The Affordable Care Act encourages employers to offer incentive-based programs alongside the standard benefits package of health insurance, dental, vision, vacation days and so on. The purpose of an incentive-based program, such as offering a reward for quitting smoking, is to provide employees with a feeling of ownership over their own health. Wellness programs are intended to help your employees make healthier choices and improve their general wellness. When your employees are healthier, you may see fewer sick days, fewer nonpreventive visits to doctors and a reduction in overall health care spending. Sponsoring wellness programs can improve your bottom line in the long term.

While employer-offered wellness programs are encouraged, the Affordable Care Act does have rules that apply. There are two types of incentive programs you can offer.

Participatory Wellness Programs

Participatory wellness programs, provided alongside a benefits package, are typically offered regardless of the health status of an employee. Often, these programs consist of employers reimbursing employees for the cost of a gym membership or providing a reward for completing a health risk assessment. The Department of Labor states that a participatory wellness program does not require an employee to satisfy a particular standard or outcome. As an example, you could offer an incentive to an employee for attending an employer-offered seminar on healthy nutrition regardless of whether he alters his diet afterward. The hope, of course, is that the information will inspire your employee to make healthy choices going forward.

Health-Contingent Wellness Programs

The ACA also has standards for nondiscriminatory health-contingent wellness programs. There are two types of health-contingent wellness programs that you can incorporate into your existing benefits package. In an “activity-only” program, employees participate in certain activities related to a specific health factor, but the program requires no particular outcome of the activity. For example, you could reward employees who participate in a walking program.

In an “outcome-based” program, employees are required to meet predetermined health outcomes, such as maintaining healthy blood-pressure levels. In either type of program, the goal is always to improve employee health and reduce health-related costs for both employees and for you.

Ensuring ACA Compliance

All wellness programs, regardless of the category, must meet the ACA standards. These programs must be intended to promote employee health or prevent disease. Additional standards related to the programs include the following:

  • There are times when existing medical conditions may prevent an employee from participating; therefore, it is now required that those employees are provided a way to alternatively qualify for any rewards or incentives offered.
  • All employees must have fair notice of an opportunity to participate in a program or qualify for an incentive. Should there be any medical or health issue that would prevent an employee from participating, ample notice will allow the employee to find alternative ways to participate.

Incentives and Limits

You can offer a variety of incentives to employees; the most common are cash, merchandise, travel vouchers and reductions in employee premiums within the offered health plan. The Office of the Federal Register states that the total reward offered to each employee cannot be worth more than 30 percent of the cost of premium that is paid for the employee’s health care. That means that if premiums for your health plan cost $7,000 per employee (regardless of how the costs are split between you and the employee), the wellness-program rewards cannot be worth more than $2,100. Smoking-cessation program rewards, however, can be worth up to 50 percent of the total cost, or $3,500 in the scenario above.

Complementing an existing benefits package with incentive-based wellness programs can encourage employees to take a vested interest in their health and well-being, reducing the overall costs associated with medical care and prescription drugs. By encouraging employees to participate in programs to improve their health, you can improve your company’s bottom line.

Allison Hutton is an experienced writer, editor, communications professional, researcher and social media consultant. During her more than 15 years of communications and writing experience, Allison has worked with a variety of clients, from small business owners to Fortune 500 companies. She has an M.S. in entertainment business, a B.A. in communication and lives in Pittsburgh, Pennsylvania, with her husband and four children.