, small employers maintain 

most small plans. Thus, the 

Departments believe that assessing the 

impact of these final regulations on 

small plans is an appropriate substitute 

for evaluating the effect on small 

entities. The definition of small entity 

considered appropriate for this purpose 

differs, however, from a definition of 

small business that is based on size 

standards promulgated by the Small 

Business Administration (SBA) (13 CFR 

§ 121.201) pursuant to the Small 

Business Act (15 U.S.C. 631 et seq.). The 

Departments requested comments on 

the appropriateness of this size standard 

at the proposed rule stage and received 

several supportive responses and no 

negative responses. 

The Departments expect that these 

final regulations will affect few small 

plans. While a large number of small 

plans offer a wellness program, the 2012 

Kaiser/HRET survey reported that only 

seven percent of employers with fewer 

than 200 employees had a wellness 

program that offered cash or cash 

equivalent incentives (including gift 

cards, merchandise, or travel 

incentives.) 62 In addition, only two 

percent of these firms offered lower 

employee health plan premiums to 

wellness participants, less than one 

percent offered lower deductibles, and 

less than one percent offered higher 

health reimbursement account or health 

savings account contributions. 

Therefore, the Departments expect that 

few small plans will be affected by 

increasing the rewards threshold from 

20 percent to 30 percent (50 percent for 

programs targeting tobacco use 

prevention or reduction), because only a 

small percentage of plans have healthcontingent wellness programs. 

Moreover, as discussed in the Economic 

Impacts section earlier in this preamble, 

few plans that offer health-contingent 

wellness programs come close to 

reaching the 20 percent limit, and most 

participatory wellness programs are 

associated with completing the health 

risk assessment irrespective of the 

results, which are not subject to the 

limitation. 

The Kaiser/HRET survey also reports 

that about 80 percent of small plans had 

their wellness programs provided by the 

health plan provider. Industry experts 

indicated to the Departments that when 

wellness programs are offered by the 

health plan provider, they typically 

supply alternative education programs 

and offer them free of charge. This 

finding indicates that the requirement in 

the final rule for health-contingent 

wellness programs to provide and pay 

for a reasonable alternative standard for 

individuals for whom it is either 

unreasonably difficult or medically 

inadvisable to meet the original activityonly standard or for all individuals who 

fail to meet the initial outcome-based 

standard will impose little new costs or 

transfers to the affected plans. 

The Departments received a comment 

suggesting that the rule would have a 

significant economic impact on small 

entities no matter how they are defined, 

because a final regulation issued by 

HHS on February 27, 2013 provided that 

that issuers in the small group market 

can vary rates for tobacco use by up to 

a ratio of 1.5 to 1 (that is, allowing up 

to a 50 percent premium surcharge for 

tobacco use), pursuant to PHS Act 

section 2701(a)(1)(A)(iv) only in 

connection with a wellness program 

meeting the standards of PHS Act 

section 2705(j) and these final 

regulations.63 Since there are no data 

available to support this prediction, and 

the Departments only received one 

comment suggesting a substantial 

increase in the number of wellness 

programs, the Departments do not 

believe that a substantial increase in the 

number of wellness programs will 

occur. 

In the event that the number of 

wellness programs associated with 

small plans does increase, the 

Departments believe that this final rule 

contains considerable regulatory 

flexibility for plans to design wellness 

programs that suit their needs. With this 

flexibility in mind, the Departments 

expect that plans will only choose to 

offer a wellness program if the benefits 

outweigh the costs. If plans choose to 

offer a wellness program, they will 

design one that minimizes costs and is 

not overly burdensome. With this 

design flexibility, this rule should not 

disproportionately impact small 

entities. Thus, the commenter has 

highlighted the possibility that this final 

rule may affect a substantial number of 

small entities, but the Departments do 

not see any evidence to indicate that 

this final rule will have a significant 

impact on small entities. 

Based on the foregoing, the 

Departments hereby certify that these 

final regulations will not have a 

significant economic impact on a 

substantial number of small entities. 

F. Paperwork Reduction Act— 

Department of Labor and Department of 

the Treasury 

The 2006 regulations and the 

proposed regulations regarding wellness 

programs did not include an 

information collection request (ICR). As 

described earlier in this preamble, these 

final regulations, like the 2006 final 

regulations, require plans and issuers to 

disclose the availability of a reasonable 

alternative standard to qualify for the 

reward (and if applicable, the possibility 

of waiver of the otherwise applicable 

standard) in all plan materials 

describing the terms of a healthcontingent wellness program (both 

activity-only and outcome-based 

wellness programs). These final 

regulations clarify that a disclosure of 

the availability of a reasonable 

alternative standard includes contact 

information for obtaining the alternative 

and a statement that recommendations 

of an individual’s personal physician 

will be accommodated. For outcomeVerDate Mar<15>2010 16:45 May 31, 2013 Jkt 229001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 E:\FR\FM\03JNR2.SGM 03JNR2

sroberts on DSK5SPTVN1PROD with RULES
33174 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

64 In 2013, that threshold level is approximately 

$141 million. 

based wellness programs, this notice 

must also be included in any disclosure 

that an individual did not satisfy an 

initial outcome-based standard. If plan 

materials merely mention that such a 

program is available, without describing 

its terms, this disclosure is not required. 

These final regulations include sample 

language that can be used to satisfy this 

requirement. 

In concluding that these final 

regulations did not include an ICR, the 

Departments reasoned that much of the 

information required was likely already 

provided as a result of state and local 

requirements or the usual business 

practices of group health plans and 

group health insurance issuers in 

connection with the offer and 

promotion of health care coverage. In 

addition, the sample disclosures would 

enable group health plans to make any 

necessary modifications with minimal 

effort. 

Finally, although the final regulations 

do not include an ICR, the regulations 

could be interpreted to require a 

revision to an existing collection of 

information. Administrators of group 

health plans covered under Title I of 

ERISA are generally required to make 

certain disclosures about the terms of a 

plan and material changes in terms 

through a Summary Plan Description 

(SPD) or Summary of Material 

Modifications (SMM) pursuant to 

sections 101(a) and 102(a) of ERISA and 

related regulations. The ICR related to 

the SPD and SMM is currently approved 

by OMB under OMB control number 

1210–0039. While these materials may 

in some cases require revisions to 

comply with the final regulations, the 

associated burden is expected to be 

negligible, and is already accounted for 

in the SPD, SMM, and the ICR by a 

burden estimation methodology, which 

anticipates ongoing revisions. Based on 

the foregoing, the Departments do not 

expect that any change to the existing 

ICR arising from these final regulations 

will be substantive or material. 

Accordingly, the Departments have not 

filed an application for approval of a 

revision to the existing ICR with OMB 

in connection with these final 

regulations. 

G. Paperwork Reduction Act— 

Department of Health and Human 

Services 

As described in earlier in this 

preamble, The 2006 regulations and the 

proposed regulations regarding wellness 

programs did not include an 

information collection request (ICR). As 

described earlier in this preamble, these 

final regulations, like the 2006 final 

regulations, require plans and issuers to 

disclose the availability of a reasonable 

alternative standard to qualify for the 

reward (and if applicable, the possibility 

of waiver of the otherwise applicable 

standard) in all plan materials 

describing the terms of a healthcontingent wellness program (both 

activity-only and outcome-based 

wellness programs). These final 

regulations clarify that a disclosure of 

the availability of a reasonable 

alternative standard includes contact 

information for obtaining the alternative 

and a statement that recommendations 

of an individual’s personal physician 

will be accommodated. For outcomebased wellness programs, this notice 

must also be included in any disclosure 

that an individual did not satisfy an 

initial outcome-based standard. If plan 

materials merely mention that such a 

program is available, without describing 

its terms, this disclosure is not required. 

These final regulations include sample 

language that can be used to satisfy this 

requirement. 

The burden associated with this 

requirement was previously approved 

under OMB control number 0938–0819. 

We are not seeking reinstatement of the 

information collection request under the 

aforementioned OMB control number, 

since we believe that much of the 

information required is likely already 

provided as a result of state and local 

requirements or the usual business 

practices of group health plans and 

group health insurance issuers in 

connection with the offer and 

promotion of health care coverage. In 

addition, the sample disclosures would 

enable group health plans to make any 

necessary modifications with minimal 

effort. 

H. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury it has been determined that 

this final rule is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these final regulations, and, because 

these final regulations do not impose a 

collection of information on small 

entities, a Regulatory Flexibility 

Analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. Pursuant to section 7805(f) 

of the Code, the notice of proposed 

rulemaking preceding this final rule was 

submitted to the Small Business 

Administration for comment on its 

impact on small business. 

I. Congressional Review Act 

These final regulations are subject to 

the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and will be 

transmitted to Congress and the 

Comptroller General for review. These 

regulations, do not constitute a ‘‘major 

rule,’’ as that term is defined in 5 U.S.C. 

804 because they are unlikely to result 

in (1) an annual effect on the economy 

of $100 million or more; (2) a major 

increase in costs or prices for 

consumers, individual industries, or 

federal, State or local government 

agencies, or geographic regions; or (3) 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic or export 

markets. 

J. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), as well as Executive Order 

12875, these final regulations do not 

include any federal mandate that may 

result in expenditures by state, local, or 

tribal governments, or by the private 

sector, of $100 million or more, adjusted 

for inflation.64

K. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the states, 

the relationship between the national 

government and states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with state and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of state and local officials in 

the preamble to the regulation. 

In the Departments’ view, these final 

regulations have federalism 

implications, however, in the 

Departments’ view, the federalism 

implications of these final regulations 

are substantially mitigated because, 

with respect to health insurance issuers, 

the vast majority of states have enacted 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33175 

65This authority applies to insurance issued with 

respect to group health plans generally, including 

plans covering employees of church organizations. 

Thus, this discussion of federalism applies to all 

group health insurance coverage that is subject to 

the PHS Act, including those church plans that 

provide coverage through a health insurance issuer 

(but not to church plans that do not provide 

coverage through a health insurance issuer). 

laws, which meet or exceed the federal 

HIPAA standards prohibiting 

discrimination based on health factors. 

Therefore, the regulations are not likely 

to require substantial additional 

oversight of states by the Department of 

HHS. 

In general, through section 514, 

ERISA supersedes state laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

state laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits states from regulating a plan as 

an insurance or investment company or 

bank, HIPAA added a new preemption 

provision to ERISA (as well as to the 

PHS Act) narrowly preempting state 

requirements for group health insurance 

coverage. With respect to the HIPAA 

nondiscrimination provisions, states 

may continue to apply state law 

requirements except to the extent that 

the requirements prevent the 

application of the portability, access, 

and renewability requirements of 

HIPAA, which include HIPAA’s 

nondiscrimination requirements 

provisions. HIPAA’s Conference Report 

states that the conferees intended the 

narrowest preemption of state laws with 

regard to health insurance issuers (H.R. 

Conf. Rep. No. 736, 104th Cong. 2d 

Session 205, 1996). State insurance laws 

that are more stringent than the federal 

requirements are unlikely to ‘‘prevent 

the application of’’ the HIPAA 

nondiscrimination provisions, and 

therefore are not preempted. 

Accordingly, states have significant 

latitude to impose requirements on 

health insurance issuers that are more 

restrictive than the federal law. 

Guidance conveying this 

interpretation was published in the 

Federal Register on April 8, 1997 (62 FR 

16904) and on December 30, 2004 (69 

FR 78720), and these final regulations 

clarify and implement the statute’s 

minimum standards and do not 

significantly reduce the discretion given 

the states by the statute. 

HIPAA provides that the states may 

enforce the provisions of HIPAA as they 

pertain to issuers, but that the Secretary 

of HHS must enforce any provisions that 

a state chooses not to or fails to 

substantially enforce. When exercising 

its responsibility to enforce provisions 

of HIPAA, HHS works cooperatively 

with the State for the purpose of 

addressing the state’s concerns and 

avoiding conflicts with the exercise of 

state authority.65 HHS has developed 

procedures to implement its 

enforcement responsibilities, and to 

afford the states the maximum 

opportunity to enforce HIPAA’s 

requirements in the first instance. In 

compliance with Executive Order 

13132’s requirement that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, DOL and HHS have engaged in 

numerous efforts to consult with and 

work cooperatively with affected state 

and local officials. 

The Departments received a comment 

letter suggesting that they failed to take 

into account the reduction in states’ 

tobacco tax revenue that would occur if 

the proposed regulations result in fewer 

people smoking. The Departments note 

that reduced tobacco tax revenue is one 

of many indirect effects of reduced 

smoking. However, the Departments 

believe that any lost tax revenue will be 

more than offset by the benefits to the 

public welfare that will result from 

reduced smoking. As the commenter 

stated in its letter, ‘‘[t]hrough 

employees’ active participation in 

nondiscriminatory wellness programs, 

sick leave, absenteeism, health plan 

costs, and worker’s compensation will 

be reduced. Needless to mention, a 

healthier workforce is a more 

sustainable workforce. Therefore, from 

the point of view of public health, the 

rule greatly contributes to the promotion 

of healthy lifestyle of the states’ 

population. If every small and large 

entity improves the health of their 

employees, the overall health of the 

states will be improved as well.’’ 

In conclusion, throughout the process 

of developing these regulations, to the 

extent feasible within the specific 

preemption provisions of HIPAA, the 

Departments have attempted to balance 

the states’ interests in regulating health 

plans and health insurance issuers, and 

the rights of those individuals that 

Congress intended to protect through 

the enactment of HIPAA. 

IV. Statutory Authority 

The Department of the Treasury 

regulations are adopted pursuant to the 

authority contained in sections 7805 

and 9833 of the Code. 

The Department of Labor regulations 

are adopted pursuant to the authority 

contained in 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1185d, 1191, 1191a, 

1191b, and 1191c; sec. 101(g), Public 

Law 104–191, 110 Stat. 1936; sec. 

401(b), Public Law 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), 

Public Law 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Public Law 

111–148, 124 Stat. 119, as amended by 

Public Law 111–152, 124 Stat. 1029; 

Secretary of Labor’s Order 1–2011, 77 

FR 1088 (January 9, 2012). 

The Department of Health and Human 

Services regulations are adopted, with 

respect to 45 CFR part 146, pursuant to 

the authority contained in sections 2702 

through 2705, 2711 through 2723, 2791, 

and 2792 of the PHS Act (42 U.S.C. 

