Begin Your Path to Wellness Compliance Now

September 23, 2013 ( - Employers increasingly realize that healthier employees give them an edge over the competition; that’s why top companies are developing creative ways to engage workers in wellness initiatives and improving personal health.

However, it’s not easy to determine what is and isn’t legal when it comes to wellness.

On June 3, 2013, the U.S. Departments of Health and Human Services and Labor and Treasury released final rules on Incentives for Nondiscriminatory Wellness Programs in Group Health Plans. These amend the 2006 Health Insurance Portability and Accountability Act (HIPAA) non-discrimination and wellness provisions, which prohibit group health plans from discriminating against an individual because of his or her health. 

Starting January 1, 2014, these newly clarified rules take effect for employers offering incentives for health-contingent wellness programs through a group health plan. Given the short time frame until the rules take effect, now is the time to evaluate wellness initiatives to ensure compliance.

Employers should design wellness strategies to promote health and prevent disease, not as a way to discriminate against individuals with health risks. Application of these five wellness requirements depends on whether the plan is “participatory” (offered to all employees regardless of health status) or “health-contingent” (giving a reward to those who meet a health-related standard, whether outcome-based or activity-only).

If your wellness initiative is considered health-contingent, it must follow these five requirements:

1.     All individuals must have the opportunity to qualify for the reward at least once per year.

·         SAME as the original guidance.

2.     The total of all health-contingent wellness rewards, whether for one or multiple health factors and activities, is limited to 30% of the total cost of employee-only health coverage. Programs designed to prevent or reduce tobacco use may increase the total tobacco-related reward to 50% of employee-only health coverage.

·         CHANGE - The total amount of the reward increased from 20%. Yet, the average employer incentive ranges from 3% to 11%.

3.     The program must have a reasonable chance of improving health or preventing disease without discriminating based on a health factor. A reasonably designed program must not be overly burdensome, discriminate based on a heath factor or be suspect in method.

·         SAME with clarification.

4.     The program must provide reasonable alternative standards to those who don’t meet the initial standard. You must provide the reasonable alternative for all health-contingent wellness program rewards, or the standard can be waived for an entire class or on an individual basis.

·         SAME with a number of clarifications which specify if an individual completes a reasonable alternative mid-plan year, the same full-plan year reward must be awarded retroactively to the beginning of the year or prorated through the rest of the year.

5.     You must communicate the ability to qualify for the reward through a reasonable alternative standard, or the possibility of a waiver of the standard in all plan materials.

·         SAME with new sample language.


In compliance matters, seek the advice of your attorney. Talk with your consultant or wellness partner to ensure your wellness initiative is reasonably designed to promote health and prevent disease, and to determine whether your current wellness rewards approach requires changes. Engaging employees requires more than incentives. A healthy workplace culture starts with commitment from senior leaders and direct supervisors, and is reinforced by passionate front line employees. Consider how a healthy workforce may contribute to your organization’s performance, and work with your consultant or internal partners to develop a plan to achieve it.


Laura Hoag is a Senior Consultant with Findley Davies’ Health and Group Benefits Practice, specializing in integrating wellness programs into health care strategy and organizational culture.   


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.