Wellness Plans, Part One

wellness plan

Recent history has seen a trend in companies implementing Wellness Plans. At their core, Wellness plans are meant to improve the health of employees and therefore help to keep down the overall cost of healthcare. Healthy employees improve a company’s productivity and cut down on missed work due to health issues. In theory, putting together a Wellness Plan seems like a straightforward operation. In actuality, there are many choices that must be made and many laws that must be followed.

There are two types of Wellness Plans: Participation Only Programs and Standards-Based Programs. Both types have the same goal of helping employees be as healthy as possible; however, the way they go about it is very different.

Participation Only Programs

In Participation Only Programs, the only requirement is participation. As long as the employee follows that requirement, the employee receives incentives. There are no goals or standards that must be met. This type of program may center around education. For example, the company offers seminars on healthy eating or classes about the benefits of exercise, and those that attend receive an incentive. The incentives offered in this type of plan can also feature things like gym membership discounts, cooking classes, or a free health fair. These types of plans are not considered a health plan and are therefore not subject to HIPAA guidelines. It is a requirement that these plans be available to everyone in the same station in a company and cannot be based on health. For example, diabetes awareness must be offered to all full-time employees, and not only to those with diabetes. Companies often choose the Participation Only route because there are fewer hurdles and rules when the plan is not considered to be a health plan.

Standards-Based Plan

In a Standards-Based Plan, the employee must meet goals or standards based on health conditions in order to receive incentives. These types of plans often involve screenings and testing to determine what the goals should be for each employee. The goals normally involve meeting certain lifestyle standards, such as smoking cessation or lowering BMI. They can also feature an education component and diagnostic testing. Because a Standards-Based Plan provides medical benefits through testing and screenings, it is considered a health plan and is subject to all HIPAA rules and regulations.

According to the Department of Labor, HIPAA has the five following requirements for Standards-Based Plans:

  1. The total reward for all the plan’s wellness programs that require satisfaction of a standard related to a health factor is limited – generally, it must not exceed 20 percent of the cost of employee-only coverage under the plan. If dependents (such as spouses and/or dependent children) may participate in the wellness program, the reward must not exceed 20 percent of the cost of the coverage in which an employee and any dependents are enrolled.
  2. The program must be reasonably designed to promote health and prevent disease.
  3. The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
  4. The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of the initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard.
  5. The plan must disclose in all materials describing the terms of the program and the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard).

HIPAA also decrees that a Standards-Based Plan cannot be structured in a way that the outcomes are measured from protected data. Also, all data must be kept confidential at all times. HIPAA is not the only law that governs how a plan must be designed and administered. GINA and ADA also have rules concerning Wellness Plans. Wellness Plans, Part 2 will discuss the limitations that the ADA and GINA put on Employer Wellness Plans.

Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit Revolution.law or call 336-333-7907.

The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.


Employee Benefits Security Administration (n.d.) FAQs About The HIPAA Nondiscrimination Requirements. United States Department of Labor. Retrieved November 19, 2012. https://www.dol.gov/ebsa/faqs/faq_hipaa_ND.html#.UKpnf-QR5c0

Mastroianni, Peggy R. (August 19, 2011). ADA & GINA: Incentives For Workplace Wellness Programs. The U.S. Equal Employment Opportunity Commission. Retrieved November 19, 2012. http.://www.eeoc.gov/eeoc/foia/letters/2011/ada_gina_incentives.html