300gg–1 through 300gg–5, 300gg–11 

through 300gg–23, 300gg–91, and 

300gg–92) prior to the amendments 

made by the Affordable Care Act and 

sections 2701 through 2763, 2791, and 

2792 of the Public Health Service Act 

(42 U.S.C. 300gg through 300gg–63, 

300gg–91, and 300gg–92), as amended 

by the Affordable Care Act; with respect 

to 45 CFR part 147, pursuant to the 

authority contained in sections 2701 

through 2763, 2791, and 2792 of the 

PHS Act (42 U.S.C. 300gg through 

300gg–63, 300gg–91, and 300gg–92), as 

amended by the Affordable Care Act. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Parts 146 and 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 


sroberts on DSK5SPTVN1PROD with RULES
33176 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

Approved: May 23, 2013. 

Beth Tucker, 

Deputy Commissioner for Operations 

Support, Internal Revenue Service. 

Signed this May 15, 2013. 

Mark Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Dated: April 25, 2013. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: April 29, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Department of the Treasury 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR part 54 is 

amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 54 is amended by adding an 

entry for § 54.9815–2705 in numerical 

order to read in part as follows: 

Authority: 26 U.S.C. 7805. * * * 

Section 54.9815–2705 also issued under 26 

U.S.C. 9833. 

■ Par. 2. In § 54.9802–1, paragraph (f) is 

revised to read as follows: 

§ 54.9802–1 Prohibiting discrimination 

against participants and beneficiaries 

based on a health factor. 

* * * * * 

(f) Nondiscriminatory wellness 

programs—in general. A wellness 

program is a program of health 

promotion or disease prevention. 

Paragraphs (b)(2)(ii) and (c)(3) of this 

section provide exceptions to the 

general prohibitions against 

discrimination based on a health factor 

for plan provisions that vary benefits 

(including cost-sharing mechanisms) or 

the premium or contribution for 

similarly situated individuals in 

connection with a wellness program 

that satisfies the requirements of this 

paragraph (f). 

(1) Definitions. The definitions in this 

paragraph (f)(1) govern in applying the 

provisions of this paragraph (f). 

(i) Reward. Except where expressly 

provided otherwise, references in this 

section to an individual obtaining a 

reward include both obtaining a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and avoiding a penalty 

(such as the absence of a premium 

surcharge or other financial or 

nonfinancial disincentive). References 

in this section to a plan providing a 

reward include both providing a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and imposing a penalty 

(such as a surcharge or other financial 

or nonfinancial disincentive). 

(ii) Participatory wellness programs. If 

none of the conditions for obtaining a 

reward under a wellness program is 

based on an individual satisfying a 

standard that is related to a health factor 

(or if a wellness program does not 

provide a reward), the wellness program 

is a participatory wellness program. 

Examples of participatory wellness 

programs are: 

(A) A program that reimburses 

employees for all or part of the cost for 

membership in a fitness center. 

(B) A diagnostic testing program that 

provides a reward for participation in 

that program and does not base any part 

of the reward on outcomes. 

(C) A program that encourages 

preventive care through the waiver of 

the copayment or deductible 

requirement under a group health plan 

for the costs of, for example, prenatal 

care or well-baby visits. (Note that, with 

respect to non-grandfathered plans, 

§ 54.9815–2713T requires benefits for 

certain preventive health services 

without the imposition of cost sharing.) 

(D) A program that reimburses 

employees for the costs of participating, 

or that otherwise provides a reward for 

participating, in a smoking cessation 

program without regard to whether the 

employee quits smoking. 

(E) A program that provides a reward 

to employees for attending a monthly, 

no-cost health education seminar. 

(F) A program that provides a reward 

to employees who complete a health 

risk assessment regarding current health 

status, without any further action 

(educational or otherwise) required by 

the employee with regard to the health 

issues identified as part of the 

assessment. (See also § 54.9802–3T for 

rules prohibiting collection of genetic 

information.) 

(iii) Health-contingent wellness 

programs. A health-contingent wellness 

program is a program that requires an 

individual to satisfy a standard related 

to a health factor to obtain a reward (or 

requires an individual to undertake 

more than a similarly situated 

individual based on a health factor in 

order to obtain the same reward). A 

health-contingent wellness program 

may be an activity-only wellness 

program or an outcome-based wellness 

program. 

(iv) Activity-only wellness programs. 

An activity-only wellness program is a 

type of health-contingent wellness 

program that requires an individual to 

perform or complete an activity related 

to a health factor in order to obtain a 

reward but does not require the 

individual to attain or maintain a 

specific health outcome. Examples 

include walking, diet, or exercise 

programs, which some individuals may 

be unable to participate in or complete 

(or have difficulty participating in or 

completing) due to a health factor, such 

as severe asthma, pregnancy, or a recent 

surgery. See paragraph (f)(3) of this 

section for requirements applicable to 

activity-only wellness programs. 

(v) Outcome-based wellness 

programs. An outcome-based wellness 

program is a type of health-contingent 

wellness program that requires an 

individual to attain or maintain a 

specific health outcome (such as not 

smoking or attaining certain results on 

biometric screenings) in order to obtain 

a reward. To comply with the rules of 

this paragraph (f), an outcome-based 

wellness program typically has two 

tiers. That is, for individuals who do not 

attain or maintain the specific health 

outcome, compliance with an 

educational program or an activity may 

be offered as an alternative to achieve 

the same reward. This alternative 

pathway, however, does not mean that 

the overall program, which has an 

outcome-based component, is not an 

outcome-based wellness program. That 

is, if a measurement, test, or screening 

is used as part of an initial standard and 

individuals who meet the standard are 

granted the reward, the program is 

considered an outcome-based wellness 

program. For example, if a wellness 

program tests individuals for specified 

medical conditions or risk factors 

(including biometric screening such as 

testing for high cholesterol, high blood 

pressure, abnormal body mass index, or 

high glucose level) and provides a 

reward to individuals identified as 

within a normal or healthy range for 

these medical conditions or risk factors, 

while requiring individuals who are 

identified as outside the normal or 

healthy range (or at risk) to take 

additional steps (such as meeting with 

a health coach, taking a health or fitness 

course, adhering to a health 

improvement action plan, complying 

with a walking or exercise program, or 

complying with a health care provider’s 

plan of care) to obtain the same reward, 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33177 

the program is an outcome-based 

wellness program. See paragraph (f)(4) 

of this section for requirements 

applicable to outcome-based wellness 

programs. 

(2) Requirement for participatory 

wellness programs. A participatory 

wellness program, as described in 

paragraph (f)(1)(ii) of this section, does 

not violate the provisions of this section 

only if participation in the program is 

made available to all similarly situated 

individuals, regardless of health status. 

(3) Requirements for activity-only 

wellness programs. A health-contingent 

wellness program that is an activityonly wellness program, as described in 

paragraph (f)(1)(iv) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

activity-only wellness program, together 

with the reward for other healthcontingent wellness programs with 

respect to the plan, must not exceed the 

applicable percentage (as defined in 

paragraph (f)(5) of this section) of the 

total cost of employee-only coverage 

under the plan. However, if, in addition 

to employees, any class of dependents 

(such as spouses, or spouses and 

dependent children) may participate in 

the wellness program, the reward must 

not exceed the applicable percentage of 

the total cost of the coverage in which 

an employee and any dependents are 

enrolled. For purposes of this paragraph 

(f)(3)(ii), the cost of coverage is 

determined based on the total amount of 

employer and employee contributions 

towards the cost of coverage for the 

benefit package under which the 

employee is (or the employee and any 

dependents are) receiving coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the activity-only 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(3)(iv), a 

reward under an activity-only wellness 

program is not available to all similarly 

situated individuals for a period unless 

the program meets both of the following 

requirements: 

(1) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

unreasonably difficult due to a medical 

condition to satisfy the otherwise 

applicable standard; and 

(2) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

medically inadvisable to attempt to 

satisfy the otherwise applicable 

standard. 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

either paragraph (f)(3)(iv)(A)(1) or (2) of 

this section, a reasonable alternative 

standard must be furnished by the plan 

or issuer upon the individual’s request 

or the condition for obtaining the 

reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an activityonly wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of this 

paragraph (f)(3) in the same manner as 

if it were an initial program standard. 

(Thus, for example, if a plan or issuer 

provides a walking program as a 

reasonable alternative standard to a 

running program, individuals for whom 

it is unreasonably difficult due to a 

medical condition to complete the 

walking program (or for whom it is 

medically inadvisable to attempt to 

complete the walking program) must be 

provided a reasonable alternative 

standard to the walking program.) To 

the extent that a reasonable alternative 

standard under an activity-only 

wellness program is, itself, an outcomebased wellness program, it must comply 

with the requirements of paragraph 

(f)(4) of this section, including 

paragraph (f)(4)(iv)(D). 

(E) If reasonable under the 

circumstances, a plan or issuer may seek 

verification, such as a statement from an 

individual’s personal physician, that a 

health factor makes it unreasonably 

difficult for the individual to satisfy, or 

medically inadvisable for the individual 

to attempt to satisfy, the otherwise 

applicable standard of an activity-only 

wellness program. Plans and issuers 

may seek verification with respect to 

requests for a reasonable alternative 

standard for which it is reasonable to 

determine that medical judgment is 

required to evaluate the validity of the 

request. 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an activity-only 

wellness program the availability of a 

reasonable alternative standard to 

qualify for the reward (and, if 

applicable, the possibility of waiver of 

the otherwise applicable standard), 

including contact information for 

obtaining a reasonable alternative 

standard and a statement that 

recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 


sroberts on DSK5SPTVN1PROD with RULES
33178 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

(vi) Example. The provisions of this 

paragraph (f)(3) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

provides a reward to individuals who 

participate in a reasonable specified walking 

program. If it is unreasonably difficult due to 

a medical condition for an individual to 

participate (or if it is medically inadvisable 

for an individual to attempt to participate), 

the plan will waive the walking program 

requirement and provide the reward. All 

materials describing the terms of the walking 

program disclose the availability of the 

waiver. 

(ii) Conclusion. In this Example, the 

program satisfies the requirements of 

paragraph (f)(3)(iii) of this section because 

the walking program is reasonably designed 

to promote health and prevent disease. The 

program satisfies the requirements of 

paragraph (f)(3)(iv) of this section because the 

reward under the program is available to all 

similarly situated individuals. It 

accommodates individuals for whom it is 

unreasonably difficult to participate in the 

walking program due to a medical condition 

(or for whom it would be medically 

inadvisable to attempt to participate) by 

providing them with the reward even if they 

do not participate in the walking program 

(that is, by waiving the condition). The plan 

also complies with the disclosure 

requirement of paragraph (f)(3)(v) of this 

section. Thus, the plan satisfies paragraphs 

(f)(3)(iii), (iv), and (v) of this section. 

(4) Requirements for outcome-based 

wellness programs. A health-contingent 

wellness program that is an outcomebased wellness program, as described in 

paragraph (f)(1)(v) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

outcome-based wellness program, 

together with the reward for other 

health-contingent wellness programs 

with respect to the plan, must not 

exceed the applicable percentage (as 

defined in paragraph (f)(5) of this 

section) of the total cost of employeeonly coverage under the plan. However, 

if, in addition to employees, any class 

of dependents (such as spouses, or 

spouses and dependent children) may 

participate in the wellness program, the 

reward must not exceed the applicable 

percentage of the total cost of the 

coverage in which an employee and any 

dependents are enrolled. For purposes 

of this paragraph (f)(4)(ii), the cost of 

coverage is determined based on the 

total amount of employer and employee 

contributions towards the cost of 

coverage for the benefit package under 

which the employee is (or the employee 

and any dependents are) receiving 

coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. To ensure that an 

outcome-based wellness program is 

reasonably designed to improve health 

and does not act as a subterfuge for 

underwriting or reducing benefits based 

on a health factor, a reasonable 

alternative standard to qualify for the 

reward must be provided to any 

individual who does not meet the initial 

standard based on a measurement, test, 

or screening that is related to a health 

factor, as explained in paragraph 

(f)(4)(iv) of this section. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the outcome-based 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(4)(iv), a 

reward under an outcome-based 

wellness program is not available to all 

similarly situated individuals for a 

period unless the program allows a 

reasonable alternative standard (or 

waiver of the otherwise applicable 

standard) for obtaining the reward for 

any individual who does not meet the 

initial standard based on the 

measurement, test, or screening, as 

described in this paragraph (f)(4)(iv). 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

paragraph (f)(4)(iv)(A) of this section, a 

reasonable alternative standard must be 

furnished by the plan or issuer upon the 

individual’s request or the condition for 

obtaining the reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an outcomebased wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of 

paragraph (f)(3) of this section in the 

same manner as if it were an initial 

program standard. To the extent that a 

reasonable alternative standard under 

an outcome-based wellness program is, 

itself, another outcome-based wellness 

program, it must comply with the 

requirements of this paragraph (f)(4), 

subject to the following special rules: 

(1) The reasonable alternative 

standard cannot be a requirement to 

meet a different level of the same 

standard without additional time to 

comply that takes into account the 

individual’s circumstances. For 

example, if the initial standard is to 

achieve a BMI less than 30, the 

reasonable alternative standard cannot 

be to achieve a BMI less than 31 on that 

same date. However, if the initial 

standard is to achieve a BMI less than 

30, a reasonable alternative standard for 

the individual could be to reduce the 

individual’s BMI by a small amount or 

small percentage, over a realistic period 

of time, such as within a year. 

(2) An individual must be given the 

opportunity to comply with the 

recommendations of the individual’s 

personal physician as a second 

reasonable alternative standard to 

meeting the reasonable alternative 

standard defined by the plan or issuer, 

but only if the physician joins in the 

request. The individual can make a 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33179 

request to involve a personal 

physician’s recommendations at any 

time and the personal physician can 

adjust the physician’s recommendations 

at any time, consistent with medical 

appropriateness. 

(E) It is not reasonable to seek 

verification, such as a statement from an 

individual’s personal physician, under 

an outcome-based wellness program 

that a health factor makes it 

unreasonably difficult for the individual 

to satisfy, or medically inadvisable for 

the individual to attempt to satisfy, the 

otherwise applicable standard as a 

condition of providing a reasonable 

alternative to the initial standard. 

