FAQ: We apply a premium contribution discount as a wellness program reward for employees who complete a biometric screening. How does that impact affordability under the employer mandate?

As background, large employers (those with 50 or more full time employees, including equivalents) must offer affordable coverage to all full time employees (those working 30 hours or more per week). The affordability rules say that incentives under a wellness program that reduce the amount employees have to pay for the employer's coverage are not treated as reducing the employee's required contribution for purposes of affordability, unless the incentive is related to tobacco use.

So, in this situation, since the wellness activity is not related to tobacco usage, the wellness incentives do not reduce an employee's required contribution (even if the employee actually receives the incentive). That means the employer will have to use the employee’s required contribution prior to the wellness incentive’s application, which likely makes it more difficult to achieve affordability.

As an example, if an employee’s required contribution is normally $100 per month, and the employer gives a $25 discount for employees who complete a biometric screening, the employer would still use the $100 per month contribution amount when calculating affordability (instead of using the $75 discounted rate). If the incentive were tied to tobacco use, the employer could use the $75 per month contribution.

As an aside, wellness programs raise many other issues under several different laws, including HIPAA, ERISA, ADA, and GINA. Employers that choose to connect their rewards with their employer-sponsored group health plans (such as through a premium discount or surcharge, a contribution to an HRA/HSA/FSA, or something similar) must consider the impact of those other laws as well.