Federal Agencies recently issued final Affordable Care Act updates with regulations governing the way employers may administer rewards for health-contingent wellness programs. Permissible rewards (or avoidance of penalties) increased to a maximum of 50 percent of the total cost of coverage for smoking cessation programs and 30 percent for all other wellness programs that require an individual to obtain a health factor in order to obtain a reward.

The new rules provide more clarity on the definition of “health contingent” by creating three categories of wellness programs:

  1. Participatory only – no medical reason a person can’t participate
  2. Health contingent but activity only – there could be a medical reason a person can’t do the activity, ie. walk 30 minutes a day.
  3. Health contingent and outcomes based – the participant must achieve an outcome, ie. lower cholesterol.

Regulations differ among the three categories of wellness programs. To understand these requirements further, please refer to this updated health policy brief: pdfNew Regulations for Wellness Program Incentives.

PCORI Fees Due July 31 for Many Employers

Health plans, including self-funded employer plans, are subject to a new fee to support the Patient Centered Outcomes Research Institute (PCORI) that will support comparative effectiveness research. The fee is first imposed on plans ending after September 30, 2012 and is due no later than July 31 of the calendar year following the last day of the plan year. That means the fees will come due for 2012 calendar year plans on July 31, 2013, while certain non-calendar year plans ending between January 1 and September 30, 2013 may defer their first payment for an additional year.

In the first year applicability, the fee $1 multiplied by the average number of lives covered under the plan. Employers will report and pay the fees using Form 720 which has been revised to provide for this payment. For additional information about how to calculate the fees, please see this updated health policy brief: pdf Calculating Comparative Effectiveness Research (PCORI) Fees.

State Medicaid Decisions Could Impact Employers and Employees

Both Illinois and Iowa are looking to expand their Medicaid programs under the Affordable Care Act while Wisconsin is poised to reduce eligibility for adults in 2014. At the time of writing, the Illinois legislature had sent a bill to Governor Quinn approving full expansion, while the Iowa legislature and Governor Brandstad crafted a compromise proposal called the “Iowa Health and Wellness Plan” which will expand Medicaid with changes if it gets a green light from the federal government. Expansions may mean more employees that move from employer plans to Medicaid.

Meanwhile, the Wisconsin legislature approved Governor Walker’s proposal to establish new income eligibility limits for adults under Wisconsin’s Medicaid program (aka BadgerCare) at 100 percent of the Federal Poverty Limit (FPL). In 2013, 100% of FPL is $11,490 for a single person, $15,510 for a family of two and continues to increase with family size.

Wisconsin’s proposal would move an estimated 90,000 Wisconsinites off BadgerCare and presumably into employer plans or subsidized exchange coverage starting in 2014. Pregnant women and children with higher incomes would continue to be eligible for BadgerCare coverage in 2014.

Wisconsin’s move was controversial in light of an offer from the federal government to pay a significant percentage of states’ costs to expand their Medicaid programs to adults with incomes up to 133% of FPL. However, this increased support would eventually be phased down. Both Illinois and Iowa will be eligible for the increased federal funding for upcoming years if their plans are approved.