Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.


October 2, 2019

CMS wants more states to experiment with wellness programs

Daily Briefing

    CMS on Monday invited states to participate in a demonstration project that will allow them to implement wellness programs in their individual health insurance markets.

    Understand the wellness spectrum—and promote healthy habits at work

    The agency is launching the demonstration project in accordance with the Affordable Care Act (ACA), which mandates that HHS, the Department of Labor (DOL), and the Department of the Treasury (DOT) launch a pilot project to test health-contingent wellness programs in the individual market.

    Health-contingent wellness programs are different from participatory wellness programs, which have been allowed on the individual market since 2013. Under health-contingent wellness programs, patients are required to meet specific health outcomes to receive rewards. In comparison, under participatory wellness programs, patients receive rewards for participating in the program—without having their health outcomes assessed.

    Demonstration project details

    CMS on Monday began accepting applications for the demonstration project, which will allow 10 states to implement health-contingent wellness programs in their individual health insurance markets.

    The demonstration project will offer states two options for implementing the programs:

    • A statewide health-contingent wellness program for the individual market; or
    • Insurer designed health-contingent wellness programs for individual health plans sold on the individual market.

    CMS said states applying for the demonstration project must:

    • Describe the terms and rewards of the wellness programs;
    • Provide an analysis demonstrating the program would not result in coverage losses or an increase in the federal government's costs; and
    • Provide data on the program's anticipated impact on medical claims and utilization and the expected number of participants in the program, as well as the rewards that state expects to provide over a three-year period.

    For example, states under the demonstration project could offer participants premium cost savings and other incentives intended to help to improve their health outcomes.

    HHS, DOL, and DOT will evaluate states' applications for the demonstration project to determine whether the proposed wellness programs comply with certain federal rules and requirements. For example, states and insurers participating in the project will be required to:

    • Allow participants to qualify for the program's rewards at least once annually;
    • Cap the rewards of wellness programs at 30% of the total cost of self-only coverage under the plan in which an individual enrolls, or 50% if the additional 20 percentage points stem from a program designed to prevent or reduce tobacco use;
    • Design the program to reasonably promote health or prevent disease;
    • Disclose the terms of the wellness program; and
    • Offer the program's full rewards to all individuals enrolled in health plans regardless of their health status by providing and disclosing "reasonable alternative standards" for participants with pre-existing medical conditions who cannot meet the program's regular standards.

    The demonstration project also gives states the option to require insurers to offer a wellness program designed to prevent or reduce tobacco use.

    CMS will require participating states to submit data on the programs starting three years from the date the states' applications are approved. CMS also will require states to annually submit data on the number and types of substantiated complaints received about the health-contingent wellness programs during the previous 12-month period, as well as state investigations into insurers offering the health-contingent wellness programs.

    HHS, DOL, and DOT will review the data to determine whether to expand the demonstration.


    CMS Administrator Seema Verma said the wellness programs will allow states to "improve the health of their residents" and "reduce health care spending."

    Joel White, president of the Council for Affordable Health Coverage (CAHC), said, "CAHC has long championed solutions that unleash innovations already underway in private health insurance markets while also delivering greater flexibility to states. This CMS demonstration project holds potential to do exactly that."

    However, other observers raised concerns about the demonstration project, pointing to past research casting doubt on wellness programs' effectiveness.

    Nicholas Bagley, a University of Michigan law professor, in a tweet wrote, "We've got loads of evidence that wellness programs do not work."

    For example, a study published earlier this year in JAMA found workplace wellness programs encourage employees to exercise and manage their weight, but do not result in better health outcomes or lower health care spending.

    Sabrina Corlette, co-director of the Center on Health Insurance Reforms at Georgetown University, also raised concerns that the demonstration project could allow insurers to charge enrollees who do not meet certain health outcomes higher premiums or higher cost-sharing. She said, "It essentially reintroduces health status underwriting—which is what issuers did before the ACA."

    Corlette added that the demonstration project could negatively affect individuals with chronic medical conditions, concerns about privacy, and low incomes, as well as individuals without computers or the time to participate in wellness programs.

    Tim Jost, an emeritus law professor at Washington and Lee University School of Law, said there also is a legal question regarding whether CMS sidestepped consumer protections and ignored public involvement by accepting applications for the demonstration before soliciting public comments on guidance for the demonstration project (Castellucci, Modern Healthcare, 9/30; Minemyer, FierceHealthcare, 9/30; Cohen, Inside Health Policy, 9/30 [subscription required]; Diamond, "Pulse," Politico, 10/1; Owens, "Vitals," Axios, 10/1).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.