However, if a plan or issuer provides an 

alternative standard to the otherwise 

applicable measurement, test, or 

screening that involves an activity that 

is related to a health factor, then the 

rules of paragraph (f)(3) of this section 

for activity-only wellness programs 

apply to that component of the wellness 

program and the plan or issuer may, if 

reasonable under the circumstances, 

seek verification that it is unreasonably 

difficult due to a medical condition for 

an individual to perform or complete 

the activity (or it is medically 

inadvisable to attempt to perform or 

complete the activity). (For example, if 

an outcome-based wellness program 

requires participants to maintain a 

certain healthy weight and provides a 

diet and exercise program for 

individuals who do not meet the 

targeted weight, a plan or issuer may 

seek verification, as described in 

paragraph (f)(3)(iv)(D) of this section, if 

reasonable under the circumstances, 

that a second reasonable alternative 

standard is needed for certain 

individuals because, for those 

individuals, it would be unreasonably 

difficult due to a medical condition to 

comply, or medically inadvisable to 

attempt to comply, with the diet and 

exercise program, due to a medical 

condition.) 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an outcomebased wellness program, and in any 

disclosure that an individual did not 

satisfy an initial outcome-based 

standard, the availability of a reasonable 

alternative standard to qualify for the 

reward (and, if applicable, the 

possibility of waiver of the otherwise 

applicable standard), including contact 

information for obtaining a reasonable 

alternative standard and a statement 

that recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 

(vi) Examples. The rules of this 

paragraph (f)(4) are illustrated by the 

following examples: 

Example 1—Cholesterol screening with 

reasonable alternative standard to work with 

personal physician. (i) Facts. A group health 

plan offers a reward to participants who 

achieve a count under 200 on a total 

cholesterol test. If a participant does not 

achieve the targeted cholesterol count, the 

plan allows the participant to develop an 

alternative cholesterol action plan in 

conjunction with the participant’s personal 

physician that may include 

recommendations for medication and 

additional screening. The plan allows the 

physician to modify the standards, as 

medically necessary, over the year. (For 

example, if a participant develops asthma or 

depression, requires surgery and 

convalescence, or some other medical 

condition or consideration makes completion 

of the original action plan inadvisable or 

unreasonably difficult, the physician may 

modify the original action plan.) All plan 

materials describing the terms of the program 

include the following statement: ‘‘Your 

health plan wants to help you take charge of 

your health. Rewards are available to all 

employees who participate in our Cholesterol 

Awareness Wellness Program. If your total 

cholesterol count is under 200, you will 

receive the reward. If not, you will still have 

an opportunity to qualify for the reward. We 

will work with you and your doctor to find 

a Health Smart program that is right for you.’’ 

In addition, when any individual participant 

receives notification that his or her 

cholesterol count is 200 or higher, the 

notification includes the following statement: 

‘‘Your plan offers a Health Smart program 

under which we will work with you and your 

doctor to try to lower your cholesterol. If you 

complete this program, you will qualify for 

a reward. Please contact us at [contact 

information] to get started.’’ 

(ii) Conclusion. In this Example 1, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain cholesterol level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because the cholesterol program is 

reasonably designed to promote health and 

prevent disease. The program satisfies the 

requirements of paragraph (f)(4)(iv) of this 

section because it makes available to all 

participants who do not meet the cholesterol 

standard a reasonable alternative standard to 

qualify for the reward. Lastly, the plan also 

discloses in all materials describing the terms 

of the program and in any disclosure that an 

individual did not satisfy the initial outcomebased standard the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

ability to involve his or her personal 

physician), as required by paragraph (f)(4)(v) 

of this section. Thus, the program satisfies 

the requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 2—Cholesterol screening with 

plan alternative and no opportunity for 

personal physician involvement. (i) Facts. 

Same facts as Example 1, except that the 

wellness program’s physician or nurse 

practitioner (rather than the individual’s 

personal physician) determines the 

alternative cholesterol action plan. The plan 

does not provide an opportunity for a 

participant’s personal physician to modify 

the action plan if it is not medically 

appropriate for that individual. 

(ii) Conclusion. In this Example 2, the 

wellness program does not satisfy the 

requirements of paragraph (f)(4)(iii) of this 

section because the program does not 

accommodate the recommendations of the 

participant’s personal physician with regard 

to medical appropriateness, as required 

under paragraph (f)(4)(iv)(C)(3) of this 

section. Thus, the program is not reasonably 

designed under paragraph (f)(4)(iii) of this 

section and is not available to all similarly 

situated individuals under paragraph 

(f)(4)(iv) of this section. The notice also does 

not provide all the content required under 

paragraph (f)(4)(v) of this section. 

Example 3—Cholesterol screening with 

plan alternative that can be modified by 

personal physician. (i) Facts. Same facts as 

Example 2, except that if a participant’s 

personal physician disagrees with any part of 

the action plan, the personal physician may 

modify the action plan at any time, and the 

plan discloses this to participants. 

(ii) Conclusion. In this Example 3, the 

wellness program satisfies the requirements 

of paragraph (f)(4)(iii) of this section because 

the participant’s personal physician may 

modify the action plan determined by the 

wellness program’s physician or nurse 

practitioner at any time if the physician 

states that the recommendations are not 

medically appropriate, as required under 

paragraph (f)(4)(iv)(C)(3) of this section. 

Thus, the program is reasonably designed 

under paragraph (f)(4)(iii) of this section and 

is available to all similarly situated 

individuals under paragraph (f)(4)(iv) of this 

section. The notice, which includes a 

statement that recommendations of an 

individual’s personal physician will be 

accommodated, also complies with 

paragraph (f)(4)(v) of this section. 

Example 4—BMI screening with walking 

program alternative. (i) Facts. A group 

health plan will provide a reward to 

participants who have a body mass index 

(BMI) that is 26 or lower, determined shortly 

before the beginning of the year. Any 

participant who does not meet the target BMI 

is given the same discount if the participant 

complies with an exercise program that 

consists of walking 150 minutes a week. Any 

participant for whom it is unreasonably 

difficult due to a medical condition to 

comply with this walking program (and any 

participant for whom it is medically 

inadvisable to attempt to comply with the 

walking program) during the year is given the 

same discount if the participant satisfies an 

alternative standard that is reasonable taking 

into consideration the participant’s medical 

situation, is not unreasonably burdensome or 


sroberts on DSK5SPTVN1PROD with RULES
33180 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

impractical to comply with, and is otherwise 

reasonably designed based on all the relevant 

facts and circumstances. All plan materials 

describing the terms of the wellness program 

include the following statement: ‘‘Fitness is 

Easy! Start Walking! Your health plan cares 

about your health. If you are considered 

overweight because you have a BMI of over 

26, our Start Walking program will help you 

lose weight and feel better. We will help you 

enroll. (* *If your doctor says that walking 

isn’t right for you, that’s okay too. We will 

work with you (and, if you wish, your own 

doctor) to develop a wellness program that 

is.)’’ Participant E is unable to achieve a BMI 

that is 26 or lower within the plan’s 

timeframe and receives notification that 

complies with paragraph (f)(4)(v) of this 

section. Nevertheless, it is unreasonably 

difficult due to a medical condition for E to 

comply with the walking program. E 

proposes a program based on the 

recommendations of E’s physician. The plan 

agrees to make the same discount available 

to E that is available to other participants in 

the BMI program or the alternative walking 

program, but only if E actually follows the 

physician’s recommendations. 

(ii) Conclusion. In this Example 4, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain BMI level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because it is reasonably designed to 

promote health and prevent disease. The 

program also satisfies the requirements of 

paragraph (f)(4)(iv) of this section because it 

makes available to all individuals who do not 

satisfy the BMI standard a reasonable 

alternative standard to qualify for the reward 

(in this case, a walking program that is not 

unreasonably burdensome or impractical for 

individuals to comply with and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances). In 

addition, the walking program is, itself, an 

activity-only standard and the plan complies 

with the requirements of paragraph (f)(3) of 

this section (including the requirement of 

paragraph (f)(3)(iv) that, if there are 

individuals for whom it is unreasonably 

difficult due to a medical condition to 

comply, or for whom it is medically 

inadvisable to attempt to comply, with the 

walking program, the plan provide a 

reasonable alternative to those individuals). 

Moreover, the plan satisfies the requirements 

of paragraph (f)(4)(v) of this section because 

it discloses, in all materials describing the 

terms of the program and in any disclosure 

that an individual did not satisfy the initial 

outcome-based standard, the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician) to qualify for the reward or the 

possibility of waiver of the otherwise 

applicable standard. Thus, the program 

satisfies the requirements of paragraphs 

(f)(4)(iii), (iv), and (v) of this section. 

Example 5—BMI screening with 

alternatives available to either lower BMI or 

meet personal physician’s recommendations. 

(i) Facts. Same facts as Example 4 except 

that, with respect to any participant who 

does not meet the target BMI, instead of a 

walking program, the participant is expected 

to reduce BMI by one point. At any point 

during the year upon request, any individual 

can obtain a second reasonable alternative 

standard, which is compliance with the 

recommendations of the participant’s 

personal physician regarding weight, diet, 

and exercise as set forth in a treatment plan 

that the physician recommends or to which 

the physician agrees. The participant’s 

personal physician is permitted to change or 

adjust the treatment plan at any time and the 

option of following the participant’s personal 

physician’s recommendations is clearly 

disclosed. 

(ii) Conclusion. In this Example 5, the 

reasonable alternative standard to qualify for 

the reward (the alternative BMI standard 

requiring a one-point reduction) does not 

make the program unreasonable under 

paragraph (f)(4)(iii) or (iv) of this section 

because the program complies with 

paragraph (f)(4)(iv)(C)(4) of this section by 

allowing a second reasonable alternative 

standard to qualify for the reward 

(compliance with the recommendations of 

the participant’s personal physician, which 

can be changed or adjusted at any time). 

Accordingly, the program continues to satisfy 

the applicable requirements of paragraph (f) 

of this section. 

Example 6—Tobacco use surcharge with 

smoking cessation program alternative. (i) 

Facts. In conjunction with an annual open 

enrollment period, a group health plan 

provides a premium differential based on 

tobacco use, determined using a health risk 

assessment. The following statement is 

included in all plan materials describing the 

tobacco premium differential: ‘‘Stop smoking 

today! We can help! If you are a smoker, we 

offer a smoking cessation program. If you 

complete the program, you can avoid this 

surcharge.’’ The plan accommodates 

participants who smoke by facilitating their 

enrollment in a smoking cessation program 

that requires participation at a time and place 

that are not unreasonably burdensome or 

impractical for participants, and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances, and 

discloses contact information and the 

individual’s option to involve his or her 

personal physician. The plan pays for the 

cost of participation in the smoking cessation 

program. Any participant can avoid the 

surcharge for the plan year by participating 

in the program, regardless of whether the 

participant stops smoking, but the plan can 

require a participant who wants to avoid the 

surcharge in a subsequent year to complete 

the smoking cessation program again. 

(ii) Conclusion. In this Example 6, the 

premium differential satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v). The program is an outcome-based 

wellness program because the initial 

standard for obtaining a reward is dependent 

on the results of a health risk assessment (a 

measurement, test, or screening). The 

program is reasonably designed under 

paragraph (f)(4)(iii) because the plan provides 

a reasonable alternative standard (as required 

under paragraph (f)(4)(iv) of this section) to 

qualify for the reward to all tobacco users (a 

smoking cessation program). The plan 

discloses, in all materials describing the 

terms of the program, the availability of the 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician). Thus, the program satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 7—Tobacco use surcharge with 

alternative program requiring actual 

cessation. (i) Facts. Same facts as Example 6, 

except the plan does not provide participant 

F with the reward in subsequent years unless 

F actually stops smoking after participating 

in the tobacco cessation program. 

(ii) Conclusion. In this Example 7, the 

program is not reasonably designed under 

paragraph (f)(4)(iii) of this section and does 

not provide a reasonable alternative standard 

as required under paragraph (f)(4)(iv) of this 

section. The plan cannot cease to provide a 

reasonable alternative standard merely 

because the participant did not stop smoking 

after participating in a smoking cessation 

program. The plan must continue to offer a 

reasonable alternative standard whether it is 

the same or different (such as a new 

recommendation from F’s personal physician 

or a new nicotine replacement therapy). 

Example 8—Tobacco use surcharge with 

smoking cessation program alternative that is 

not reasonable. (i) Facts. Same facts as 

Example 6, except the plan does not facilitate 

participant F’s enrollment in a smoking 

cessation program. Instead the plan advises 

F to find a program, pay for it, and provide 

a certificate of completion to the plan. 

(ii) Conclusion. In this Example 8, the 

requirement for F to find and pay for F’s own 

smoking cessation program means that the 

alternative program is not reasonable. 

Accordingly, the plan has not offered a 

reasonable alternative standard that complies 

with paragraphs (f)(4)(iii) and (iv) of this 

section and the program fails to satisfy the 

requirements of paragraph (f) of this section. 

(5) Applicable percentage—(i) For 

purposes of this paragraph (f), the 

applicable percentage is 30 percent, 

except that the applicable percentage is 

increased by an additional 20 

percentage points (to 50 percent) to the 

extent that the additional percentage is 

in connection with a program designed 

to prevent or reduce tobacco use. 

(ii) The provisions of this paragraph 

(f)(5) are illustrated by the following 

examples: 

Example 1. (i) Facts. An employer 

sponsors a group health plan. The annual 

premium for employee-only coverage is 

$6,000 (of which the employer pays $4,500 

per year and the employee pays $1,500 per 

year). The plan offers employees a healthcontingent wellness program with several 

components, focused on exercise, blood 

sugar, weight, cholesterol, and blood 

pressure. The reward for compliance is an 

annual premium rebate of $600. 

(ii) Conclusion. In this Example 1, the 

reward for the wellness program, $600, does 

not exceed the applicable percentage of 30 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33181 

percent of the total annual cost of employeeonly coverage, $1,800. ($6,000 × 30% = 

$1,800.) 

Example 2. (i) Facts. Same facts as 

Example 1, except the wellness program is 

exclusively a tobacco prevention program. 

