Bona fide wellness program fog -- "reasonable alternative standard"

[Guest steelejared]

If an employer sponsoring a group health plan sets up a non-smoker premium discount under the proposed HIPAA regs on BFWPs, the employer must also provide a "reasonable alternative standard" for those participants who cannot stop smoking due to an addiction to nicotine. This requirement is can presumably be met by the employer allowing such participants to complete a smoking cessation program as an alternative way of qualifying for the discount. The regulations themselves do not explicitly require that the employer provide such a reaonable alternative at the employer's expense, indeed it seems as though the language only requires that the employer provide the standard. However, the preambles, to the proposed regulations imply that the employer will incur the expense for the reasonable alternatives. The EBSA FAQs on BFWPs do not suggest that the employer must bear the cost of the alternatives, but only that the employer must provide the standard. I have seen others on this message board suggest that they have utilized a "modest subsidy" for employee participation in a smoking cessation program. What does everyone think? Must the employer pay for the smoking cessation course? If it is inexpensive for participants, does that make it a reasonable alternative?

On a side note, if someone declares themselves a non-smoker at open enrollment and then takes up smoking during the year, and the employer's program requires that the employee loses the discount, does that premium cost increase trigger, assuming the plan terms provide for it, the ability to make a corresponding change in the participants 125 election under the cafeteria plan regulations? what do you think?

[ERISAatty]

My understanding is that a modest cost to participants would be considered "reasonable." Of course, if someone complained, you would have to defend the position that the amount employees pay is "reasonable." In what I personally have seen so far, employers are picking up all, or all but a token amount, of the cost for these programs.

Your questions about whether a premium change (as a result of smoking) would trigger the right to make a cafeteria election change is governed by Treasury Regulation 1.125-4(f)(2). It is arguable that such an event might allow a change in status election, but remember that this regulation does not REQUIRE the plan to allow such election changes. The plan sponsor gets to choose whether they offer a change to change election.

You should review that regulation and see how it applies to your specific facts. First, it requires the cost change to be "significant." I don't know how much the change would be, but you need to consider whether you could defend it as significant. Second, if someone starts smoking under your wellness plan in a way that affects health premiums, do you really want to make it easier for them to make an election under the cafeteria plan? Doesn't that take away some of the incentive to stick with the wellness plan? I would discuss these issues with either a local benefits attorney, or a third-party plan administrator, in order to reach the correct conclusion for your situation.