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Wellness Programs

The Health Insurance Portability and Accountability Act (HIPAA) generally prohibits health plans from discriminating against individuals based on a health status-related factor but an exception is provided for certain wellness programs. Since chronic illnesses due to lifestyle choices (smoking, poor diet, lack of exercise, etc.) have a significant impact on health care costs, the Affordable Care Act (ACA) embraces the use of wellness programs as a means to help employees make better lifestyle choices. The provisions of the ACA are intended to protect participants while simultaneously allowing for certain incentives to encourage employee engagement.

For plan years beginning on or after January 1, 2014, there are three types of permissible wellness programs – participatory, activity-only health contingent and outcome-based health contingent.

Participatory Wellness Programs

Wellness programs that do not provide rewards or that provide rewards but do not require a participant to satisfy a standard related to a health factor in order to get the reward are permissible so long as participation in the program is available to all similarly situated individuals. Examples of participatory wellness programs include:

  • Fitness center reimbursement programs
  • Diagnostic testing programs that do not base rewards on test outcomes
  • Programs that encourage preventive care by waiving cost-sharing
  • Reimbursement for smoking cessation aids regardless of whether the employee quits smoking
  • Programs that reward employees for attending health education seminars

Health Contingent Wellness Programs

There are two types of health contingent wellness programs – activity-only and outcome-based.

  • Activity-only Programs – Require individuals to complete an activity that is related to a health factor but do not require individuals to attain or maintain a specific result in order to get a reward.Examples of activity-only programs include walking and diet programs.
  • Outcome Based Programs – Require individuals to attain or maintain a certain health outcome in order to get a reward.Examples include smoking cessation or attaining certain results on biometric screenings (e.g., blood pressure, cholesterol, etc.).

Although health contingent wellness programs discriminate on the basis of a health factor, they are permitted so long as the program provides the following safeguards:

  • The reward cannot exceed 30% of the cost of employee-only coverage (50% for tobacco cessation)
  • The program must be reasonably designed to promote health or prevent disease
  • Eligible individuals must have the opportunity to qualify at least once per year
  • The reward must be available to all similarly situated individuals, with a reasonable alternative available where it would be unreasonable or inadvisable to satisfy the standard due to a medical condition
  • All plan materials must describe the terms of the program and alternative standards

Application of Other Laws to Wellness Programs

Wellness programs must not only comply with HIPAA but must also comply with other State and Federal law, such as the Americans with Disabilities Act (ADA) and Title II of the Genetic Information Nondiscrimination Act (GINA). Employers sponsoring wellness programs should consider all applicable laws when designing a program.

Additional Information

     Through its comprehensive array of employee health management consulting services and programs, KeenanWell can help employers to achieve and maintain optimal health and productivity for their workers, and create and support a culture of wellness in their organizations.