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Don't Get Busted with 'Guilty' Incentive Based Wellness Programs

incentive based wellness programs

Compliance Advisor

Getting in trouble with the law is pretty much the last thing on someone’s mind when starting a wellness program, right? Of course!

Employers who leverage wellness programs want to make their staff healthier to save on health care costs, and top talent pays attention to benefits offerings -- making incentive based wellness programs a useful recruiting and retention tool.

While working on wellness is an admirable pursuit (and one we highly recommend), there are a number of regulations to follow when creating a wellness program. Non-compliance may have a negative effect on your organization's health, so let’s not take any chances!

Because we're on the verge of open enrollment season, now is a good time to dig into the full scope of your benefits offerings, including incentive based wellness programs. Here's what you should review during your open enrollment prep period to stay on the right side of the law: 

Beware the Taxman

Gift cards handed out as part of your wellness program could be included in an employee’s taxable income. When deciding on a reward system for your wellness program, think creatively about your rewards. If you plan to give gift cards, keep them to a small dollar amount and disbursement at a minimum. 

Do the (Deduction) Math

Under HIPAA, rewards must be a deduction of only 30 percent or lower off your health plan premium. If there is a non-smoking factor in your program, this can go up to a 50 percent deduction.

Always Another Option

Under HIPAA, there also must be an alternative if someone cannot meet a requirement. For example, if an employee is going to continue smoking (and not receive a nice deduction on his health care plan because of it), you have to give them another option to receive a deduction, as smoking is considered a condition under HIPAA. In this example, to get that wellness program participation in (and to earn the deduction), an alternative for the smoker employee could be attending smoking cessation classes.

Privacy, Please

HIPAA and the Genetic Information Nondiscrimination Act (GINA) also have privacy laws to which your wellness program is subject. With privacy in mind, be careful of what you require your employees to share with you as the employer. There could also be conditions that are genetic and protected under privacy laws that your wellness program sees as a risk (like high cholesterol), and if you're requiring that employees share this information without a reasonable alternative, you are in questionable legal territory. 

Classified Information

According to HIPAA, the boss cannot see health information, because it could interfere with performance evaluations or judgment of an associate. To protect yourself from such an incident, one option is to hire a third-party administrator for your wellness program to avoid employees claiming violation of HIPAA rights. 

Incentive based wellness programs show your employees that you care about their well-being and want to reward them for taking their health seriously. With open enrollment just around the corner, now is the perfect time to evaluate how you're performing against the regs and make a course correction to get on the right path.

Don't get caught with a guilty wellness program. An "innocent" program is a successful program, and one your employees will be excited to participate in.


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DISCLAIMER: We hope this blog post gave you an "Aha!" moment, but please don't hold it as legal or tax advice. This information is general in nature, and your specific situation deserves attention from a dedicated legal or tax advisor.

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