There are many rules employers must consider when implementing an employee wellness program, including the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA).  Here are the final regulations as issued by the departments of Treasury, Labor, Health and Human Services.   

Welcome to the Compliance Center

Final Wellness Rules Under the HIPAA and ACA

Oct 11, 2016

Implementing a Non-Discriminatory Employee Wellness Program

October 11, 2016

There are many rules employers must consider when implementing an employee wellness program, including the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA). 

HIPAA regulates how employers may use wellness programs to encourage healthy behavior in employees without discriminating against individuals based on health factors. These rules include limits on employee incentives (and penalties) based on participation in a health-contingent wellness program. The ACA codified these HIPAA non-discrimination rules and increased these limits beginning in 2014, from 20 percent to 30 percent generally, and from 20 percent to 50 percent for smoking cessation programs.  It also changed the HIPAA wellness rules for operating a health-contingent program.

The Departments of Treasury, Labor and Health and Human Services issued final regulations in June of 2013, addressing two types of wellness programs:

  1. Participatory wellness program: a program that either does NOT offer a reward, or does NOT condition the reward upon a health factor
  2. Health-contingent wellness program: A program that DOES condition the reward upon a health factor

Health-contingent programs are further sub-divided into two categories:

  1. Activity-only wellness program:  a program in which an individual is required to perform or complete an activity related to a health factor in order to obtain a reward, but does not require the individual to attain a specific health outcome. Examples include walking, diet or exercise programs
  2. Outcome-based wellness program:  a program in which an individual must attain or maintain a specific health outcome in order to obtain a reward.

Outcome-based programs generally have two parts:

  • A measurement, test, or screening to establish an initial standard
  • A program that targets individuals who do not meet the initial standard
     

Outcome-based wellness programs typically test for specific medical conditions or risk factors and provide a reward to employees identified as having a normal or healthy range, and may require employees outside the normal or healthy range to take additional steps to obtain the same reward. Examples include rewards for not smoking or attaining certain results on biometric screening.

In addition to complying with the limits on incentives, a wellness program falling under the health-contingent category, whether activity-based or outcome-based, must comply with the following requirements:

  • Provide participants with an opportunity to qualify for the reward annually
  • The program must be reasonably designed to promote health or prevent disease
  • Comply with reasonable alternative standards
  • Provide notice of reasonable alternative standard

Although applicable to both outcome and activity based programs, there are differences in how these standards must be administered under the two types of health-contingent wellness plans, an explanation of which is outside the scope of this article.

Employers considering health-contingent wellness programs should consult with their advisors to ensure compliance with HIPAA and other applicable laws.