Employees who have used tobacco in the last 

12 months and who are not enrolled in the 

plan’s tobacco cessation program are charged 

a $1,000 premium surcharge (in addition to 

their employee contribution towards the 

coverage). (Those who participate in the 

plan’s tobacco cessation program are not 

assessed the $1,000 surcharge.) 

(ii) Conclusion. In this Example 2, the 

reward for the wellness program (absence of 

a $1,000 surcharge), does not exceed the 

applicable percentage of 50 percent of the 

total annual cost of employee-only coverage, 

$3,000. ($6,000 × 50% = $3,000.) 

Example 3. (i) Facts. Same facts as 

Example 1, except that, in addition to the 

$600 reward for compliance with the healthcontingent wellness program, the plan also 

imposes an additional $2,000 tobacco 

premium surcharge on employees who have 

used tobacco in the last 12 months and who 

are not enrolled in the plan’s tobacco 

cessation program. (Those who participate in 

the plan’s tobacco cessation program are not 

assessed the $2,000 surcharge.) 

(ii) Conclusion. In this Example 3, the total 

of all rewards (including absence of a 

surcharge for participating in the tobacco 

program) is $2,600 ($600 + $2,000 = $2,600), 

which does not exceed the applicable 

percentage of 50 percent of the total annual 

cost of employee-only coverage ($3,000); and, 

tested separately, the $600 reward for the 

wellness program unrelated to tobacco use 

does not exceed the applicable percentage of 

30 percent of the total annual cost of 

employee-only coverage ($1,800). 

Example 4. (i) Facts. An employer 

sponsors a group health plan. The total 

annual premium for employee-only coverage 

(including both employer and employee 

contributions towards the coverage) is 

$5,000. The plan provides a $250 reward to 

employees who complete a health risk 

assessment, without regard to the health 

issues identified as part of the assessment. 

The plan also offers a Healthy Heart program, 

which is a health-contingent wellness 

program, with an opportunity to earn a 

$1,500 reward. 

(ii) Conclusion. In this Example 4, even 

though the total reward for all wellness 

programs under the plan is $1,750 ($250 + 

$1,500 = $1,750, which exceeds the 

applicable percentage of 30 percent of the 

cost of the annual premium for employeeonly coverage ($5,000 × 30% = $1,500)), only 

the reward offered for compliance with the 

health-contingent wellness program ($1,500) 

is taken into account in determining whether 

the rules of this paragraph (f)(5) are met. (The 

$250 reward is offered in connection with a 

participatory wellness program and therefore 

is not taken into account.) Accordingly, the 

health-contingent wellness program offers a 

reward that does not exceed the applicable 

percentage of 30 percent of the total annual 

cost of employee-only coverage. 

(6) Sample language. The following 

language, or substantially similar 

language, can be used to satisfy the 

notice requirement of paragraphs 

(f)(3)(v) or (f)(4)(v) of this section: ‘‘Your 

health plan is committed to helping you 

achieve your best health. Rewards for 

participating in a wellness program are 

available to all employees. If you think 

you might be unable to meet a standard 

for a reward under this wellness 

program, you might qualify for an 

opportunity to earn the same reward by 

different means. Contact us at [insert 

contact information] and we will work 

with you (and, if you wish, with your 

doctor) to find a wellness program with 

the same reward that is right for you in 

light of your health status.’’ 

* * * * * 

■ 3. Section 54.9815–2705 is added to 

read as follows: 

§ 54.9815–2705 Prohibiting discrimination 

against participants and beneficiaries 

based on a health factor. 

(a) In general. A group health plan 

and a health insurance issuer offering 

group health insurance coverage must 

comply with the requirements of 

§ 54.9802–1. 

(b) Applicability date. This section is 

applicable to group health plans and 

health insurance issuers offering group 

health insurance coverage for plan years 

beginning on or after January 1, 2014. 

Department of Labor 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons set forth in the 

preamble, 29 CFR part 2590 is amended 

as follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 4. The authority citation for part 2590 

continues to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1185d, 1191, 1191a, 

1191b, and 1191c; sec. 101(g), Pub. L. 104– 

191, 110 Stat. 1936; sec. 401(b), Pub. L. 105– 

200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 

12(d), Pub. L. 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Pub. L. 111–148, 

124 Stat. 119, as amended by Pub. L. 111– 

152, 124 Stat. 1029; Secretary of Labor’s 

Order 1–2011, 77 FR 1088 (January 9, 2012). 

Subpart B—Health Coverage 

Portability, Nondiscrimination, and 

Renewability 

■ 5. Section 2590.702 is amended by 

revising paragraph (f) to read as follows: 

§ 2590.702 Prohibiting discrimination 

against participants and beneficiaries 

based on a health factor. 

* * * * * 

(f) Nondiscriminatory wellness 

programs—in general. A wellness 

program is a program of health 

promotion or disease prevention. 

Paragraphs (b)(2)(ii) and (c)(3) of this 

section provide exceptions to the 

general prohibitions against 

discrimination based on a health factor 

for plan provisions that vary benefits 

(including cost-sharing mechanisms) or 

the premium or contribution for 

similarly situated individuals in 

connection with a wellness program 

that satisfies the requirements of this 

paragraph (f). 

(1) Definitions. The definitions in this 

paragraph (f)(1) govern in applying the 

provisions of this paragraph (f). 

(i) Reward. Except where expressly 

provided otherwise, references in this 

section to an individual obtaining a 

reward include both obtaining a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and avoiding a penalty 

(such as the absence of a premium 

surcharge or other financial or 

nonfinancial disincentive). References 

in this section to a plan providing a 

reward include both providing a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and imposing a penalty 

(such as a surcharge or other financial 

or nonfinancial disincentive). 

(ii) Participatory wellness programs. If 

none of the conditions for obtaining a 

reward under a wellness program is 

based on an individual satisfying a 

standard that is related to a health factor 

(or if a wellness program does not 

provide a reward), the wellness program 

is a participatory wellness program. 

Examples of participatory wellness 

programs are: 

(A) A program that reimburses 

employees for all or part of the cost for 

membership in a fitness center. 

(B) A diagnostic testing program that 

provides a reward for participation in 

that program and does not base any part 

of the reward on outcomes. 

(C) A program that encourages 

preventive care through the waiver of 

the copayment or deductible 

requirement under a group health plan 

for the costs of, for example, prenatal 

care or well-baby visits. (Note that, with 

respect to non-grandfathered plans, 

§ 2590.715–2713 of this part requires 

benefits for certain preventive health 


sroberts on DSK5SPTVN1PROD with RULES
33182 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

services without the imposition of cost 

sharing.) 

(D) A program that reimburses 

employees for the costs of participating, 

or that otherwise provides a reward for 

participating, in a smoking cessation 

program without regard to whether the 

employee quits smoking. 

(E) A program that provides a reward 

to employees for attending a monthly, 

no-cost health education seminar. 

(F) A program that provides a reward 

to employees who complete a health 

risk assessment regarding current health 

status, without any further action 

(educational or otherwise) required by 

the employee with regard to the health 

issues identified as part of the 

assessment. (See also § 2590.702–1 for 

rules prohibiting collection of genetic 

information.) 

(iii) Health-contingent wellness 

programs. A health-contingent wellness 

program is a program that requires an 

individual to satisfy a standard related 

to a health factor to obtain a reward (or 

requires an individual to undertake 

more than a similarly situated 

individual based on a health factor in 

order to obtain the same reward). A 

health-contingent wellness program 

may be an activity-only wellness 

program or an outcome-based wellness 

program. 

(iv) Activity-only wellness programs. 

An activity-only wellness program is a 

type of health-contingent wellness 

program that requires an individual to 

perform or complete an activity related 

to a health factor in order to obtain a 

reward but does not require the 

individual to attain or maintain a 

specific health outcome. Examples 

include walking, diet, or exercise 

programs, which some individuals may 

be unable to participate in or complete 

(or have difficulty participating in or 

completing) due to a health factor, such 

as severe asthma, pregnancy, or a recent 

surgery. See paragraph (f)(3) of this 

section for requirements applicable to 

activity-only wellness programs. 

(v) Outcome-based wellness 

programs. An outcome-based wellness 

program is a type of health-contingent 

wellness program that requires an 

individual to attain or maintain a 

specific health outcome (such as not 

smoking or attaining certain results on 

biometric screenings) in order to obtain 

a reward. To comply with the rules of 

this paragraph (f), an outcome-based 

wellness program typically has two 

tiers. That is, for individuals who do not 

attain or maintain the specific health 

outcome, compliance with an 

educational program or an activity may 

be offered as an alternative to achieve 

the same reward. This alternative 

pathway, however, does not mean that 

the overall program, which has an 

outcome-based component, is not an 

outcome-based wellness program. That 

is, if a measurement, test, or screening 

is used as part of an initial standard and 

individuals who meet the standard are 

granted the reward, the program is 

considered an outcome-based wellness 

program. For example, if a wellness 

program tests individuals for specified 

medical conditions or risk factors 

(including biometric screening such as 

testing for high cholesterol, high blood 

pressure, abnormal body mass index, or 

high glucose level) and provides a 

reward to individuals identified as 

within a normal or healthy range for 

these medical conditions or risk factors, 

while requiring individuals who are 

identified as outside the normal or 

healthy range (or at risk) to take 

additional steps (such as meeting with 

a health coach, taking a health or fitness 

course, adhering to a health 

improvement action plan, complying 

with a walking or exercise program, or 

complying with a health care provider’s 

plan of care) to obtain the same reward, 

the program is an outcome-based 

wellness program. See paragraph (f)(4) 

of this section for requirements 

applicable to outcome-based wellness 

programs. 

(2) Requirement for participatory 

wellness programs. A participatory 

wellness program, as described in 

paragraph (f)(1)(ii) of this section, does 

not violate the provisions of this section 

only if participation in the program is 

made available to all similarly situated 

individuals, regardless of health status. 

(3) Requirements for activity-only 

wellness programs. A health-contingent 

wellness program that is an activityonly wellness program, as described in 

paragraph (f)(1)(iv) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

activity-only wellness program, together 

with the reward for other healthcontingent wellness programs with 

respect to the plan, must not exceed the 

applicable percentage (as defined in 

paragraph (f)(5) of this section) of the 

total cost of employee-only coverage 

under the plan. However, if, in addition 

to employees, any class of dependents 

(such as spouses, or spouses and 

dependent children) may participate in 

the wellness program, the reward must 

not exceed the applicable percentage of 

the total cost of the coverage in which 

an employee and any dependents are 

enrolled. For purposes of this paragraph 

(f)(3)(ii), the cost of coverage is 

determined based on the total amount of 

employer and employee contributions 

towards the cost of coverage for the 

benefit package under which the 

employee is (or the employee and any 

dependents are) receiving coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the activity-only 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(3)(iv), a 

reward under an activity-only wellness 

program is not available to all similarly 

situated individuals for a period unless 

the program meets both of the following 

requirements: 

(1) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

unreasonably difficult due to a medical 

condition to satisfy the otherwise 

applicable standard; and 

(2) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

medically inadvisable to attempt to 

satisfy the otherwise applicable 

standard. 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

either paragraph (f)(3)(iv)(A)(1) or (2) of 

this section, a reasonable alternative 

standard must be furnished by the plan 

or issuer upon the individual’s request 

or the condition for obtaining the 

reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33183 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an activityonly wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of this 

paragraph (f)(3) in the same manner as 

if it were an initial program standard. 

(Thus, for example, if a plan or issuer 

provides a walking program as a 

reasonable alternative standard to a 

running program, individuals for whom 

it is unreasonably difficult due to a 

medical condition to complete the 

walking program (or for whom it is 

medically inadvisable to attempt to 

complete the walking program) must be 

provided a reasonable alternative 

standard to the walking program.) To 

the extent that a reasonable alternative 

standard under an activity-only 

wellness program is, itself, an outcomebased wellness program, it must comply 

with the requirements of paragraph 

(f)(4) of this section, including 

paragraph (f)(4)(iv)(D). 

(E) If reasonable under the 

circumstances, a plan or issuer may seek 

verification, such as a statement from an 

individual’s personal physician, that a 

health factor makes it unreasonably 

difficult for the individual to satisfy, or 

medically inadvisable for the individual 

to attempt to satisfy, the otherwise 

applicable standard of an activity-only 

wellness program. Plans and issuers 

may seek verification with respect to 

requests for a reasonable alternative 

standard for which it is reasonable to 

determine that medical judgment is 

required to evaluate the validity of the 

request. 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an activity-only 

wellness program the availability of a 

reasonable alternative standard to 

qualify for the reward (and, if 

applicable, the possibility of waiver of 

the otherwise applicable standard), 

including contact information for 

obtaining a reasonable alternative 

standard and a statement that 

recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 

(vi) Example. The provisions of this 

paragraph (f)(3) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

provides a reward to individuals who 

participate in a reasonable specified walking 

program. If it is unreasonably difficult due to 

a medical condition for an individual to 

participate (or if it is medically inadvisable 

for an individual to attempt to participate), 

the plan will waive the walking program 

requirement and provide the reward. All 

materials describing the terms of the walking 

program disclose the availability of the 

waiver. 

(ii) Conclusion. In this Example, the 

program satisfies the requirements of 

paragraph (f)(3)(iii) of this section because 

the walking program is reasonably designed 

to promote health and prevent disease. The 

program satisfies the requirements of 

paragraph (f)(3)(iv) of this section because the 

reward under the program is available to all 

similarly situated individuals. It 

accommodates individuals for whom it is 

unreasonably difficult to participate in the 

walking program due to a medical condition 

(or for whom it would be medically 

inadvisable to attempt to participate) by 

providing them with the reward even if they 

do not participate in the walking program 

(that is, by waiving the condition). The plan 

also complies with the disclosure 

requirement of paragraph (f)(3)(v) of this 

section. Thus, the plan satisfies paragraphs 

(f)(3)(iii), (iv), and (v) of this section. 

