FAQs About Affordable Care Act and Health Insurance Portability and Accountability Act Implementation Part 74 (Aug. 26, 2026)
The DOL, HHS, and IRS have issued two FAQs addressing questions raised in dozens of class action lawsuits challenging tobacco surcharges imposed under employer-sponsored group health plans. As background, the 2013 tri-agency wellness regulations treat a tobacco-use premium surcharge (or tobacco-free discount) as a wellness “reward.” When the premium differential is conditioned on satisfying a standard related to a health factor—such as refraining from tobacco use—the program is generally an outcome-based health-contingent wellness program. As such, it must satisfy various requirements, including making the full reward available to all similarly situated individuals by offering a reasonable alternative standard (RAS) for obtaining the reward. The preamble to the 2013 regulations states that if a participant satisfies an RAS partway through the plan year, the plan must provide the full reward retroactive to the beginning of the plan year. Courts have been divided on whether this retroactive approach is required. A related issue is the scope of the required RAS disclosure.
According to the FAQs, the preamble to the 2013 final regulations indicates that the full reward must be provided retroactively, but the regulatory text does not clearly require retroactive application. Thus, until further guidance or regulations are issued, the Departments will not take enforcement action against a plan or issuer that provides the reward only prospectively—that is, from the point at which the participant satisfies the RAS—so long as the plan otherwise satisfies the applicable wellness program requirements and provides sufficient time for participants to complete the alternative standard and receive a reward. The FAQs emphasize that this enforcement relief does not affect other requirements, including the requirement that a program must be reasonably designed to promote health or prevent disease and not operate as a subterfuge for discrimination based on a health factor.
The FAQs also clarify that the requirement to disclose the availability of an RAS applies only when plan materials describe the terms of a health-contingent wellness program—not when materials merely mention that such a program is available. For example, a summary of benefits and coverage that notes only that cost-sharing may vary based on participation in an outcome-based wellness program, without describing the program’s standards, would not trigger the disclosure requirement.
EBIA Comment: While plan sponsors will welcome the enforcement relief, they should also be cautious, as the Departments may issue further guidance and some courts may continue to require retroactive rewards. Plan sponsors and their advisors should review plan documents, enrollment materials, and wellness notices to confirm compliance with all applicable substantive and procedural requirements—including the RAS disclosure rules. For more information, see EBIA’s HIPAA Portability, Privacy & Security manual at Sections VI.G (“Wellness Programs”), XI.I (“Wellness Programs Must Meet Specific Nondiscrimination Requirements”), and XV.E (“HIPAA Nondiscrimination Violations”). See also EBIA’s Consumer-Driven Health Care manual at Section VI.D.2 (“Nondiscrimination Exception for Wellness and Disease-Management Programs”), EBIA’s Group Health Plan Mandates manual at Section XX.F (“ADA Considerations for Wellness Programs”), EBIA’s Health Care Reform manual at Section XIII.C (“Health Status Nondiscrimination and Wellness Programs”), and EBIA’s Self-Insured Health Plans manual at Section XIII.D.3 (“Nondiscrimination Rules’ Interaction With Wellness Programs”).
Contributing Editors: EBIA Staff.
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