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HCR Update: Wellness Grants & Rewards and Grandfathering for Assoc Plans

Feb 03, 2011

Health Care Reform Update

January 28, 2011

New fact sheets explain small employer wellness grants

Starting in 2011, small employers will be able to apply for grants that help pay for wellness programs that meet specific requirements. Only wellness programs started after the health care reform law was enacted (March 23, 2010) will be eligible for grant funding.

The U.S. Department of Health and Human Services (HHS) is expected to release detailed criteria about programs that are eligible for grant funding in 2011. We are analyzing the information currently available to develop potential options - which may include establishing new wellness programs and products. This analysis will allow us to act quickly once HHS releases detailed criteria for eligible programs and guidelines for employers to follow in applying for the grants.

For more details and talking points, refer to this fact sheet.


Wellness rewards cap increasing to 30%


In 2014, the cap on reward payments to employees who participate in qualified wellness programs and meet certain health-related benchmarks will increase from 20% of the total cost of coverage to 30% of the total cost.  

Currently, the wellness program requirements of the Health Insurance Portability and Accountability Act (HIPAA) nondiscrimination regulations limit the total reward that may be given to an individual for achieving health standards under an employer's compliant wellness incentive program to an aggregate annual maximum of 20% of the full cost of coverage under the employer's group health plan. If participation in the wellness program is open to dependents, the reward is limited to 20% of the cost of coverage in which the employee and any dependents are enrolled. The health care reform law will increase this cap to 30%.

We expect the U.S. Department of Health and Human Services to release guidance on this provision at a later date. However, in frequently asked questions released by the Department of Labor on December 22, 2010, the agency indicated that the federal regulators responsible for enforcing the HIPAA requirements intend to propose regulations that will raise the cap to 30% before 2014.

Attached is a summary  of the language in the health care reform law, which codifies the existing HIPAA rules and changes the incentive cap to 30% effective in 2014.


Decision made on grandfathering for association plans 

As we move into the second year of health care reform, our company continues to analyze regulations and determine how to implement reform effectively. In particular, we are determining how to manage the complexity of grandfathering while continuing to provide value to our customers and members. 

The issue of grandfathering is especially complex for association programs. Reasons why include:

·         Association programs have varied legal/contract structures

·         Some association programs include both small and large employers

·         Employers can take certain actions that cause their benefit plan option to lose grandfathered status for the entire association

·         The health care reform law does not address these programs specifically, so application of provisions is not clear in certain areas


Therefore, we've decided we will not allow associations to grandfather going forward. This decision came after thoroughly evaluating:

·         The latest grandfathering regulations

·         Market interest in grandfathering

·         Pros and cons of maintaining grandfathered status for associations 

If you have questions or concerns, please contact your sales representative.

Now you have a single, reliable resource for health care reform information.


This content is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers

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