The Affordable Care Act is giving employers the opportunity to reward employees with incentives to get — and stay — healthy. Studies have shown that financial reward is the most lucrative way to engage employees in workplace wellness, and many employers are turning to a reduction in employee monthly health care premiums as a primary incentive. However, there are mandates within the ACA that you should be aware of if you set up this type of reward program.

According to the Kaiser Family Foundation and Health Research & Educational Trust 2011 survey of employer health benefits, 65 percent of businesses that offer health benefits also offer at least one workplace wellness program. The survey also shows reductions in medical costs, sick days and workers’ compensation costs in companies with wellness programs. Many businesses are implementing financial-based rewards for employees who participate in workplace wellness programs.


Should you decide to utilize a workplace wellness program that lowers monthly premium costs for employees as a reward, you must still choose a health care plan that is deemed valuable and affordable. Remember that, in order for your plan to be considered affordable per the mandates of the ACA, the amount that an individual employee pays for the premium must not exceed 9.5 percent of his household income. You cannot use wellness premium decreases to bring the premium costs down into the affordability range. This means that you must assume that no employees will receive the incentive when you evaluate plan costs.

One exception to the affordability rule centers around tobacco. If you offer a workplace wellness program that offers a reduction in premiums for stopping tobacco use, “the affordability of plans for tobacco users will be determined based on the premiums charged to tobacco users who complete a nondiscriminatory wellness program related to tobacco use,” according to the Health Affairs blog.

Limits on Value

The Affordable Care Act has very specific criteria regarding offering cash incentives to employees. The total of all financial rewards offered to an employee under the wellness program cannot exceed 30 percent of the total cost of both the employer and employee portions of employee health benefits coverage. The limit for the value of tobacco cessation programs can go up to 50 percent of total benefits cost, according to the Department of Labor. Additionally, employees must be given a chance to qualify for the reward at least on an annual basis.


The ACA also requires that incentives must be made available to all employees and that a reasonable alternative must be provided for those employees with a medical condition that makes it unreasonably difficult to meet the standard of the wellness incentive. This alternative, and the availability of it to eligible employees, must be outlined in the wellness program materials.

Should you choose to incorporate a workplace wellness program into your business with the intention of reducing monthly premium costs for your employees, talk with your provider or broker to ensure that you are offering a valuable program that stays compliant with regulations.

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.