(4) Requirements for outcome-based 

wellness programs. A health-contingent 

wellness program that is an outcomebased wellness program, as described in 

paragraph (f)(1)(v) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

outcome-based wellness program, 

together with the reward for other 

health-contingent wellness programs 

with respect to the plan, must not 

exceed the applicable percentage (as 

defined in paragraph (f)(5) of this 

section) of the total cost of employeeonly coverage under the plan. However, 

if, in addition to employees, any class 

of dependents (such as spouses, or 

spouses and dependent children) may 

participate in the wellness program, the 

reward must not exceed the applicable 

percentage of the total cost of the 

coverage in which an employee and any 

dependents are enrolled. For purposes 

of this paragraph (f)(4)(ii), the cost of 

coverage is determined based on the 

total amount of employer and employee 

contributions towards the cost of 

coverage for the benefit package under 

which the employee is (or the employee 

and any dependents are) receiving 

coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. To ensure that an 

outcome-based wellness program is 

reasonably designed to improve health 

and does not act as a subterfuge for 

underwriting or reducing benefits based 

on a health factor, a reasonable 

alternative standard to qualify for the 

reward must be provided to any 

individual who does not meet the initial 

standard based on a measurement, test, 

or screening that is related to a health 

factor, as explained in paragraph 

(f)(4)(iv) of this section. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the outcome-based 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(4)(iv), a 

reward under an outcome-based 

wellness program is not available to all 

similarly situated individuals for a 

period unless the program allows a 


sroberts on DSK5SPTVN1PROD with RULES
33184 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

reasonable alternative standard (or 

waiver of the otherwise applicable 

standard) for obtaining the reward for 

any individual who does not meet the 

initial standard based on the 

measurement, test, or screening, as 

described in this paragraph (f)(4)(iv). 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

paragraph (f)(4)(iv)(A) of this section, a 

reasonable alternative standard must be 

furnished by the plan or issuer upon the 

individual’s request or the condition for 

obtaining the reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an outcomebased wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of 

paragraph (f)(3) of this section in the 

same manner as if it were an initial 

program standard. To the extent that a 

reasonable alternative standard under 

an outcome-based wellness program is, 

itself, another outcome-based wellness 

program, it must comply with the 

requirements of this paragraph (f)(4), 

subject to the following special 

provisions: 

(1) The reasonable alternative 

standard cannot be a requirement to 

meet a different level of the same 

standard without additional time to 

comply that takes into account the 

individual’s circumstances. For 

example, if the initial standard is to 

achieve a BMI less than 30, the 

reasonable alternative standard cannot 

be to achieve a BMI less than 31 on that 

same date. However, if the initial 

standard is to achieve a BMI less than 

30, a reasonable alternative standard for 

the individual could be to reduce the 

individual’s BMI by a small amount or 

small percentage, over a realistic period 

of time, such as within a year. 

(2) An individual must be given the 

opportunity to comply with the 

recommendations of the individual’s 

personal physician as a second 

reasonable alternative standard to 

meeting the reasonable alternative 

standard defined by the plan or issuer, 

but only if the physician joins in the 

request. The individual can make a 

request to involve a personal 

physician’s recommendations at any 

time and the personal physician can 

adjust the physician’s recommendations 

at any time, consistent with medical 

appropriateness. 

(E) It is not reasonable to seek 

verification, such as a statement from an 

individual’s personal physician, under 

an outcome-based wellness program 

that a health factor makes it 

unreasonably difficult for the individual 

to satisfy, or medically inadvisable for 

the individual to attempt to satisfy, the 

otherwise applicable standard as a 

condition of providing a reasonable 

alternative to the initial standard. 

However, if a plan or issuer provides an 

alternative standard to the otherwise 

applicable measurement, test, or 

screening that involves an activity that 

is related to a health factor, then the 

rules of paragraph (f)(3) of this section 

for activity-only wellness programs 

apply to that component of the wellness 

program and the plan or issuer may, if 

reasonable under the circumstances, 

seek verification that it is unreasonably 

difficult due to a medical condition for 

an individual to perform or complete 

the activity (or it is medically 

inadvisable to attempt to perform or 

complete the activity). (For example, if 

an outcome-based wellness program 

requires participants to maintain a 

certain healthy weight and provides a 

diet and exercise program for 

individuals who do not meet the 

targeted weight, a plan or issuer may 

seek verification, as described in 

paragraph (f)(3)(iv)(D) of this section, if 

reasonable under the circumstances, 

that a second reasonable alternative 

standard is needed for certain 

individuals because, for those 

individuals, it would be unreasonably 

difficult due to a medical condition to 

comply, or medically inadvisable to 

attempt to comply, with the diet and 

exercise program, due to a medical 

condition.) 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an outcomebased wellness program, and in any 

disclosure that an individual did not 

satisfy an initial outcome-based 

standard, the availability of a reasonable 

alternative standard to qualify for the 

reward (and, if applicable, the 

possibility of waiver of the otherwise 

applicable standard), including contact 

information for obtaining a reasonable 

alternative standard and a statement 

that recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 

(vi) Examples. The provisions of this 

paragraph (f)(4) are illustrated by the 

following examples: 

Example 1—Cholesterol screening with 

reasonable alternative standard to work with 

personal physician. (i) Facts. A group health 

plan offers a reward to participants who 

achieve a count under 200 on a total 

cholesterol test. If a participant does not 

achieve the targeted cholesterol count, the 

plan allows the participant to develop an 

alternative cholesterol action plan in 

conjunction with the participant’s personal 

physician that may include 

recommendations for medication and 

additional screening. The plan allows the 

physician to modify the standards, as 

medically necessary, over the year. (For 

example, if a participant develops asthma or 

depression, requires surgery and 

convalescence, or some other medical 

condition or consideration makes completion 

of the original action plan inadvisable or 

unreasonably difficult, the physician may 

modify the original action plan.) All plan 

materials describing the terms of the program 

include the following statement: ‘‘Your 

health plan wants to help you take charge of 

your health. Rewards are available to all 

employees who participate in our Cholesterol 

Awareness Wellness Program. If your total 

cholesterol count is under 200, you will 

receive the reward. If not, you will still have 

an opportunity to qualify for the reward. We 

will work with you and your doctor to find 

a Health Smart program that is right for you.’’ 

In addition, when any individual participant 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33185 

receives notification that his or her 

cholesterol count is 200 or higher, the 

notification includes the following statement: 

‘‘Your plan offers a Health Smart program 

under which we will work with you and your 

doctor to try to lower your cholesterol. If you 

complete this program, you will qualify for 

a reward. Please contact us at [contact 

information] to get started.’’ 

(ii) Conclusion. In this Example 1, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain cholesterol level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because the cholesterol program is 

reasonably designed to promote health and 

prevent disease. The program satisfies the 

requirements of paragraph (f)(4)(iv) of this 

section because it makes available to all 

participants who do not meet the cholesterol 

standard a reasonable alternative standard to 

qualify for the reward. Lastly, the plan also 

discloses in all materials describing the terms 

of the program and in any disclosure that an 

individual did not satisfy the initial outcomebased standard the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

ability to involve his or her personal 

physician), as required by paragraph (f)(4)(v) 

of this section. Thus, the program satisfies 

the requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 2—Cholesterol screening with 

plan alternative and no opportunity for 

personal physician involvement. (i) Facts. 

Same facts as Example 1, except that the 

wellness program’s physician or nurse 

practitioner (rather than the individual’s 

personal physician) determines the 

alternative cholesterol action plan. The plan 

does not provide an opportunity for a 

participant’s personal physician to modify 

the action plan if it is not medically 

appropriate for that individual. 

(ii) Conclusion. In this Example 2, the 

wellness program does not satisfy the 

requirements of paragraph (f)(4)(iii) of this 

section because the program does not 

accommodate the recommendations of the 

participant’s personal physician with regard 

to medical appropriateness, as required 

under paragraph (f)(4)(iv)(C)(3) of this 

section. Thus, the program is not reasonably 

designed under paragraph (f)(4)(iii) of this 

section and is not available to all similarly 

situated individuals under paragraph 

(f)(4)(iv) of this section. The notice also does 

not provide all the content required under 

paragraph (f)(4)(v) of this section. 

Example 3—Cholesterol screening with 

plan alternative that can be modified by 

personal physician. (i) Facts. Same facts as 

Example 2, except that if a participant’s 

personal physician disagrees with any part of 

the action plan, the personal physician may 

modify the action plan at any time, and the 

plan discloses this to participants. 

(ii) Conclusion. In this Example 3, the 

wellness program satisfies the requirements 

of paragraph (f)(4)(iii) of this section because 

the participant’s personal physician may 

modify the action plan determined by the 

wellness program’s physician or nurse 

practitioner at any time if the physician 

states that the recommendations are not 

medically appropriate, as required under 

paragraph (f)(4)(iv)(C)(3) of this section. 

Thus, the program is reasonably designed 

under paragraph (f)(4)(iii) of this section and 

is available to all similarly situated 

individuals under paragraph (f)(4)(iv) of this 

section. The notice, which includes a 

statement that recommendations of an 

individual’s personal physician will be 

accommodated, also complies with 

paragraph (f)(4)(v) of this section. 

Example 4—BMI screening with walking 

program alternative. (i) Facts. A group health 

plan will provide a reward to participants 

who have a body mass index (BMI) that is 26 

or lower, determined shortly before the 

beginning of the year. Any participant who 

does not meet the target BMI is given the 

same discount if the participant complies 

with an exercise program that consists of 

walking 150 minutes a week. Any participant 

for whom it is unreasonably difficult due to 

a medical condition to comply with this 

walking program (and any participant for 

whom it is medically inadvisable to attempt 

to comply with the walking program) during 

the year is given the same discount if the 

participant satisfies an alternative standard 

that is reasonable taking into consideration 

the participant’s medical situation, is not 

unreasonably burdensome or impractical to 

comply with, and is otherwise reasonably 

designed based on all the relevant facts and 

circumstances. All plan materials describing 

the terms of the wellness program include 

the following statement: ‘‘Fitness is Easy! 

Start Walking! Your health plan cares about 

your health. If you are considered overweight 

because you have a BMI of over 26, our Start 

Walking program will help you lose weight 

and feel better. We will help you enroll. (**If 

your doctor says that walking isn’t right for 

you, that’s okay too. We will work with you 

(and, if you wish, your own doctor) to 

develop a wellness program that is.)’’ 

Participant E is unable to achieve a BMI that 

is 26 or lower within the plan’s timeframe 

and receives notification that complies with 

paragraph (f)(4)(v) of this section. 

Nevertheless, it is unreasonably difficult due 

to a medical condition for E to comply with 

the walking program. E proposes a program 

based on the recommendations of E’s 

physician. The plan agrees to make the same 

discount available to E that is available to 

other participants in the BMI program or the 

alternative walking program, but only if E 

actually follows the physician’s 

recommendations. 

(ii) Conclusion. In this Example 4, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain BMI level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because it is reasonably designed to 

promote health and prevent disease. The 

program also satisfies the requirements of 

paragraph (f)(4)(iv) of this section because it 

makes available to all individuals who do not 

satisfy the BMI standard a reasonable 

alternative standard to qualify for the reward 

(in this case, a walking program that is not 

unreasonably burdensome or impractical for 

individuals to comply with and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances). In 

addition, the walking program is, itself, an 

activity-only standard and the plan complies 

with the requirements of paragraph (f)(3) of 

this section (including the requirement of 

paragraph (f)(3)(iv) that, if there are 

individuals for whom it is unreasonably 

difficult due to a medical condition to 

comply, or for whom it is medically 

inadvisable to attempt to comply, with the 

walking program, the plan provide a 

reasonable alternative to those individuals). 

Moreover, the plan satisfies the requirements 

of paragraph (f)(4)(v) of this section because 

it discloses, in all materials describing the 

terms of the program and in any disclosure 

that an individual did not satisfy the initial 

outcome-based standard, the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician) to qualify for the reward or the 

possibility of waiver of the otherwise 

applicable standard. Thus, the program 

satisfies the requirements of paragraphs 

(f)(4)(iii), (iv), and (v) of this section. 

Example 5—BMI screening with 

alternatives available to either lower BMI or 

meet personal physician’s recommendations. 

(i) Facts. Same facts as Example 4 except 

that, with respect to any participant who 

does not meet the target BMI, instead of a 

walking program, the participant is expected 

to reduce BMI by one point. At any point 

during the year upon request, any individual 

can obtain a second reasonable alternative 

standard, which is compliance with the 

recommendations of the participant’s 

personal physician regarding weight, diet, 

and exercise as set forth in a treatment plan 

that the physician recommends or to which 

the physician agrees. The participant’s 

personal physician is permitted to change or 

adjust the treatment plan at any time and the 

option of following the participant’s personal 

physician’s recommendations is clearly 

disclosed. 

(ii) Conclusion. In this Example 5, the 

reasonable alternative standard to qualify for 

the reward (the alternative BMI standard 

requiring a one-point reduction) does not 

make the program unreasonable under 

paragraph (f)(4)(iii) or (iv) of this section 

because the program complies with 

paragraph (f)(4)(iv)(C)(4) of this section by 

allowing a second reasonable alternative 

standard to qualify for the reward 

(compliance with the recommendations of 

the participant’s personal physician, which 

can be changed or adjusted at any time). 

Accordingly, the program continues to satisfy 

the applicable requirements of paragraph (f) 

of this section. 

Example 6—Tobacco use surcharge with 

smoking cessation program alternative. (i) 

Facts. In conjunction with an annual open 

enrollment period, a group health plan 

provides a premium differential based on 

tobacco use, determined using a health risk 

assessment. The following statement is 

included in all plan materials describing the 

tobacco premium differential: ‘‘Stop smoking 

today! We can help! If you are a smoker, we 


sroberts on DSK5SPTVN1PROD with RULES
33186 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

offer a smoking cessation program. If you 

complete the program, you can avoid this 

surcharge.’’ The plan accommodates 

participants who smoke by facilitating their 

enrollment in a smoking cessation program 

that requires participation at a time and place 

that are not unreasonably burdensome or 

impractical for participants, and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances, and 

discloses contact information and the 

individual’s option to involve his or her 

personal physician. The plan pays for the 

cost of participation in the smoking cessation 

program. Any participant can avoid the 

surcharge for the plan year by participating 

in the program, regardless of whether the 

participant stops smoking, but the plan can 

require a participant who wants to avoid the 

surcharge in a subsequent year to complete 

the smoking cessation program again. 

