Healthcare Reform: Workplace Wellness Program Incentives

By | February 28, 2014

Know Your BenefitsMany companies operate wellness programs to keep their employees productive and their insurance costs down. Some wellness programs include incentives or rewards to promote healthy lifestyle choices and discourage behaviors that are detrimental to employees’ good health.

The Affordable Care Act (ACA) established new guidelines to regulate and encourage the use of workplace wellness programs. Beginning in 2014, these rules allow employers to increase incentives or rewards offered as part of a health-contingent wellness program, provided the program follows certain guidelines.

While it is important to note that companies must follow specific guidelines if they choose to offer a wellness program, they are not required to provide a program to employees.


Types of Wellness Programs

Not all wellness programs are the same. Some offer incentives to all enrollees, while others concentrate on rewarding specific health or fitness goals. The incentives available to employees can differ significantly depending on the type of wellness program instituted at your company.


Under the ACA, workplace wellness programs can be divided into two general categories: participatory wellness programs and health-contingent wellness programs.

Participatory wellness programs are open to any employee who wishes to participate. If any reward is offered, you will not have to meet specific certain goals to obtain it. You receive the reward simply for enrolling.

Participatory wellness programs can include:

  • Smoking cessation programs (regardless of whether the employee quits smoking)
  • Gym membership reimbursement
  • Undergoing diagnostic testing and screenings (regardless of outcomes)
  • Health education classes or seminars

These types of programs can be reimbursed, subsidized or incentivized by your employer as a reward if it chooses to do so. There is no limit to the type of reward given for participating, as long as the reward is not dependent on an outcome.

Health-contingent wellness programs are programs that reward employees for achieving a specific health goal. There are two types of health-contingent wellness programs:

  • Activity-only wellness programs require an individual to perform or complete a health-related activity to obtain a reward (for example, walking, diet or exercise programs). While you are obligated to perform an activity to obtain a reward, you will not have to achieve or maintain a specific health outcome, like losing weight or reducing your blood pressure.
  • Outcome-based wellness programs require an individual to attain or maintain a certain health outcome, like meeting exercise targets or not smoking, in order to obtain a reward. Generally, these programs have two tiers: a measurement, test or screening as part of an initial standard, and a larger program that then targets individuals who do not meet the initial standard with wellness activities.


Health-contingent Wellness Program Rewards

There is a maximum reward that can be given under a health-contingent wellness program.

For 2014, rewards for most programs and goals can equal up to 30 percent of the cost of the employer’s health coverage for an employee and his or her dependents.

However, if the program is specifically designed to prevent smoking, the total amount of incentives offered can equal up to 50 percent of an employee’s cost of health coverage.

Alternative Standards

Employers are required to offer alternative standards for employees who cannot reasonably be expected to complete health-contingent programs due to a medical condition.

For activity-only wellness programs, health plans can require employees to have a physician verify that their health condition makes it medically inadvisable to participate in the activity-only wellness program as designed.

For outcome-based wellness programs, health plans cannot ask for a physician to verify that the initial standard is medically inadvisable or too difficult because of a medical condition.

The availability of the alternative must be disclosed in wellness program materials.


Workplace Wellness Program Incentives

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