Health-Contingent Wellness Programs Enter Individual Marketplace

October 03, 2019 - CMS will allow states to expand their wellness programs for the individual marketplace either through state-run or payer-designed programs, CMS announced.

The goal of the demonstration is two-fold, CMS Administrator Seema Verma explained in a press release.

“Allowing states to implement these wellness programs in their individual markets offers the opportunity to not only improve the health of their residents but also to help reduce healthcare spending,” said Administrator Verma.

States can offer premium cost savings or other financial incentives as a part of their wellness programs and develop their programs using the issuer-based demonstration project or the standard demonstration project.

In states that choose the former option, the state will institute HHS-approved criteria for wellness programs on the individual health insurance market. Healthcare payers wanting to offer a wellness program for the individual health insurance market have the freedom to design their plan for their members and submit it to the state for approval. The state’s standards would have to align with those designed for the group health insurance market.

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In the second option, the standard demonstration project, the state would design the wellness program and healthcare payers would have to comply with that model. The design would be subject to the same requirements as the group market. This option is more restrictive, requiring healthcare payers to comply with the terms and rewards the state defines precisely.

Regardless of which option the states choose, their guidelines must give beneficiaries at least one opening per year to qualify for the benefit. The states must also take into account whether the design is achievable for all members regardless of medical condition and, if not, a potential substitute must be arranged for those individuals.

Furthermore, if the design is outcomes-based, the desired outcome must be attainable and must have an alternative for those who cannot achieve it for health-related reasons. States have to announce the wellness program’s outcome goals as well as the opportunity for a different arrangement if necessary.

The states must restrict their wellness program rewards to 30 percent of the individual health plan’s cost. The only exception is if the wellness program includes tobacco prevention or cessation elements, like New Mexico’s recent state employee wellness program. These can be awarded 20 percent of the plan’s cost.

The state must demonstrate that the project will not lessen healthcare coverage for its population and it must be neutral to the federal budget, so that the federal government is not increasing financial subsidies for the individual healthcare insurance market.

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States will also record the program’s size, the amount of rewards, the savings associated with the program, and any shifts in beneficiaries’ healthcare tendencies including utilization and healthcare spending. Three years after the state receives permission to pursue its program and once a year following the first three years, the states must share this data with HHS.

Up until now, health-contingent wellness programs have only been available through employer-sponsored healthcare insurance, not to individuals on the Affordable Care Act’s individual health insurance marketplace.

Health-contingent wellness programs have a complex legal history due to potential discrimination based on health conditions.

In June of 2013, the final rule for the Incentives for Nondiscriminatory Wellness Programs in Group Health Plans defined a wellness program as a program that may lead to positive health outcomes or check the spread of disease and it is either participatory or health-contingent.

Health-contingent programs, unlike participatory plans, will only reward a beneficiary if they achieve the program’s intended, health-related goal. They can be either activity-only or outcome-based. If the former, they may require that the beneficiary do a specific health-related activity to obtain a reward without achieving a health outcome. If the latter, the reward is tied to a specific health outcome.

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“Employers have long offered their employees health-contingent wellness programs,” CMS explained. “However, these kinds of wellness programs have been unavailable to consumers who purchase coverage in the individual market until now because Obamacare does not allow individual market health-contingent wellness programs outside of this demonstration project.”

In the private sector, employer-sponsored health plans continue to evolve. More recently, employers have been looking at wellness programs that extend beyond health-related factors, particularly to confront financial wellness.

Healthcare payers have also been innovative in evolving their use of virtual care in their wellness programs. As plans develop and expand their wellness programs, the results may portend well for the creative power they could channel into the individual health insurance market.