As the Affordable Care Act (ACA) continues to get implemented throughout 2014, certain aspects of the law will have a significant impact on the health club industry. One of the principal components of the ACA is a set of initiatives that increase the focus on wellness promotion. Based on a growing body of empirical evidence that supports the economic benefits of maintaining wellness over primarily focusing on disease treatment, the ACA hopes to shift the paradigm of America’s predominantly disease-centered approach to healthcare to one that helps people stay well. This shift has the potential to bode well for allied health professionals, integrated health providers, wellness centers, and health clubs.
How are things changing?
No matter which side of the fence you sit on regarding the ACA, the reality is much of the legislation of the ACA is likely to be implemented. Putting rhetoric and opinion aside for a moment, few would argue that moving towards a system that reaches people before they fall ill is a worthy pursuit. What is still being determined is the proper way to reengineer our system to support this ideology. Practitioners who are focused on sustaining health, traditionally roles prevalent in integrated and allied health professions, will undoubtedly play an expanded role within this new paradigm. This also means that the “scope of practice” for certifications within these fields (many of which can be found in health clubs, i.e. exercise physiologists, nutritionists, physical therapists, etc.) will likely expand to service a population who is now being more effectively encouraged to stay well.
Upcoming opportunities
The United States Department of Labor has committed, starting in 2014, to promote evolving employer wellness programs as a mechanism to control health care spending (re: http://www.dol.gov/ebsa/newsroom/fswellnessprogram.html). According to the Department of Labor, in conjunction with the Department of Health and Human Services (HHS) and the Treasury, the ACA will empower lawmakers to introduce new incentives and help expand wellness program policies. Many of these measures pertain to “participatory wellness programs” which refers to programs that can generally be applied to the entire population. These types of participatory programs include economic incentives like fitness center membership reimbursement and monetary rewards for coming into a health club to complete a health risk assessment.
Also expanding in 2014 are “health-contingent wellness programs”. These programs are meant for participants who are usually subsets of the general population. However, this does not diminish the opportunity for health clubs to benefit from catering to these specific groups. For instance, subsidized wellness programs targeting Baby Boomers that service the aging-well are an advantageous revenue stream for health clubs that are able to create innovative programming specific to keeping seniors active. Other avenues, such as weight control programs, are also candidates for this type of reimbursement. Some might have read in a previous Club Industry article (re: http://clubindustry.com/profits/checkup-health-club-opportunities-affordable-care-act ) how Miramont Lifestyle Fitness in Colorado has been profiting from these types of programs.
The current economics
Although much of the lasting effects of the ACA is still uncertain due to active challenges by policymakers, as it currently stands, rewards associated with health-contingent wellness programs will increase from 20 percent to 30 percent this year, and could eventually increase to 50 percent for certain groups over time. Furthermore, this year through the ACA $200 million in wellness grants has been earmarked for wellness program development.
Early innovators
Although some of the ways for operators to capitalize on these opportunities require creativity, those willing to do the work are already benefiting. For example, MINDBODY – who has stated that less than 10% of most company’s employees are aware they can use their health savings accounts (HSAs) and/or flex spending accounts (FSAs) to pay for traditional health club services such as yoga and massage – has developed a product to streamline the processing of substantiation making it easier for members to purchase these types of services with pre-tax dollars. Companies such as Bravo Wellness offer products and services to help organizations keep track of improved health metrics while complying with the Health Insurance Portability and Accountability Act (HIPAA) regulations. By pairing traditional health services with the monitoring of health metrics that are tied to the reward benefits now offered through the ACA, health clubs will be able to add another level of member motivation which will undoubtedly lead to better retention rates. There are even lobbyists like Active Policy Solutions, as well as the efforts of the American College of Sports Medicine’s Exercise is Medicine division, which is working with health clubs directly to create new opportunities based on the ACA. Lastly, you will soon be reading about progressive health clubs that have carved out some of the $200 million dollars in grant money through innovative programs aimed at helping entire municipalities with their residents’ health concerns.
An ounce of prevention is worth a pound of cure
Despite the ongoing debates regarding the ACA, it is clear that big business recognizes that small investments upfront like health club memberships for their employees mean future cost savings with significant returns on investment down the road. In addition to this growing sentiment, there are strong, powerful interest groups that believe that keeping populations healthy is not just good for people, but good for business too. Gary Loveman, who is the CEO of Caesars Entertainment Corporation and also the Chair of the Business Roundtable’s Health and Retirement Committee, wrote in an open letter to the White House’s Office of Information and Regulatory Affairs (OIRA), “Wellness programs work. They lower healthcare costs by keeping workers and their families healthier.” He continued on with quantifiable data to support his claim using health statistics from Caesars that showed the positive results of investing in employee health. This is just one example of a growing body of empirical evidence that supports the argument that wellness programs, when administered properly, reduce healthcare costs, and improve population health. The current ACA rules are vague in defining the parameters of how wellness programs can be designed and administered. Like most new frontiers, this provides an unprecedented opportunity – especially within the health club industry – to strengthen our voice in this ongoing conversation as well as benefit from increasing our role in preventative care.