(ii) Conclusion. In this Example 6, the 

premium differential satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v). The program is an outcome-based 

wellness program because the initial 

standard for obtaining a reward is dependent 

on the results of a health risk assessment (a 

measurement, test, or screening). The 

program is reasonably designed under 

paragraph (f)(4)(iii) because the plan provides 

a reasonable alternative standard (as required 

under paragraph (f)(4)(iv) of this section) to 

qualify for the reward to all tobacco users (a 

smoking cessation program). The plan 

discloses, in all materials describing the 

terms of the program, the availability of the 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician). Thus, the program satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 7—Tobacco use surcharge with 

alternative program requiring actual 

cessation. (i) Facts. Same facts as Example 6, 

except the plan does not provide participant 

F with the reward in subsequent years unless 

F actually stops smoking after participating 

in the tobacco cessation program. 

(ii) Conclusion. In this Example 7, the 

program is not reasonably designed under 

paragraph (f)(4)(iii) of this section and does 

not provide a reasonable alternative standard 

as required under paragraph (f)(4)(iv) of this 

section. The plan cannot cease to provide a 

reasonable alternative standard merely 

because the participant did not stop smoking 

after participating in a smoking cessation 

program. The plan must continue to offer a 

reasonable alternative standard whether it is 

the same or different (such as a new 

recommendation from F’s personal physician 

or a new nicotine replacement therapy). 

Example 8—Tobacco use surcharge with 

smoking cessation program alternative that is 

not reasonable. (i) Facts. Same facts as 

Example 6, except the plan does not facilitate 

participant F’s enrollment in a smoking 

cessation program. Instead the plan advises 

F to find a program, pay for it, and provide 

a certificate of completion to the plan. 

(ii) Conclusion. In this Example 8, the 

requirement for F to find and pay for F’s own 

smoking cessation program means that the 

alternative program is not reasonable. 

Accordingly, the plan has not offered a 

reasonable alternative standard that complies 

with paragraphs (f)(4)(iii) and (iv) of this 

section and the program fails to satisfy the 

requirements of paragraph (f) of this section. 

(5) Applicable percentage—(i) For 

purposes of this paragraph (f), the 

applicable percentage is 30 percent, 

except that the applicable percentage is 

increased by an additional 20 

percentage points (to 50 percent) to the 

extent that the additional percentage is 

in connection with a program designed 

to prevent or reduce tobacco use. 

(ii) The rules of this paragraph (f)(5) 

are illustrated by the following 

examples: 

Example 1. (i) Facts. An employer sponsors 

a group health plan. The annual premium for 

employee-only coverage is $6,000 (of which 

the employer pays $4,500 per year and the 

employee pays $1,500 per year). The plan 

offers employees a health-contingent 

wellness program with several components, 

focused on exercise, blood sugar, weight, 

cholesterol, and blood pressure. The reward 

for compliance is an annual premium rebate 

of $600. 

(ii) Conclusion. In this Example 1, the 

reward for the wellness program, $600, does 

not exceed the applicable percentage of 30 

percent of the total annual cost of employeeonly coverage, $1,800. ($6,000 × 30% = 

$1,800.) 

Example 2. (i) Facts. Same facts as 

Example 1, except the wellness program is 

exclusively a tobacco prevention program. 

Employees who have used tobacco in the last 

12 months and who are not enrolled in the 

plan’s tobacco cessation program are charged 

a $1,000 premium surcharge (in addition to 

their employee contribution towards the 

coverage). (Those who participate in the 

plan’s tobacco cessation program are not 

assessed the $1,000 surcharge.) 

(ii) Conclusion. In this Example 2, the 

reward for the wellness program (absence of 

a $1,000 surcharge), does not exceed the 

applicable percentage of 50 percent of the 

total annual cost of employee-only coverage, 

$3,000. ($6,000 × 50% = $3,000.) 

Example 3. (i) Facts. Same facts as 

Example 1, except that, in addition to the 

$600 reward for compliance with the healthcontingent wellness program, the plan also 

imposes an additional $2,000 tobacco 

premium surcharge on employees who have 

used tobacco in the last 12 months and who 

are not enrolled in the plan’s tobacco 

cessation program. (Those who participate in 

the plan’s tobacco cessation program are not 

assessed the $2,000 surcharge.) 

(ii) Conclusion. In this Example 3, the total 

of all rewards (including absence of a 

surcharge for participating in the tobacco 

program) is $2,600 ($600 + $2,000 = $2,600), 

which does not exceed the applicable 

percentage of 50 percent of the total annual 

cost of employee-only coverage ($3,000); and, 

tested separately, the $600 reward for the 

wellness program unrelated to tobacco use 

does not exceed the applicable percentage of 

30 percent of the total annual cost of 

employee-only coverage ($1,800). 

Example 4. (i) Facts. An employer sponsors 

a group health plan. The total annual 

premium for employee-only coverage 

(including both employer and employee 

contributions towards the coverage) is 

$5,000. The plan provides a $250 reward to 

employees who complete a health risk 

assessment, without regard to the health 

issues identified as part of the assessment. 

The plan also offers a Healthy Heart program, 

which is a health-contingent wellness 

program, with an opportunity to earn a 

$1,500 reward. 

(ii) Conclusion. In this Example 4, even 

though the total reward for all wellness 

programs under the plan is $1,750 ($250 + 

$1,500 = $1,750, which exceeds the 

applicable percentage of 30 percent of the 

cost of the annual premium for employeeonly coverage ($5,000 × 30% = $1,500)), only 

the reward offered for compliance with the 

health-contingent wellness program ($1,500) 

is taken into account in determining whether 

the rules of this paragraph (f)(5) are met. (The 

$250 reward is offered in connection with a 

participatory wellness program and therefore 

is not taken into account.) Accordingly, the 

health-contingent wellness program offers a 

reward that does not exceed the applicable 

percentage of 30 percent of the total annual 

cost of employee-only coverage. 

(6) Sample language. The following 

language, or substantially similar 

language, can be used to satisfy the 

notice requirement of paragraphs 

(f)(3)(v) or (f)(4)(v) of this section: ‘‘Your 

health plan is committed to helping you 

achieve your best health. Rewards for 

participating in a wellness program are 

available to all employees. If you think 

you might be unable to meet a standard 

for a reward under this wellness 

program, you might qualify for an 

opportunity to earn the same reward by 

different means. Contact us at [insert 

contact information] and we will work 

with you (and, if you wish, with your 

doctor) to find a wellness program with 

the same reward that is right for you in 

light of your health status.’’ 

* * * * * 

Subpart C—Other Requirements 

■ 6. Section 2590.715–2705 is added to 

read as follows: 

§ 2590.715–2705 Prohibiting 

discrimination against participants and 

beneficiaries based on a health factor. 

(a) In general. A group health plan 

and a health insurance issuer offering 

group health insurance coverage must 

comply with the requirements of 

§ 2590.702 of this part. 

(b) Applicability date. This section is 

applicable to group health plans and 

health insurance issuers offering group 

health insurance coverage for plan years 

beginning on or after January 1, 2014. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33187 

Department of Health and Human 

Services 

45 CFR Subtitle A 

For the reasons stated in the 

preamble, the Department of Health and 

Human Services amends 45 CFR Parts 

146 and 147 as follows: 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 7. The authority citation for part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the Public 

Health Service Act (42 U.S.C. 300gg–1 

through 300gg–5, 300gg–11 through 300gg– 

23, 300gg–91, and 300gg–92) (1996). 

Section 146.121 is also issued under secs. 

2701 through 2763, 2791, and 2792 of the 

Public Health Service Act (42 U.S.C. 300gg 

through 300gg–63, 300gg–91, and 300gg–92), 

as amended (2010). 

■ 8. In § 146.121, paragraph (f) is 

revised to read as follows: 

§ 146.121 Prohibiting discrimination 

against participants and beneficiaries 

based on a health factor. 

* * * * * 

(f) Nondiscriminatory wellness 

programs—in general. A wellness 

program is a program of health 

promotion or disease prevention. 

Paragraphs (b)(2)(ii) and (c)(3) of this 

section provide exceptions to the 

general prohibitions against 

discrimination based on a health factor 

for plan provisions that vary benefits 

(including cost-sharing mechanisms) or 

the premium or contribution for 

similarly situated individuals in 

connection with a wellness program 

that satisfies the requirements of this 

paragraph (f). 

(1) Definitions. The definitions in this 

paragraph (f)(1) govern in applying the 

provisions of this paragraph (f). 

(i) Reward. Except where expressly 

provided otherwise, references in this 

section to an individual obtaining a 

reward include both obtaining a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and avoiding a penalty 

(such as the absence of a premium 

surcharge or other financial or 

nonfinancial disincentive). References 

in this section to a plan providing a 

reward include both providing a reward 

(such as a discount or rebate of a 

premium or contribution, a waiver of all 

or part of a cost-sharing mechanism, an 

additional benefit, or any financial or 

other incentive) and imposing a penalty 

(such as a surcharge or other financial 

or nonfinancial disincentive). 

(ii) Participatory wellness programs. If 

none of the conditions for obtaining a 

reward under a wellness program is 

based on an individual satisfying a 

standard that is related to a health factor 

(or if a wellness program does not 

provide a reward), the wellness program 

is a participatory wellness program. 

Examples of participatory wellness 

programs are: 

(A) A program that reimburses 

employees for all or part of the cost for 

membership in a fitness center. 

(B) A diagnostic testing program that 

provides a reward for participation in 

that program and does not base any part 

of the reward on outcomes. 

(C) A program that encourages 

preventive care through the waiver of 

the copayment or deductible 

requirement under a group health plan 

for the costs of, for example, prenatal 

care or well-baby visits. (Note that, with 

respect to non-grandfathered plans, 

§ 147.130 of this subchapter requires 

benefits for certain preventive health 

services without the imposition of cost 

sharing.) 

(D) A program that reimburses 

employees for the costs of participating, 

or that otherwise provides a reward for 

participating, in a smoking cessation 

program without regard to whether the 

employee quits smoking. 

(E) A program that provides a reward 

to employees for attending a monthly, 

no-cost health education seminar. 

(F) A program that provides a reward 

to employees who complete a health 

risk assessment regarding current health 

status, without any further action 

(educational or otherwise) required by 

the employee with regard to the health 

issues identified as part of the 

assessment. (See also § 146.122 for rules 

prohibiting collection of genetic 

information.) 

(iii) Health-contingent wellness 

programs. A health-contingent wellness 

program is a program that requires an 

individual to satisfy a standard related 

to a health factor to obtain a reward (or 

requires an individual to undertake 

more than a similarly situated 

individual based on a health factor in 

order to obtain the same reward). A 

health-contingent wellness program 

may be an activity-only wellness 

program or an outcome-based wellness 

program. 

(iv) Activity-only wellness programs. 

An activity-only wellness program is a 

type of health-contingent wellness 

program that requires an individual to 

perform or complete an activity related 

to a health factor in order to obtain a 

reward but does not require the 

individual to attain or maintain a 

specific health outcome. Examples 

include walking, diet, or exercise 

programs, which some individuals may 

be unable to participate in or complete 

(or have difficulty participating in or 

completing) due to a health factor, such 

as severe asthma, pregnancy, or a recent 

surgery. See paragraph (f)(3) of this 

section for requirements applicable to 

activity-only wellness programs. 

(v) Outcome-based wellness 

programs. An outcome-based wellness 

program is a type of health-contingent 

wellness program that requires an 

individual to attain or maintain a 

specific health outcome (such as not 

smoking or attaining certain results on 

biometric screenings) in order to obtain 

a reward. To comply with the rules of 

this paragraph (f), an outcome-based 

wellness program typically has two 

tiers. That is, for individuals who do not 

attain or maintain the specific health 

outcome, compliance with an 

educational program or an activity may 

be offered as an alternative to achieve 

the same reward. This alternative 

pathway, however, does not mean that 

the overall program, which has an 

outcome-based component, is not an 

outcome-based wellness program. That 

is, if a measurement, test, or screening 

is used as part of an initial standard and 

individuals who meet the standard are 

granted the reward, the program is 

considered an outcome-based wellness 

program. For example, if a wellness 

program tests individuals for specified 

medical conditions or risk factors 

(including biometric screening such as 

testing for high cholesterol, high blood 

pressure, abnormal body mass index, or 

high glucose level) and provides a 

reward to individuals identified as 

within a normal or healthy range for 

these medical conditions or risk factors, 

while requiring individuals who are 

identified as outside the normal or 

healthy range (or at risk) to take 

additional steps (such as meeting with 

a health coach, taking a health or fitness 

course, adhering to a health 

improvement action plan, complying 

with a walking or exercise program, or 

complying with a health care provider’s 

plan of care) to obtain the same reward, 

the program is an outcome-based 

wellness program. See paragraph (f)(4) 

of this section for requirements 

applicable to outcome-based wellness 

programs. 

(2) Requirement for participatory 

wellness programs. A participatory 

wellness program, as described in 

paragraph (f)(1)(ii) of this section, does 

not violate the provisions of this section 

only if participation in the program is 


sroberts on DSK5SPTVN1PROD with RULES
33188 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

made available to all similarly situated 

individuals, regardless of health status. 

(3) Requirements for activity-only 

wellness programs. A health-contingent 

wellness program that is an activityonly wellness program, as described in 

paragraph (f)(1)(iv) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

activity-only wellness program, together 

with the reward for other healthcontingent wellness programs with 

respect to the plan, must not exceed the 

applicable percentage (as defined in 

paragraph (f)(5) of this section) of the 

total cost of employee-only coverage 

under the plan. However, if, in addition 

to employees, any class of dependents 

(such as spouses, or spouses and 

dependent children) may participate in 

the wellness program, the reward must 

not exceed the applicable percentage of 

the total cost of the coverage in which 

an employee and any dependents are 

enrolled. For purposes of this paragraph 

(f)(3)(ii), the cost of coverage is 

determined based on the total amount of 

employer and employee contributions 

towards the cost of coverage for the 

benefit package under which the 

employee is (or the employee and any 

dependents are) receiving coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the activity-only 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(3)(iv), a 

reward under an activity-only wellness 

program is not available to all similarly 

situated individuals for a period unless 

the program meets both of the following 

requirements: 

(1) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

unreasonably difficult due to a medical 

condition to satisfy the otherwise 

applicable standard; and 

(2) The program allows a reasonable 

alternative standard (or waiver of the 

otherwise applicable standard) for 

obtaining the reward for any individual 

for whom, for that period, it is 

medically inadvisable to attempt to 

satisfy the otherwise applicable 

standard. 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

either paragraph (f)(3)(iv)(A)(1) or (2) of 

this section, a reasonable alternative 

standard must be furnished by the plan 

or issuer upon the individual’s request 

or the condition for obtaining the 

reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an activityonly wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of this 

paragraph (f)(3) in the same manner as 

if it were an initial program standard. 

