Health Care Reform Q&A: Wellness Program Incentives

Incentives for nondiscriminatory wellness programs in group health plans


Here is an update on one aspect of the Affordable Care Act that you may find helpful as an employer.


On May 29, 2013, The Departments of Health and Human Services (HHS), Labor and the Treasury jointly issued final rules on wellness program incentives effective for plan and policy years starting on or after January 1, 2014.


The Affordable Care Act (ACA) prohibits group health plans and group health insurers from discriminating against individuals in eligibility, benefits or premiums based on enumerated health factors such as medical condition, claims experience, medical history, and genetic information.

The ACA recognizes an exception to this prohibition that permits the use of rewards such as premium discounts or rebates and modifications to cost-sharing in return for adherence to programs of health promotion and disease prevention.


The ACA provision and the final rules expand on existing statutory provisions and agency regulations that apply to insured and self-funded group health plans and were enacted as part of the Health Insurance Portability and Accountability Act (HIPAA). Under the final rules, a group health plan or group health insurer is permitted to offer a reward or incentive to individuals that meet standards related to a health factor as long as the specified wellness program requirements are met. The rules address two types of wellness programs:


  • Participatory wellness programs that do not include a reward or do not condition the reward or incentive on achievement of a health factor standard
  • Health-contingent programs requiring participants to meet a health factor standard to obtain the reward or incentive


Who must comply with the wellness program requirements? The ACA provisions that prohibit discrimination based on health status and the exception for certain programs of health promotion and disease prevention are applicable to non-grandfathered group health plans and group health insurers.


However, the Departments have determined that they have authority under existing HIPAA standards and the ACA to extend the application of the final rules to all group health plans and insurers regardless of their status as a grandfathered plan.


The final rules do not apply to health insurance in the individual market and, as a result, insurers will not be permitted to provide rewards or incentives based on a health factor for such coverage.



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Susan Peters