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New Regulations Impact Financial Incentives in Employer Wellness Programs

Wellness programs can be an effective way to reduce healthcare costs and minimize employee absence due to illness. To encourage participation, many companies offer incentives for participation in company sponsored wellness programs. Final regulations under the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA) concerning the wellness programs have recently been issued, and they impact what financial incentives are allowed. While similar to pre-ACA regulations, here are a few differences that you should be aware of:

  • The maximum reward has increased. This includes an increase to 50 percent for wellness programs that are designed to prevent or reduce tobacco use.
  • Wellness program categories have been revised into three categories: 1) participatory; 2) activity-only; and 3) outcome-based.
  • The requirement to offer a reasonable alternative program for wellness programs that require the participant to meet a standard has been expanded.

Any wellness program, with or without financial incentives, must also be compliant with other federal nondiscrimination laws including the Americans with Disabilities Act, Employee Retirement Income Security Act, Genetic Information Nondiscrimination Act, and any applicable state laws concerning discrimination.

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