Affordable Care Act Boosts Wellness Programs
The Patient Protection and Affordable Care Act (ACA) introduced new provisions that promote wellness programs. These include implementing nondiscrimination programs (in other words, programs that can benefit anyone, not just the sick) and increasing the maximum reward limit for group health plans. These changes went into effect this year. The new provisions are applicable to health plans that are grandfathered, as well as most non-grandfathered plans.
The ACA provisions continue to support two available reward categories. Participatory wellness programs which allow for rewards that do not consider the individual’s health status – such as fitness center membership discount. Conversely, health-contingent wellness programs which provide rewards based on meeting a specific standard relating to an individual’s health, for example, tobacco use reduction.
These new provisions increase the maximum reward for health-contingent wellness programs to 30 percent of health coverage costs (up for 20 percent). These new regulations also cover what a reasonable alternative standard is for health-contingent programs. Employers are afforded some flexibility when forming reasonable alternative standards. For example, they now can communicate with an individual’s physician for recommendations on alternatives.
So how can employers benefit from these new provisions? Many will aim to modify major medical plan premiums since they are the biggest voluntary income deductions of employees. However, employers should also think about having flexible spending accounts (FSAs) and health reimbursement accounts (HRAs), which potentially could be more impactful. For instance, a $20 reward added to a major medical plan premium each month might go unnoticed as many employees are already making monthly contributions worth hundreds of dollars. However, adding extra money to a health FSA or HRA makes more money available for out-of-pocket expenses which generally get observed more than deductions from a paycheck.
Wellness programs also provide a good opportunity to cut down on medical plan costs. A review of the major health risk factors in a workforce can be performed. Then the employer can tailor their wellness program to concentrate on and address these factors. The employer can also evaluate their workforce’s progress and make beneficial adjustments along the way. A good wellness program includes both participatory and health-contingent components.
Economic incentives have been shown to motivate workforces. As the law sets now, any cash rewards are probably going to be seen as taxable income if not used directly for health. Therefore, placing part of the rewards into flexible benefits is something to be explored. When funding FSAs, don’t allow the option of getting cash (or another taxable benefit) and the reward won’t be a factor in the ACA salary deduction contribution limit (which as of 2014 is $2500). There are no such limits for HRAs.
When you incorporate a wellness reward into a health FSA or HRA, you need to take into account the four forms of nondiscrimination regulations:
1) ACA/HIPAA
As well as the limits for reward size, the regulations require that employees must qualify for a reward at a minimum of once per year. Employers need to make the reward uniformly available and provide a reasonable alternative standard if it is difficult for an employee to meet a set standard due to a medical condition. The employee should not have to pay for the alternative (the food costs associated with some diet programs are a notable exception). The program also has to be reasonably designed for health promotion or disease prevention. It cannot be used to discriminate against a particular health factor.
2) Americans with Disabilities Act (ADA)
In 1992, the Equal Employment Opportunity Commission (EEOC) declared that wellness programs need to be voluntary, but they did not elaborate on this. In 2012, when asked by the American Bar Association, the EEOC said they have not taken a position in regards to whether programs are made involuntary if financial incentives require disability-related inquiries or medical examinations. Information that is collected needs to meet ADA confidentiality rules. Discrimination against people with disabilities is not allowed.
3) Cafeteria plans
Under a cafeteria plan, a health FSA counts as a qualified benefit, but not an HRA. Funding a health FSA with a wellness reward may be problematic with the key employee concentration test, which does not allow cafeteria plan benefits for a key employee to exceed 25 percent of the benefits for the total number of employees. Assessing a reward in relation to these limits is necessary.
4) Self-insured plans
The benefits test for self-insured plans needs to be considered. Take for example an employer who places $1000 into the health FSA or HRA of all their employees as an incentive; what if there are some highly compensated employees who meet the standard and some who don’t? This issue is not necessarily addressed by the current nondiscrimination rules, but the rules enable optional benefits if all eligible employees choose the option and everyone has the same contribution.
If an eligibility test is not met, then providing a wellness reward can increase the number of employees taking part in a health FSA. A wellness program can make flexible benefits more useful, which will lead to more participation in the program, which is a smart and healthy option for everyone.