On November 20, 2012, Affordable Care Act guidance was issued in the form of over 300 pages of proposed regulations. The guidance is broken into three parts: 1) requirements for essential health benefits, actuarial value, and other exchange related requirements; 2) various market reform initiatives; and 3) regulations related to employee wellness programs.
At this time, the proposed regulations related to the exchange requirements, as well as the market reform initiatives, will be more meaningful to industry practitioners. The proposed regulations related to wellness programs will be of greatest interest to employers.
In general, as of January 1, 2014, health plans will not be able to underwrite based on health status. Wellness programs have been granted a limited exemption. The maximum allowable reward under a wellness program as part of a group health plan has increased from twenty to thirty percent of the cost of coverage. Also, the maximum reward for tobacco prevention programs increased to fifty percent of the cost of coverage. This allows employers to reduce premiums for employees that participate in these healthy “activities.” Many have referred to this practice as “backdoor” underwriting which seems to circumvent the removal of health-based underwriting. The proposed wellness program regulations are also effective for plan years beginning on or after January 1, 2014.
This promises to be only the beginning of the proposed regulations as there are many aspects of the Act that need clarification. If you should have any questions regarding the Affordable Care Act, please contact Mark Flanagan of Aronson’s Employee Benefit Plan Services Group at 301.231.6257.