Participatory vs. Health-Contingent Wellness Programs
If you’re considering implementing a new wellness program, it is important to decide which type of program you wish to offer to your employees. The Affordable Care Act (ACA) divides workplace wellness programs into two categories: participatory workplace wellness programs and health-contingent programs. What are the differences between these two types of programs? And what are the standards employers must meet when designing a wellness program as part of its benefit package for employees?
Participatory Wellness Programs
A participatory wellness program is, by definition, open to any employee who wishes to participate. Some easily recognizable types of participatory programs include employee participation in diagnostic testing and screening; smoking cessation classes and education; reimbursement for gym or wellness center memberships; and programs for health education classes or seminars.
An employer can choose to reimburse or reward employees for participation in these programs. However, reimbursement or reward must not be contingent upon any health outcomes involved. For instance, if you sponsor a smoking cessation seminar, rewarding your employees for attendance would be appropriate. Setting rewards based on whether employees actually quit smoking, however, would not be. According to ACA guidelines, tying rewards to certain health outcomes isn’t acceptable for wellness programs designated as participatory in nature. As long as the chosen rewards are not tied to specific outcomes, there is no limit to the type of reward you can offer for participating in this type of wellness program.
This flexibility makes participatory programs attractive for some companies, especially if the company has not offered any type of wellness program before. It is also an attractive benefit for employees who may have concerns about achieving specific health outcomes, because it precludes incentivizing such outcomes.
Health-Contingent (aka Outcomes-based) Workplace Wellness ProgramsThe standard for participatory wellness programs is compliance with nondiscrimination requirements. This means that as long as participation in the program is made available to all similarly-situated employees regardless of their health status, it is considered nondiscriminatory as far as the ACA guidelines are concerned. Additionally, the ACA does not set a limit on the financial incentives offered for participatory wellness programs, leaving it to the sole discretion of the company if, how, and when to reward employee participation.
In general, health-contingent workplace wellness programs reward employees not merely for participating, but for achieving a specific health goal. Examples of this type of wellness program might include programs that reward non-smokers, or smokers who stop or reduce their smoking habits subsequent to program participation, or reward those who lower their cholesterol or weight through a targeted program.
Within the category of health-contingent workplace wellness programs, there are two basic sub-groups: activity-only initiatives and outcome-based programs.
Examples of activity-only programs might be rewarding employees for taking a specific health-related action. For instance, you might reward employees for walking every day, for engaging in other regular exercise, or for dieting. In this type of program, the reward comes not from the results achieved, but from the behaviors themselves. As an example, you might reward an employee for walking 30 minutes a day for a specified time, even if that employee derives no appreciable health benefit by doing so.
Outcome-based wellness programs, on the other hand, require employees to attain or maintain a certain health outcome to receive rewards. To measure outcomes requires a three-step process. There must first be a measurement, test, or screening to establish a baseline. Then, there must be a larger program that targets individuals who do not meet the initial standard with wellness activities. Finally, there must be a form of measurement of clearly achieved outcomes, so that appropriate rewards can be applied.
Regarding standards for ACA compliance for health-contingent wellness programs, there are a few things to consider. Unlike participatory programs, mere participation in health-contingent wellness programs is not enough. To qualify for rewards or incentives, employees must clearly demonstrate achievement in the form of improved health outcomes.
To be fully compliant with ACA standards, employers must design their health-contingent wellness programs with the following guidelines:
Guidelines for Health-Contingent Plan ACA Compliance
- Eligible employees must be given the opportunity to qualify for rewards at least once a year.
- The total financial reward offered must be no more than 30 percent of the cost of health coverage.
- Rewards must be nondiscriminatory in nature. In other words, rewards must be available to all similarly-situated employees. Provisions must be made for employees who cannot reasonably meet the initial standards to obtain rewards in a reasonable, alternative way.
- The program requirements must be reasonably designed to promote health or prevent disease. While promoting these objectives, participation must be designed in such a way that no undue burden is put on participants.
- Plans must disclose the availability of other ways to qualify for rewards in distributed materials describing the wellness program to employees.
When considering the type of wellness program to include in your employee benefits package, you must project the return on investment from either type of initiative. Participatory programs may be more easily administered, but may not provide what your company wants in terms of employee health outcomes. On the other hand, health-contingent plans require more time and effort to administer, but may provide health outcomes that potentially compensate for the extra expenditure of time and money. In any event, it is wise to examine both types of wellness programs to find the right fit for your company and employees.
If you would like more information about wellness programs and other benefits available, please contact us. As leaders in the field of benefits consulting, we can work with you to craft a benefits package that is both cost-effective for you and of real value to your employees and their families.