Does Your Wellness Plan Need a Checkup?

The Affordable Care Act recognized the importance of wellness programs allowing employers to offer higher incentives for participation. Just be careful your incentives don’t violate the Americans with Disabilities Act (ADA).

Wellness programs seek to improve and promote health and fitness among a group of employees or insureds. Programs include smoking cessation classes and treatments, diabetes management programs, weight loss programs, and preventative health screenings. Employers often offer premium discounts, cash rewards, gym memberships, and other incentives to participate.

Title I of the ADA allows employers to conduct voluntary medical examinations and activities, including obtaining information from voluntary medical histories, as part of an employee wellness program. However, if the employer requires participation or penalizes employees who do not participate, the EEOC no longer considers the program voluntary.

Many employers use incentives to encourage employees to participate in their wellness programs. The Affordable Care Act increased the maximum incentive for participating in wellness programs to 30 percent of premiums if participants must achieve a health-related goal. It boosted incentives for programs aimed toward eliminating or preventing tobacco use to 50 percent.

To help employers avoid programs that violate the ADA, the U.S. Equal Employment Opportunity Commission (EEOC) released proposed rules in April. The comment period for the proposed rules ended on June 19; final rules won’t be available for a while. However, they are likely to be similar to the proposed rules.

The proposed rules require wellness programs to:


  • be “reasonably designed” to promote health or prevent disease.
  • have a reasonable chance of improving health or preventing disease in participating employees.
  • be voluntary on the part of employees.


They cannot:


  • collect information without providing feedback to employees or without using the information to design specific health programs.
  • violate the ADA
  • offer incentives for participating or achieving a health goal that exceeds 30 percent of the total cost of employee-only coverage.


The Affordable Care Act’s rules recognize two types of wellness programs: “participatory wellness programs,” which are a majority of wellness programs, and “health-contingent wellness programs.” Participatory wellness programs either do not provide a reward or do not require an individual to satisfy a health standard to obtain a reward. Participatory wellness programs would include a program that reimburses employees for all or part of the cost of membership in a fitness center, a diagnostic testing program that does not base any part of the reward on outcomes, and a program that rewards employees for attending a no-cost health education seminar.

In contrast, health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Final regulations subdivide this category into: (1) activity-only wellness programs, and (2) outcome-based wellness programs, which require the achievement of some health-related standard, such as body mass index or cholesterol level.

Activity-only wellness programs must offer a “reasonable alternative standard” or waive the standard for individuals whose medical condition makes it unreasonably difficult or medically inadvisable to attempt to satisfy the standard. Because outcome-based programs condition receipt of a reward on meeting specific health standards, they must offer alternatives to a broader group of individuals than activity-only wellness programs. They must provide a “reasonable alternative standard” to all individuals who do not meet the initial standard, with or without a physician’s note. The rules require this to ensure that wellness programs are reasonably designed to improve health and not a subterfuge for underwriting or reducing benefits based on health status.

Well-designed wellness programs can encourage healthy behaviors among employees. Don’t let compliance issues prevent you from offering wellness programs; for assistance in selecting or reviewing a wellness program, please contact us.