Using Standard-Based Incentives for Wellness Program Participation

Some employers that have invested significantly in their corporate wellness plans are ready to take the next step to increase their return-on-investment (ROI). Many of these employers have already provided incentives for participating in health risk assessments, health coaching and physical activity. But where do they go from here?

Until recently, most of the incentives associated with wellness plans have been based strictly on participation in the wellness program. These “participation-based” incentives operate on the principal that an employee receives the incentive with continued participation in the program. HIPAA allows for this type of incentive with a fairly wide degree of latitude. When you move to a “standard-based” incentive, however, the HIPAA noose begins to tighten.

The standard-based incentive plans that are receiving the most publicity are based on biometric measurements for body mass index (BMI), blood pressure, cholesterol count and nicotine usage. If an employee meets the designated standards for these four items, they receive an incentive. The most popular of these incentives are those that affect the employee’s bottom line – where employers are raising their deductible and then allowing workers to reduce that deductible by meeting the biometric standards.

What does HIPAA have to say about this? The final HIPAA wellness rules issued 12/13/2006 provide that a plan may vary benefits (including deductibles) based on whether an individual has met the standards of a wellness program as long as the following five conditions are met:

1. Limited value of reward (not to exceed 20% of applicable coverage)

2. Company must promote health or prevent disease

3. Offer annual qualification

4. Reward available to all similarly-situated individuals

5. Full disclosure of alternative standards and waiver opportunity

So if the program is designed properly, HIPAA should not be a deterrent to standard-based incentives. The real unknown is the ADA, which is enforced by the Equal Employment Opportunity Commission (EEOC). It generally prohibits employment discrimination against disabled individuals and limits the circumstances in which an employer may require physical examinations or answers to medical inquiries. However, voluntary medical exams and inquires are permitted as part of an employee health program if (1) participation in the program is voluntary, (2) information obtained is according to the confidentiality requirements of the ADA, and (3) information obtained is not used to discriminate against an employee.

The EEOC has yet to provide guidance on whether they feel these health standard-based deductible reimbursement plans are in violation of the ADA. The EEOC has only made clear that compliance with HIPAA’s nondiscrimination rules and wellness program requirements does not ensure compliance with the ADA.

To learn more about “standards” based wellness plans, please click on the following links:

Plan Bases Deductible on Health Tests, Sees Costs Fall

Tying Health Benefits to Health Status: A Few Words of Caution


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    September 14, 2007

    Hill, Chesson & Woody strives to keep our clients' group decision makers abreast of trends influencing the employee benefits market. Look for Eyes on Benefits to bring you news and information affecting you and your employees.

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