Final Rules for Wellness Plans Limit Incentives at 30%

posted in: Affordable Care Act | 0

wellnessTHE U.S. Equal Employment Opportunity Commission
has released final regulations for employer-sponsored wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act. The final rules, required by the Affordable Care Act, take effect at the start of 2017 and affect all wellness plans for employees and their family members, even those plans that don’t also require enrollment in a health plan. Here we look at the final rules:


Under the final rules, you can offer up to a 30% discount on self only health coverage to employees in wellness plans, but if you offer more than one health care plan, the incentive cannot exceed 30% of the cost of the lowest-priced option. The final rules also limit spousal incentives to 30% of employee only coverage. Under Health Insurance Portability and Accountability Act (HIPAA) regulations, incentives for a wellness program with a smoking-cessation component are not limited to the 30% rule and can be as high as 50%. However, if the program includes biometric screening or any other tests for the presence of nicotine or tobacco, it would be limited to incentives of 30%. Employers are also permitted to offer in-kind incentives (e.g., employee recognition, parking spot use, relaxed dress code).

“Voluntary” defined

The final regulations define what is considered “voluntary”:

  • Employers must not require employees to participate.
  • Employers may not deny health care coverage to employees
    who do not participate.
  • Employers may not take any adverse employment action
    against or coerce employees who do not participate


You must provide employees with a written notice that advises them about what medical information will be obtained through the wellness program, how it will be used and restrictions on its use.

Confidentiality and information protection

Information obtained under employee wellness programs is still considered protected health information for purposes of HIPAA compliance. It is important to ensure that all information is kept confidential and that employees handling the information are well trained on their confidentiality obligations. Employers also must ensure that they do not receive the information in a manner that would disclose the identity of specific individuals.


To ensure that this exception applies, the program must be “reasonably designed to promote health or prevent disease.” For example, programs that penalize an individual because his or her spouse suffers from a disease or disorder will not meet this standard. Information collected under the program must actually be used to
design services that address the conditions identified in the information collected. The ADA bars employers from denying access to a particular health plan because an employee does not answer disability-related questions or undergo medical examinations, the EEOC said in a statement.

Under new ADA regulations, employers must offer reasonable accommodations to allow an employee to participate in a wellness program so long as doing so does not constitute an undue burden. Also, where an employer’s wellness program provides medical care and rewards an individual for meeting a health standard, the employer must provide a reasonable alternative to earning any incentive. For example, a program that rewards an employee for reaching a certain body mass index must modify that standard for any employee who cannot reach that BMI for medical reasons, such as a thyroid condition. That way the employee could still earn the financial incentive.

The takeaway

If you have a wellness program or are considering implementing one, you should talk to us about your options and discuss any concerns you may have regarding compliance with the new regulations.

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