The ACA’s wellness incentives: what employers need to know

Gary Cassidy

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As Seen In

Businesses clearly see the value of offering employee health and wellness plans. In fact, 80% of employers already offer themi. But this begs an interesting question: why are only 25% of organizations that already have wellness programs planning to take advantage of incentives under the Affordable Care Actii (ACA)?


Statistics tell some of the story:



of employers attribute their non-participation to a lack of understanding of the benefits of wellness programs offered under the ACAiii of employers attributelack of desireas the reason for not offering incentive plans

However, I suspect something else is at play. My theory: The lack of desire could mean employers don’t have a clear understanding of what is being offered by the ACA. Beyond that, they may not realize how increased incentives can help them develop a wellness and disease management program that will help drive positive change in their organizations and impact the bottom line.

Here’s what businesses need to know about wellness program incentives under the ACA:

What the Plan Says
The main benefit of the language in the ACA is that it allows employers greater flexibility with wellness incentives and protects them from employee lawsuits as long as they stay within the law. New guidelines covered by HIPAA and detailed in the ACA take a neutral stance on incentives, classifying them as neither positive nor negative. That frees employers to decide whether to position their incentives as discounts (which is often a more effective approach) or penalties.

Under the ACA, programs are separated into two different categories: Participation-Only Wellness Programs and Standards-Based Wellness Programs. Each type of plan comes with its own set of requirements and guidelines:

Participation-Only Wellness Programs
These plans require participation but do not condition eligibility for a reward upon a participant’s ability to meet a health standard. For instance, employees may receive the incentive of a free T-shirt for attending a health fair, gym membership reimbursement, or gift card for participating in a health fair or biometrics testing, regardless of the outcome.

The key here is that the incentive is based on the act of the employee taking part in something, rather than achieving a certain outcome or meeting a set of requirements. Employees may be rewarded (with a gift card, for example) for participating in a weight-loss program, even if they don’t achieve the program’s weight reduction goals.

Standard-Based Wellness Programs
Standards-Based Programs differ from Participation-Only Wellness Programs in that an employee’s eligibility to receive a reward is conditioned upon the ability to meet standards related to a health factor. Because of this, the ACA has included the following five requirements employers must meet in order to offer a wellness and disease management program that falls into this category:

  1. Rewards must be no more than 30% of the cost of coverage (for programs that do not also offer a tobacco cessation program) or 50% of the cost of coverage (for those programs that do offer tobacco cessation programs)
  2. Programs must be designed to promote health or prevent disease
  3. Employees must be able to qualify for reward one time per year
  4. Rewards must be available to all similarly situated individuals
  5. Employers must disclose that alternative standards (or waivers) are available for people with certain health conditions or disabilities

The first three requirements are the easiest to meet. However, the fourth and fifth are where employers need to pay the closest attention.

An example of violating the fourth requirement (making the program available to all similarly-situated individuals) is if your organization only offered a wellness incentive to C-Suite employees and not to all other plan participants.

As for the fifth requirement regarding waivers, if an employee with a genetic disposition to high cholesterol is unable to meet the criteria for a health level, either through medication or lifestyle changes, they must still be considered eligible to receive the incentive, provided they obtained a waiver from their primary care physician that validates their condition.

Transitioning from a Participation-Only to a Standards-Based Program
Consider these factors when implementing your wellness program:

  • Don’t just pull the trigger on a Standards-Based Program. Your employees’ benefits should always been seen as just that – a benefit, not a punishment. The most successful health and wellness programs promote a sense of inclusion and ownership with the employees.
  • Employee education and communication is the lynchpin for success. Before your employees can be expected engage or participate in these programs, it’s imperative that they have a solid understanding of what’s expected of them and why the criteria are important for their personal health.

Remember, your goal should be to affect a long-term cultural change within the organization – not just imposing short-term requirements. Achieving long-lasting cultural changes requires a commitment to, and the implementation of, a multi-year strategic plan.

iVirginPulse, “The Business of Healthy Employees: A Survey of Workplace Health Priorities,” 2014.


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