How Wellness Programs Affect Affordability and Minimum Value Calculations
By Linda Rowings
We field a lot of questions from employers about wellness programs and how they comply with PPACA. Here are two of the most common ones from UBA’s “Frequently Asked Questions (FAQ) About Wellness Programs’ Legal Requirements”:
Q: How does a wellness program affect affordability calculations?
A: The proposed regulations provide that when deciding if the employee’s share of the premium is affordable (less than 9.5% of the employee’s safe harbor income), the employer may not consider wellness incentives or surcharges except for a non-smoking incentive. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded.
Example: Acme has a wellness program that reduces premiums by $300 for employees who do not use tobacco products or who complete a smoking cessation course. Premiums are reduced by $200 if an employee completes cholesterol screening during the plan year. The annual employee premium is $4,000. Employee B does not use tobacco and completed the cholesterol screen, so the cost of his actual premium is $3,500 [$4,000 - 300 - 200]. Employee C uses tobacco and does not do the cholesterol screen, so the cost of her actual premiums is $4,000. For purposes of affordability, Acme will use $3,700 as the cost of coverage for both Employee B and Employee C [$4,000 less the available $300 non-smoker discount].
Q: How does a wellness program affect minimum value calculations?
A: When calculating minimum value, if incentives for nonuse of tobacco may be used to reduce cost-sharing (i.e., the deductible or out-of-pocket costs), those incentives may be taken into account when determining minimum value. Other types of wellness incentives that affect cost-sharing may not be considered.
For nearly 50 frequently asked questions and answers about wellness programs United Benefit Advisors (UBA) request UBA’s “Frequently Asked Questions (FAQ) About Wellness Programs’ Legal Requirements”. For general highlights about wellness programs, download “Highlights of the Wellness program Requirements”.