Header graphic for print
Employee Benefits Legal Blog Employee Benefits Related to Labor & Employment Matters

PPACA and Wellness Plans: The CVS Model

Posted in Plan Administration, Welfare Plans

In prior entries, I have discussed wellness programs and the rules related to discrimination.  Specifically, we considered what can and cannot be done with respect to "participation based" versus "outcome based" programs.  Clearly wellness programs are a key component of controlling health claims costs and PPACA certainly allows them to exist (and even encourages them).  So looking at the CVS model announced last week, we can see how implementing a "participation based" program can be very effective.

According to reports, CVS will implement a wellness program that will require its employees that enroll in the company medical plan to have a wellness review completed or face a penalty.  The company will pay for the review and it will be administered by a third party.  The company will not know any of the results, only whether or not the employee participated in the review.  The employee will then be told about potential health risks they face and how to get healthier.  If employees do not participate, they will pay a $600 annual "penalty" in the form of increased contributions to health insurance coverage.

The reward, not paying the $600, is the incentive to participate in the program and since the reward is not based on a particular outcome (such as losing weight or lowering BMI), it avoids the HIPAA non-discrimination concerns that outcome based programs face.  Of course it has caused quite an uproar because the assumption is that it penalizes employees for being overweight, but this is not actually the case.  It merely provides an incentive to employees to find out how they can be more healthy, including the fact that they might need to lose weight.  Ideally, as employees find out about their health risks, they will seek to improve their health, thus driving down overall health plan costs.

So as we come closer to full PPACA compliance, employers should consider adding a wellness program component to their health plan as a means of potentially controlling health claims expense.  It is perfectly legal and can be done in a manner as simple as the CVS model.  But make sure you know whether you have an outcome based or participation based program to avoid discrimination concerns.