Written by: Ken Marsh
Date published: January 26, 2017
Reading time: 6 Minutes
Many 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. With the growing popularity of financial incentives, the legal landscape has become a bit more complex and unsettling for employers implementing such programs. Therefore, it is important to work with professionals who are experts in these programs to avoid some of the pitfalls that exist for employers.
Numerous federal and state laws impact workplace wellness programs and not all of them have clear guidance from the agencies that enforce them. Legal compliance with these regulations, as part of a workplace wellness program, is crucial to not only prevent lawsuits from disgruntled employees, but also to instill confidence in the program for all participants. It is important to note that the types of incentives available to employees can differ significantly depending of the type of wellness program instituted at your company.
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 those that do not condition eligibility for a reward upon a participant’s satisfying a health standard and where participation in the programs is available to all similarly situated individuals. Participatory wellness programs can include the following:
- 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
There is no limit to the type of reward given for participating, as long as the reward is not dependent on an outcome. However, as explained below, another federal law—the Americans with Disabilities Act (ADA)—may limit rewards under a participatory wellness program.
“Health-contingent wellness programs” require an individual to satisfy a standard related to a health factor. There are two types of health-contingent wellness programs:
- “Activity-based wellness programs” require performance or completion of an activity but does not require attainment of a specific health outcome.
- “Outcome-based wellness programs” require the attainment of a standard related to a health factor, rather than simply participating or engaging in an activity. Thus, they require the employee to actually succeed at wellness
Examples of Activity-Based Wellness Programs Include:
- Walking four miles per week
- Participating in an aerobics or exercise class
- Engaging in a weight loss program
Examples of Outcome-Based Wellness Programs Include:
- Discounted premium for individuals who are tobacco free.
- Discounted premium for individuals who have a body-mass index within a specified range
- Discounted premium for individuals who have an annual cholesterol test showing a cholesterol level under 200
Health-contingent Wellness Program Rewards
There is a maximum reward that can be given under a health-contingent wellness program. Generally, 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 if they are eligible to participate). However, if the program is specifically designed to prevent or reduce tobacco use, the total amount of incentives offered can equal up to 50 percent of the cost of health coverage.
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.
Americans with Disabilities Act (ADA)
The ADA is another federal law that may impact the level of incentives that may be offered under a workplace wellness program. The ADA’s wellness program rules apply if a program includes questions about employees’ health or medical examinations. The federal agency in charge of implementing the ADA, the Equal Employment Opportunity Commission (EEOC), has indicated that the amount of incentives that may be offered for an employee to participate or to achieve health outcomes may not exceed 30 percent of the total cost of employee-only coverage. This incentive limit applies to participatory and health-contingent wellness programs that include disability-related inquiries or medical examinations.
Further, reach out to the Infinity team for more information about workplace wellness implementation and incentive guidelines.