Are wellness program incentives considered in determining a health planís minimum value?


Your company offers an eligible employer-sponsored plan that reduces the deductible by $300 for employees who do not use tobacco products or who complete a smoking cessation course. The deductible is reduced by $200 if an employee completes cholesterol screening within the first six months of the plan year. Bob does not use tobacco and his deductible is $3,700. Carla uses tobacco and her deductible is $4,000. For purposes of determining minimum value (MV) under the Patient Protection and Affordable Care Act (ACA), how are these wellness incentives treated?


Individuals generally may not receive a premium tax credit if they are eligible for affordable coverage under an eligible employer-sponsored plan that provides MV. An applicable large employer may be liable for an assessable payment under Internal Revenue Code Sec. 4980H if a full-time employee receives a premium tax credit. For employer-sponsored plans to provide MV, the percentage of total allowed costs of benefits provided to an employee (MV percentage) must be at least 60 percent.

Proposed regulations provide that nondiscriminatory wellness program incentives offered by an eligible employer-sponsored plan that affect deductibles, copayments, or other cost-sharing are treated as earned in determining the plan's MV percentage to the extent the incentives relate to tobacco use. Wellness program incentives that do not relate to tobacco use are treated as not earned.

Thus, only the incentives related to tobacco use are considered in determining the plan's MV percentage. Carla is treated as having earned the $300 incentive for attending a smoking cessation course. Thus, the deductible for determining the MV percentage for both Bob and Carla is $3,700. The $200 incentive for completing cholesterol screening is disregarded.

Source: IRS Proposed Reg. Sec. 1.36B-6(c)(2)(ii).

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