(Thus, for example, if a plan or issuer 

provides a walking program as a 

reasonable alternative standard to a 

running program, individuals for whom 

it is unreasonably difficult due to a 

medical condition to complete the 

walking program (or for whom it is 

medically inadvisable to attempt to 

complete the walking program) must be 

provided a reasonable alternative 

standard to the walking program.) To 

the extent that a reasonable alternative 

standard under an activity-only 

wellness program is, itself, an outcomebased wellness program, it must comply 

with the requirements of paragraph 

(f)(4) of this section, including 

paragraph (f)(4)(iv)(D). 

(E) If reasonable under the 

circumstances, a plan or issuer may seek 

verification, such as a statement from an 

individual’s personal physician, that a 

health factor makes it unreasonably 

difficult for the individual to satisfy, or 

medically inadvisable for the individual 

to attempt to satisfy, the otherwise 

applicable standard of an activity-only 

wellness program. Plans and issuers 

may seek verification with respect to 

requests for a reasonable alternative 

standard for which it is reasonable to 

determine that medical judgment is 

required to evaluate the validity of the 

request. 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an activity-only 

wellness program the availability of a 

reasonable alternative standard to 

qualify for the reward (and, if 

applicable, the possibility of waiver of 

the otherwise applicable standard), 

including contact information for 

obtaining a reasonable alternative 

standard and a statement that 

recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 

(vi) Example. The provisions of this 

paragraph (f)(3) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

provides a reward to individuals who 

participate in a reasonable specified walking 

program. If it is unreasonably difficult due to 

a medical condition for an individual to 

participate (or if it is medically inadvisable 

for an individual to attempt to participate), 

the plan will waive the walking program 

requirement and provide the reward. All 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33189 

materials describing the terms of the walking 

program disclose the availability of the 

waiver. 

(ii) Conclusion. In this Example, the 

program satisfies the requirements of 

paragraph (f)(3)(iii) of this section because 

the walking program is reasonably designed 

to promote health and prevent disease. The 

program satisfies the requirements of 

paragraph (f)(3)(iv) of this section because the 

reward under the program is available to all 

similarly situated individuals. It 

accommodates individuals for whom it is 

unreasonably difficult to participate in the 

walking program due to a medical condition 

(or for whom it would be medically 

inadvisable to attempt to participate) by 

providing them with the reward even if they 

do not participate in the walking program 

(that is, by waiving the condition). The plan 

also complies with the disclosure 

requirement of paragraph (f)(3)(v) of this 

section. Thus, the plan satisfies paragraphs 

(f)(3)(iii), (iv), and (v) of this section. 

(4) Requirements for outcome-based 

wellness programs. A health-contingent 

wellness program that is an outcomebased wellness program, as described in 

paragraph (f)(1)(v) of this section, does 

not violate the provisions of this section 

only if all of the following requirements 

are satisfied: 

(i) Frequency of opportunity to 

qualify. The program must give 

individuals eligible for the program the 

opportunity to qualify for the reward 

under the program at least once per 

year. 

(ii) Size of reward. The reward for the 

outcome-based wellness program, 

together with the reward for other 

health-contingent wellness programs 

with respect to the plan, must not 

exceed the applicable percentage (as 

defined in paragraph (f)(5) of this 

section) of the total cost of employeeonly coverage under the plan. However, 

if, in addition to employees, any class 

of dependents (such as spouses, or 

spouses and dependent children) may 

participate in the wellness program, the 

reward must not exceed the applicable 

percentage of the total cost of the 

coverage in which an employee and any 

dependents are enrolled. For purposes 

of this paragraph (f)(4)(ii), the cost of 

coverage is determined based on the 

total amount of employer and employee 

contributions towards the cost of 

coverage for the benefit package under 

which the employee is (or the employee 

and any dependents are) receiving 

coverage. 

(iii) Reasonable design. The program 

must be reasonably designed to promote 

health or prevent disease. A program 

satisfies this standard if it has a 

reasonable chance of improving the 

health of, or preventing disease in, 

participating individuals, and it is not 

overly burdensome, is not a subterfuge 

for discriminating based on a health 

factor, and is not highly suspect in the 

method chosen to promote health or 

prevent disease. This determination is 

based on all the relevant facts and 

circumstances. To ensure that an 

outcome-based wellness program is 

reasonably designed to improve health 

and does not act as a subterfuge for 

underwriting or reducing benefits based 

on a health factor, a reasonable 

alternative standard to qualify for the 

reward must be provided to any 

individual who does not meet the initial 

standard based on a measurement, test, 

or screening that is related to a health 

factor, as explained in paragraph 

(f)(4)(iv) of this section. 

(iv) Uniform availability and 

reasonable alternative standards. The 

full reward under the outcome-based 

wellness program must be available to 

all similarly situated individuals. 

(A) Under this paragraph (f)(4)(iv), a 

reward under an outcome-based 

wellness program is not available to all 

similarly situated individuals for a 

period unless the program allows a 

reasonable alternative standard (or 

waiver of the otherwise applicable 

standard) for obtaining the reward for 

any individual who does not meet the 

initial standard based on the 

measurement, test, or screening, as 

described in this paragraph (f)(4)(iv). 

(B) While plans and issuers are not 

required to determine a particular 

reasonable alternative standard in 

advance of an individual’s request for 

one, if an individual is described in 

paragraph (f)(4)(iv)(A) of this section, a 

reasonable alternative standard must be 

furnished by the plan or issuer upon the 

individual’s request or the condition for 

obtaining the reward must be waived. 

(C) All the facts and circumstances are 

taken into account in determining 

whether a plan or issuer has furnished 

a reasonable alternative standard, 

including but not limited to the 

following: 

(1) If the reasonable alternative 

standard is completion of an 

educational program, the plan or issuer 

must make the educational program 

available or assist the employee in 

finding such a program (instead of 

requiring an individual to find such a 

program unassisted), and may not 

require an individual to pay for the cost 

of the program. 

(2) The time commitment required 

must be reasonable (for example, 

requiring attendance nightly at a onehour class would be unreasonable). 

(3) If the reasonable alternative 

standard is a diet program, the plan or 

issuer is not required to pay for the cost 

of food but must pay any membership 

or participation fee. 

(4) If an individual’s personal 

physician states that a plan standard 

(including, if applicable, the 

recommendations of the plan’s medical 

professional) is not medically 

appropriate for that individual, the plan 

or issuer must provide a reasonable 

alternative standard that accommodates 

the recommendations of the individual’s 

personal physician with regard to 

medical appropriateness. Plans and 

issuers may impose standard cost 

sharing under the plan or coverage for 

medical items and services furnished 

pursuant to the physician’s 

recommendations. 

(D) To the extent that a reasonable 

alternative standard under an outcomebased wellness program is, itself, an 

activity-only wellness program, it must 

comply with the requirements of 

paragraph (f)(3) of this section in the 

same manner as if it were an initial 

program standard. To the extent that a 

reasonable alternative standard under 

an outcome-based wellness program is, 

itself, another outcome-based wellness 

program, it must comply with the 

requirements of this paragraph (f)(4), 

subject to the following special rules: 

(1) The reasonable alternative 

standard cannot be a requirement to 

meet a different level of the same 

standard without additional time to 

comply that takes into account the 

individual’s circumstances. For 

example, if the initial standard is to 

achieve a BMI less than 30, the 

reasonable alternative standard cannot 

be to achieve a BMI less than 31 on that 

same date. However, if the initial 

standard is to achieve a BMI less than 

30, a reasonable alternative standard for 

the individual could be to reduce the 

individual’s BMI by a small amount or 

small percentage, over a realistic period 

of time, such as within a year. 

(2) An individual must be given the 

opportunity to comply with the 

recommendations of the individual’s 

personal physician as a second 

reasonable alternative standard to 

meeting the reasonable alternative 

standard defined by the plan or issuer, 

but only if the physician joins in the 

request. The individual can make a 

request to involve a personal 

physician’s recommendations at any 

time and the personal physician can 

adjust the physician’s recommendations 

at any time, consistent with medical 

appropriateness. 

(E) It is not reasonable to seek 

verification, such as a statement from an 

individual’s personal physician, under 

an outcome-based wellness program 

that a health factor makes it 


sroberts on DSK5SPTVN1PROD with RULES
33190 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

unreasonably difficult for the individual 

to satisfy, or medically inadvisable for 

the individual to attempt to satisfy, the 

otherwise applicable standard as a 

condition of providing a reasonable 

alternative to the initial standard. 

However, if a plan or issuer provides an 

alternative standard to the otherwise 

applicable measurement, test, or 

screening that involves an activity that 

is related to a health factor, then the 

rules of paragraph (f)(3) of this section 

for activity-only wellness programs 

apply to that component of the wellness 

program and the plan or issuer may, if 

reasonable under the circumstances, 

seek verification that it is unreasonably 

difficult due to a medical condition for 

an individual to perform or complete 

the activity (or it is medically 

inadvisable to attempt to perform or 

complete the activity). (For example, if 

an outcome-based wellness program 

requires participants to maintain a 

certain healthy weight and provides a 

diet and exercise program for 

individuals who do not meet the 

targeted weight, a plan or issuer may 

seek verification, as described in 

paragraph (f)(3)(iv)(D) of this section, if 

reasonable under the circumstances, 

that a second reasonable alternative 

standard is needed for certain 

individuals because, for those 

individuals, it would be unreasonably 

difficult due to a medical condition to 

comply, or medically inadvisable to 

attempt to comply, with the diet and 

exercise program, due to a medical 

condition.) 

(v) Notice of availability of reasonable 

alternative standard. The plan or issuer 

must disclose in all plan materials 

describing the terms of an outcomebased wellness program, and in any 

disclosure that an individual did not 

satisfy an initial outcome-based 

standard, the availability of a reasonable 

alternative standard to qualify for the 

reward (and, if applicable, the 

possibility of waiver of the otherwise 

applicable standard), including contact 

information for obtaining a reasonable 

alternative standard and a statement 

that recommendations of an individual’s 

personal physician will be 

accommodated. If plan materials merely 

mention that such a program is 

available, without describing its terms, 

this disclosure is not required. Sample 

language is provided in paragraph (f)(6) 

of this section, as well as in certain 

examples of this section. 

(vi) Examples. The provisions of this 

paragraph (f)(4) are illustrated by the 

following examples: 

Example 1—Cholesterol screening with 

reasonable alternative standard to work with 

personal physician. (i) Facts. A group health 

plan offers a reward to participants who 

achieve a count under 200 on a total 

cholesterol test. If a participant does not 

achieve the targeted cholesterol count, the 

plan allows the participant to develop an 

alternative cholesterol action plan in 

conjunction with the participant’s personal 

physician that may include 

recommendations for medication and 

additional screening. The plan allows the 

physician to modify the standards, as 

medically necessary, over the year. (For 

example, if a participant develops asthma or 

depression, requires surgery and 

convalescence, or some other medical 

condition or consideration makes completion 

of the original action plan inadvisable or 

unreasonably difficult, the physician may 

modify the original action plan.) All plan 

materials describing the terms of the program 

include the following statement: ‘‘Your 

health plan wants to help you take charge of 

your health. Rewards are available to all 

employees who participate in our Cholesterol 

Awareness Wellness Program. If your total 

cholesterol count is under 200, you will 

receive the reward. If not, you will still have 

an opportunity to qualify for the reward. We 

will work with you and your doctor to find 

a Health Smart program that is right for you.’’ 

In addition, when any individual participant 

receives notification that his or her 

cholesterol count is 200 or higher, the 

notification includes the following statement: 

‘‘Your plan offers a Health Smart program 

under which we will work with you and your 

doctor to try to lower your cholesterol. If you 

complete this program, you will qualify for 

a reward. Please contact us at [contact 

information] to get started.’’ 

(ii) Conclusion. In this Example 1, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain cholesterol level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because the cholesterol program is 

reasonably designed to promote health and 

prevent disease. The program satisfies the 

requirements of paragraph (f)(4)(iv) of this 

section because it makes available to all 

participants who do not meet the cholesterol 

standard a reasonable alternative standard to 

qualify for the reward. Lastly, the plan also 

discloses in all materials describing the terms 

of the program and in any disclosure that an 

individual did not satisfy the initial outcomebased standard the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

ability to involve his or her personal 

physician), as required by paragraph (f)(4)(v) 

of this section. Thus, the program satisfies 

the requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 2—Cholesterol screening with 

plan alternative and no opportunity for 

personal physician involvement. (i) Facts. 

Same facts as Example 1, except that the 

wellness program’s physician or nurse 

practitioner (rather than the individual’s 

personal physician) determines the 

alternative cholesterol action plan. The plan 

does not provide an opportunity for a 

participant’s personal physician to modify 

the action plan if it is not medically 

appropriate for that individual. 

(ii) Conclusion. In this Example 2, the 

wellness program does not satisfy the 

requirements of paragraph (f)(4)(iii) of this 

section because the program does not 

accommodate the recommendations of the 

participant’s personal physician with regard 

to medical appropriateness, as required 

under paragraph (f)(4)(iv)(C)(3) of this 

section. Thus, the program is not reasonably 

designed under paragraph (f)(4)(iii) of this 

section and is not available to all similarly 

situated individuals under paragraph 

(f)(4)(iv) of this section. The notice also does 

not provide all the content required under 

paragraph (f)(4)(v) of this section. 

Example 3—Cholesterol screening with 

plan alternative that can be modified by 

personal physician. (i) Facts. Same facts as 

Example 2, except that if a participant’s 

personal physician disagrees with any part of 

the action plan, the personal physician may 

modify the action plan at any time, and the 

plan discloses this to participants. 

(ii) Conclusion. In this Example 3, the 

wellness program satisfies the requirements 

of paragraph (f)(4)(iii) of this section because 

the participant’s personal physician may 

modify the action plan determined by the 

wellness program’s physician or nurse 

practitioner at any time if the physician 

states that the recommendations are not 

medically appropriate, as required under 

paragraph (f)(4)(iv)(C)(3) of this section. 

