Fed Releases New Health Incentive Rules for Employers

The start of 2014 will likely see many Americans intent on becoming more proactive about their health, not necessarily a result of their New Year's resolutions, but because, under the Obama administration's new health care laws, their bad habits could cost them much more money.

On Wednesday, the Obama administration released a set of guidelines for employers planning to provide their employees with incentives to become healthier under the Affordable Care Act, signed into law in 2010.

Under the plan, employers will be allowed to knock off a maximum 50 percent off premium costs for employees who improve themselves, such as by losing weight or stopping smoke.

On the other hand, employers will also have the go-ahead to charge 30 percent more from employees who hold on to their vices.

Under current law, employers can discount the healthcare premiums by 20 percent, but most offer rewards of 3 percent to 11 percent.

Meanwhile, employers will be directed by regulators to make concessions and punish employees with less-than-perfect-health, as long as they're trying to become healthier.

Under the rules issued Wednesday by the Treasury, Labor and Health and Human Services departments, employers must structure wellness programs so that "every individual participating" can "receive the full amount of any reward or incentive, regardless of any health factor."

The rules, a senior administration official told reporters, are intended to make sure workplace wellness programs are not "a subterfuge for discrimination," for instance, penalizing smokers who cannot kick their nicotine addiction.

"It could be a way of charging someone in less-than-ideal health more for insurance, which is something healthcare reform is trying to move away from," Kathleen Stoll, director of health policy at Families USA, a non-profit group that supports healthcare reform, was quoted saying in a report by Reuters.

Because the rules do not require that wellness programs provide scientific evidence they work, Stoll said, it raises the possibility that workers could be penalized for spurning programs that are ineffective.

Then again, some employer groups worry that the new guidelines prove so generous they dilute any health or financial benefits from workplace wellness programs.

"It's questionable whether this broader allowance for offering incentives is going to work or not," said Steve Wojcik, vice president for public policy at the National Business Group on Health, which represents large employers. "If the employer has to offer rewards, even without evidence that an employee is trying" to improve his or her health, "it might decide to end the wellness program."

As well, the new rules could drive some companies away from offering employer-based insurance, instead opting to pay the penalties that the healthcare law imposes for doing so, said Tom Emerick, president of Emerick Consulting and former vice president of global benefits at Walmart.

"With these regulations, large companies who are trying to decide whether to pay or play will get more reasons to pay and not play," he said.