Human Resources News & Insights

You won’t like latest guidance on wellness programs under Obamacare

Companies have been hoping that their wellness program incentives will help their health plans meet affordability and minimal value requirements under Obamacare. So chances are they won’t like the guidance the IRS just issued.

Recently, the IRS — one of the three agencies responsible for issuing compliance deadlines and guidance for the Affordable Care Act — released a flurry of Obamacare guidance.

A major chunk of that guidance was dedicated to clearing up some confusion surrounding wellness programs and their role in determining minimum value and affordable coverage.

As you know, Obamacare requires employers with 50 or more full-time equivalent employees (FTEs) to offer affordable coverage that meets the feds’ minimum value and affordability standards to all FTEs starting January 1, 2014 or pay a penalty.

Health care is deemed affordable if an employee’s contribution toward self-only coverage doesn’t exceed 9.5% of his or her household income.

The minimum — or “actuarial” — value is the percentage (on average) of the total cost of care a plan will cover.

For example: If a plan has an actuarial value of 60% (the minimum percentage of coverage a plan can cover to not be penalized under the law), an individual under that plan would be responsible for 40% of the cost of his or her care.

The minimum value “metal levels” under Obamacare are as follows:

  • bronze plans will cover 60% of care costs
  • silver plans will cover 70%
  • gold plans will cover 80%, and
  • platinum plans will cover 90%.

A one-year exception

The IRS’ new guidance says for a limited period of time — from May 3, 2013 through January 1, 2015 — employers can assume that all of their employees will earn any discounts and incentives offered through their wellness program when calculating their plan’s “value” and “affordability.”

Example: If a wellness plan offers employees who volunteer to take a health risk assessment $200 off of their premiums or deductible, the plan’s minimum value metal level and affordability can be calculated as if all employees will earn that $200 incentive.

This is the one exception the IRS added to the guidance.

Tobacco vs. non-tobacco incentives

After Jan. 1, 2015, wellness incentives will be divided into two main categories:

From then on, how a company’s health plan affordability and minimum value is determined will depend on what category its wellness incentives fall into.

When it comes to wellness program incentives specific to tobacco usage, health plans should assume all employees will earn the program’s incentives when it comes to determining the plan’s affordability and minimum value.

Example: If a company’s wellness program offers a premium discount to non-smokers, the company can use the discounted premium when calculating the affordability and minimum value of its health plan.

And if a plan penalizes smokers — with higher premiums or cost-sharing — the plan can calculate affordability and minimum value using the figures all non-smokers would pay.

On the other hand, when it comes to determining affordability and minimum value for health plans with all other wellness incentives not geared toward smoking prevention, plans should assume that all employees will fail to satisfy the wellness program’s requirements to earn incentives.

Therefore, all non-smoking-based incentives/penalties offered through an employer’s wellness plan won’t factor into the affordability and minimum-value calculations after Jan. 1, 2015.

Hopes crushed

Bottom line: Employers’ hopes about the majority of their wellness program incentives helping their health plans meet minimum-value and affordability requirements have effectively been crushed by the feds.

Many experts in the benefits community aren’t happy with the distinction the feds made between wellness programs and feel the moves adds more confusion to complying with Obamacare’s many regs.

As Paul Dennett, senior vice president, health policy, at the American Benefits Council, put it, “It’s not clear why the proposed rules would have one rule that applies to completing a wellness program that addresses tobacco use, and an entirely different rule for any other kind of wellness program. It seems as though the rules should be consistent and this will add one more wrinkle to what will already be a real challenge to communicate to employees.”

Another potential drawback: The move could also make smokers feel even more singled out.

This post originally ran on our sister website,

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  • Janice

    This Obama care will serve the poor and destroy the middle class…which all the politicians both Democratic and Republican have to know will happen. The poor have baby after baby and we are forced to support them and in fact have done so for many, many years. The direction and objective in my opinion will be to lead us like horses to a one payor system. The rich are not affected. Only the middle class. The poor get subsidized by the government…which the majority of those taxpayers ARE THE MIDDLE CLASS. Never in my life did I think this nation would get to this point and that one President and his polices could harm us as this President has done under the guise of trying to provide insurance for the sake of the poor! Wonder who came up with that campaign on his staff.
    Without the middle class, there is no USA. You only will have two classes…poor and rich. The American Dream has been destroyed by the greed of our politicians and don’t tell me for a second that any politician has the obligation to pay back the businesses who supported his campaign. The American People are not stupid….just slow to act. You start taking the money from us in order to survive and force us to support the poor which the majority of those did not have to end up that way in the first place and you are inciting us to rebel. There is only one agenda in Washington….to keep the Democrats in office no matter who is adversely affected. It is quite clear they only care about themselves and influence the poor by acting as though they care. They have LIED to ALL OF US. Perhaps someone needs to investigate our presidents contributors and see if any of them benefit from Obama care….who reaps the rewards now that our government is our INSURANCE COMPANY. Ask yourself, who did it serve for Obama to defer big business yet did not be considerate of us individuals? Obama only face of defense is that most black Americans will stand behind him due to him being black. For god sakes wake up fellow black Americans and quit riding on that fact and become more educated and learn the facts about Obama care and quit being influenced just because your president is black. The Democrats tell you everything is going to be fine. It is NOT. Furthermore how come it is not made very clear to us that he made November, National Muslim month. He bragged on how he is going to make it easier for them to come to the USA!!
    Obamacare: We have Insurance companies cancelling their policies. We have seniors on grandfathered good policies that are using the excuse of Obamacare to cancel those policies and cost the seniors more money. Insurance companies are leaving the market. Doctors are not going to have their income capped. Doctors have informed me they are going back to their native countries cause they can now make more money there in lieu of the USA. Doctors are asking for monthly retainers to see you and or opting out of even taking Medicare.
    Obama is the best example of how our politicians only have one agenda and that is theirs….not for the people of this nation anymore. When the people get fed up…….you will not be pleased with the outcome. We gathered together against England. We can do it again. The politicians need to get it together and work together for the good of the entire people. They need to hire experienced people to get our debt down and to lower our taxes so we can survive to continue to pay taxes. Without the middle class there is no longer a USA. Quit destroying us with the Obamacare and the increase in taxes…..we cannot even afford a home anymore much less to take care of our families and put back money for our old age. You are taxing us to death!