Thus, the program is reasonably designed 

under paragraph (f)(4)(iii) of this section and 

is available to all similarly situated 

individuals under paragraph (f)(4)(iv) of this 

section. The notice, which includes a 

statement that recommendations of an 

individual’s personal physician will be 

accommodated, also complies with 

paragraph (f)(4)(v) of this section. 

Example 4—BMI screening with walking 

program alternative. (i) Facts. A group 

health plan will provide a reward to 

participants who have a body mass index 

(BMI) that is 26 or lower, determined shortly 

before the beginning of the year. Any 

participant who does not meet the target BMI 

is given the same discount if the participant 

complies with an exercise program that 

consists of walking 150 minutes a week. Any 

participant for whom it is unreasonably 

difficult due to a medical condition to 

comply with this walking program (and any 

participant for whom it is medically 

inadvisable to attempt to comply with the 

walking program) during the year is given the 

same discount if the participant satisfies an 

alternative standard that is reasonable taking 

into consideration the participant’s medical 

situation, is not unreasonably burdensome or 

impractical to comply with, and is otherwise 

reasonably designed based on all the relevant 

facts and circumstances. All plan materials 

describing the terms of the wellness program 

include the following statement: ‘‘Fitness is 

Easy! Start Walking! Your health plan cares 

about your health. If you are considered 

overweight because you have a BMI of over 

26, our Start Walking program will help you 

lose weight and feel better. We will help you 

enroll. (**If your doctor says that walking 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 33191 

isn’t right for you, that’s okay too. We will 

work with you (and, if you wish, your own 

doctor) to develop a wellness program that 

is.)’’ Participant E is unable to achieve a BMI 

that is 26 or lower within the plan’s 

timeframe and receives notification that 

complies with paragraph (f)(4)(v) of this 

section. Nevertheless, it is unreasonably 

difficult due to a medical condition for E to 

comply with the walking program. E 

proposes a program based on the 

recommendations of E’s physician. The plan 

agrees to make the same discount available 

to E that is available to other participants in 

the BMI program or the alternative walking 

program, but only if E actually follows the 

physician’s recommendations. 

(ii) Conclusion. In this Example 4, the 

program is an outcome-based wellness 

program because the initial standard requires 

an individual to attain or maintain a specific 

health outcome (a certain BMI level) to 

obtain a reward. The program satisfies the 

requirements of paragraph (f)(4)(iii) of this 

section because it is reasonably designed to 

promote health and prevent disease. The 

program also satisfies the requirements of 

paragraph (f)(4)(iv) of this section because it 

makes available to all individuals who do not 

satisfy the BMI standard a reasonable 

alternative standard to qualify for the reward 

(in this case, a walking program that is not 

unreasonably burdensome or impractical for 

individuals to comply with and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances). In 

addition, the walking program is, itself, an 

activity-only standard and the plan complies 

with the requirements of paragraph (f)(3) of 

this section (including the requirement of 

paragraph (f)(3)(iv) that, if there are 

individuals for whom it is unreasonably 

difficult due to a medical condition to 

comply, or for whom it is medically 

inadvisable to attempt to comply, with the 

walking program, the plan provide a 

reasonable alternative to those individuals). 

Moreover, the plan satisfies the requirements 

of paragraph (f)(4)(v) of this section because 

it discloses, in all materials describing the 

terms of the program and in any disclosure 

that an individual did not satisfy the initial 

outcome-based standard, the availability of a 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician) to qualify for the reward or the 

possibility of waiver of the otherwise 

applicable standard. Thus, the program 

satisfies the requirements of paragraphs 

(f)(4)(iii), (iv), and (v) of this section. 

Example 5—BMI screening with 

alternatives available to either lower BMI or 

meet personal physician’s recommendations. 

(i) Facts. Same facts as Example 4 except 

that, with respect to any participant who 

does not meet the target BMI, instead of a 

walking program, the participant is expected 

to reduce BMI by one point. At any point 

during the year upon request, any individual 

can obtain a second reasonable alternative 

standard, which is compliance with the 

recommendations of the participant’s 

personal physician regarding weight, diet, 

and exercise as set forth in a treatment plan 

that the physician recommends or to which 

the physician agrees. The participant’s 

personal physician is permitted to change or 

adjust the treatment plan at any time and the 

option of following the participant’s personal 

physician’s recommendations is clearly 

disclosed. 

(ii) Conclusion. In this Example 5, the 

reasonable alternative standard to qualify for 

the reward (the alternative BMI standard 

requiring a one-point reduction) does not 

make the program unreasonable under 

paragraph (f)(4)(iii) or (iv) of this section 

because the program complies with 

paragraph (f)(4)(iv)(C)(4) of this section by 

allowing a second reasonable alternative 

standard to qualify for the reward 

(compliance with the recommendations of 

the participant’s personal physician, which 

can be changed or adjusted at any time). 

Accordingly, the program continues to satisfy 

the applicable requirements of paragraph (f) 

of this section. 

Example 6—Tobacco use surcharge with 

smoking cessation program alternative. (i) 

Facts. In conjunction with an annual open 

enrollment period, a group health plan 

provides a premium differential based on 

tobacco use, determined using a health risk 

assessment. The following statement is 

included in all plan materials describing the 

tobacco premium differential: ‘‘Stop smoking 

today! We can help! If you are a smoker, we 

offer a smoking cessation program. If you 

complete the program, you can avoid this 

surcharge.’’ The plan accommodates 

participants who smoke by facilitating their 

enrollment in a smoking cessation program 

that requires participation at a time and place 

that are not unreasonably burdensome or 

impractical for participants, and that is 

otherwise reasonably designed based on all 

the relevant facts and circumstances, and 

discloses contact information and the 

individual’s option to involve his or her 

personal physician. The plan pays for the 

cost of participation in the smoking cessation 

program. Any participant can avoid the 

surcharge for the plan year by participating 

in the program, regardless of whether the 

participant stops smoking, but the plan can 

require a participant who wants to avoid the 

surcharge in a subsequent year to complete 

the smoking cessation program again. 

(ii) Conclusion. In this Example 6, the 

premium differential satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v). The program is an outcome-based 

wellness program because the initial 

standard for obtaining a reward is dependent 

on the results of a health risk assessment (a 

measurement, test, or screening). The 

program is reasonably designed under 

paragraph (f)(4)(iii) because the plan provides 

a reasonable alternative standard (as required 

under paragraph (f)(4)(iv) of this section) to 

qualify for the reward to all tobacco users (a 

smoking cessation program). The plan 

discloses, in all materials describing the 

terms of the program, the availability of the 

reasonable alternative standard (including 

contact information and the individual’s 

option to involve his or her personal 

physician). Thus, the program satisfies the 

requirements of paragraphs (f)(4)(iii), (iv), 

and (v) of this section. 

Example 7—Tobacco use surcharge with 

alternative program requiring actual 

cessation. (i) Facts. Same facts as Example 

6, except the plan does not provide 

participant F with the reward in subsequent 

years unless F actually stops smoking after 

participating in the tobacco cessation 

program. 

(ii) Conclusion. In this Example 7, the 

program is not reasonably designed under 

paragraph (f)(4)(iii) of this section and does 

not provide a reasonable alternative standard 

as required under paragraph (f)(4)(iv) of this 

section. The plan cannot cease to provide a 

reasonable alternative standard merely 

because the participant did not stop smoking 

after participating in a smoking cessation 

program. The plan must continue to offer a 

reasonable alternative standard whether it is 

the same or different (such as a new 

recommendation from F’s personal physician 

or a new nicotine replacement therapy). 

Example 8—Tobacco use surcharge with 

smoking cessation program alternative that is 

not reasonable. (i) Facts. Same facts as 

Example 6, except the plan does not facilitate 

participant F’s enrollment in a smoking 

cessation program. Instead the plan advises 

F to find a program, pay for it, and provide 

a certificate of completion to the plan. 

(ii) Conclusion. In this Example 8, the 

requirement for F to find and pay for F’s own 

smoking cessation program means that the 

alternative program is not reasonable. 

Accordingly, the plan has not offered a 

reasonable alternative standard that complies 

with paragraphs (f)(4)(iii) and (iv) of this 

section and the program fails to satisfy the 

requirements of paragraph (f) of this section. 

(5) Applicable percentage—(i) For 

purposes of this paragraph (f), the 

applicable percentage is 30 percent, 

except that the applicable percentage is 

increased by an additional 20 

percentage points (to 50 percent) to the 

extent that the additional percentage is 

in connection with a program designed 

to prevent or reduce tobacco use. 

(ii) The rules of this paragraph (f)(5) 

are illustrated by the following 

examples: 

Example 1. (i) Facts. An employer 

sponsors a group health plan. The annual 

premium for employee-only coverage is 

$6,000 (of which the employer pays $4,500 

per year and the employee pays $1,500 per 

year). The plan offers employees a healthcontingent wellness program with several 

components, focused on exercise, blood 

sugar, weight, cholesterol, and blood 

pressure. The reward for compliance is an 

annual premium rebate of $600. 

(ii) Conclusion. In this Example 1, the 

reward for the wellness program, $600, does 

not exceed the applicable percentage of 30 

percent of the total annual cost of employeeonly coverage, $1,800. ($6,000 × 30% = 

$1,800.) 

Example 2. (i) Facts. Same facts as 

Example 1, except the wellness program is 

exclusively a tobacco prevention program. 

Employees who have used tobacco in the last 

12 months and who are not enrolled in the 

plan’s tobacco cessation program are charged 

a $1,000 premium surcharge (in addition to 

their employee contribution towards the 


sroberts on DSK5SPTVN1PROD with RULES
33192 Federal Register / Vol. 78, No. 106 / Monday, June 3, 2013 / Rules and Regulations 

coverage). (Those who participate in the 

plan’s tobacco cessation program are not 

assessed the $1,000 surcharge.) 

(ii) Conclusion. In this Example 2, the 

reward for the wellness program (absence of 

a $1,000 surcharge), does not exceed the 

applicable percentage of 50 percent of the 

total annual cost of employee-only coverage, 

$3,000. ($6,000 × 50% = $3,000.) 

Example 3. (i) Facts. Same facts as 

Example 1, except that, in addition to the 

$600 reward for compliance with the healthcontingent wellness program, the plan also 

imposes an additional $2,000 tobacco 

premium surcharge on employees who have 

used tobacco in the last 12 months and who 

are not enrolled in the plan’s tobacco 

cessation program. (Those who participate in 

the plan’s tobacco cessation program are not 

assessed the $2,000 surcharge.) 

(ii) Conclusion. In this Example 3, the total 

of all rewards (including absence of a 

surcharge for participating in the tobacco 

program) is $2,600 ($600 + $2,000 = $2,600), 

which does not exceed the applicable 

percentage of 50 percent of the total annual 

cost of employee-only coverage ($3,000); and, 

tested separately, the $600 reward for the 

wellness program unrelated to tobacco use 

does not exceed the applicable percentage of 

30 percent of the total annual cost of 

employee-only coverage ($1,800). 

Example 4. (i) Facts. An employer 

sponsors a group health plan. The total 

annual premium for employee-only coverage 

(including both employer and employee 

contributions towards the coverage) is 

$5,000. The plan provides a $250 reward to 

employees who complete a health risk 

assessment, without regard to the health 

issues identified as part of the assessment. 

The plan also offers a Healthy Heart program, 

which is a health-contingent wellness 

program, with an opportunity to earn a 

$1,500 reward. 

(ii) Conclusion. In this Example 4, even 

though the total reward for all wellness 

programs under the plan is $1,750 ($250 + 

$1,500 = $1,750, which exceeds the 

applicable percentage of 30 percent of the 

cost of the annual premium for employeeonly coverage ($5,000 × 30% = $1,500)), only 

the reward offered for compliance with the 

health-contingent wellness program ($1,500) 

is taken into account in determining whether 

the rules of this paragraph (f)(5) are met. (The 

$250 reward is offered in connection with a 

participatory wellness program and therefore 

is not taken into account.) Accordingly, the 

health-contingent wellness program offers a 

reward that does not exceed the applicable 

percentage of 30 percent of the total annual 

cost of employee-only coverage. 

(6) Sample language. The following 

language, or substantially similar 

language, can be used to satisfy the 

notice requirement of paragraphs 

(f)(3)(v) or (f)(4)(v) of this section: ‘‘Your 

health plan is committed to helping you 

achieve your best health. Rewards for 

participating in a wellness program are 

available to all employees. If you think 

you might be unable to meet a standard 

for a reward under this wellness 

program, you might qualify for an 

opportunity to earn the same reward by 

different means. Contact us at [insert 

contact information] and we will work 

with you (and, if you wish, with your 

doctor) to find a wellness program with 

the same reward that is right for you in 

light of your health status.’’ 

* * * * * 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL INSURANCE 

MARKETS 

■ 9. The authority citation for Part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended (2010). 

■ 10. Section 147.110 is added to read 

as follows: 

§ 147.110 Prohibiting discrimination 

against participants, beneficiaries, and 

individuals based on a health factor. 

(a) In general. A group health plan 

and a health insurance issuer offering 

group or individual health insurance 

coverage must comply with all the 

requirements under 45 CFR 146.121 

applicable to a group health plan and a 

health insurance issuer offering group 

health insurance coverage. Accordingly, 

with respect to an issuer offering health 

insurance coverage in the individual 

market, the issuer is subject to the 

requirements of § 146.121 to the same 

extent as an issuer offering group health 

insurance coverage, except the 

exception contained in § 146.121(f) 

(concerning nondiscriminatory wellness 

programs) does not apply. 

(b) Applicability date. This section is 

applicable to group health plans and 

health insurance issuers offering group 

or individual health insurance coverage 

for plan years (in the individual market, 

policy years) beginning on or after 

January 1, 2014. See § 147.140, which 

provides that the rules of this section do 

not apply to grandfathered health plans 

that are individual health insurance 

coverage. 

[FR Doc. 2013–12916 Filed 5–29–13; 11:15 am] 

BILLING CODE 4830–01–4510–29–4120–01–P 


sroberts on DSK5SPTVN1PROD with RULES