TYPES OF HEALTH & WELLNESS INCENTIVE PROGRAMS
It can be a challenge deciding which type of health and wellness incentive program is the best fit for your organization or whether or not you should engage the services of an incentive provider to gain helpful insights. Health and wellness incentive programs are an important part of encouraging health among employees, decreasing spending on employee health care, increasing productivity, and raising morale among employees. Health and wellness incentive programs come in many forms, depending on the sponsoring organization’s particular goals, and what tactics are needed to influence healthy behavior. Health and wellness incentive programs should be consistent with an organization’s vision and goals, legally compliant, and relevant to the program’s participants needs. As a general rule, most health and wellness incentive programs will fall under one of four different types:
- Type 1 – General Educational or Participatory and not Health Plan-Related
- Type 2 – Health Plan-Related Participatory Programs
- Type 3 – Health Plan-Related Activity-Only Programs
- Type 4 – Health Plan-Related Outcome-Based Programs
When effectively implemented, these health and wellness incentive programs have been shown to improve work performance, decrease the number of sickness-related absences, increase companies’ abilities to attract top talent, and improve employee’s self-management skills. Each of these types of plans have their own unique features and compliance obligations. Becoming informed as to the different types of health and wellness incentive programs and their requirements is one of the first steps any organization should take when planning their health and wellness incentive program. Different plans will fit into different niches, depending on an organization’s needs.
Additionally, these health and wellness incentive programs each have different legal requirements they must meet. The most common laws that a health and wellness incentive program will have to comply with include:
- The Patient Protection and Affordable Care Act (PPACA)
- The Health Insurance Portability and Accountability Act (HIPAA)
- The Employee Retirement Income Security Act (ERISA)
- The Consolidated Omnibus Budget Reconciliation Act (COBRA)
- The Age Discrimination in Employment Act (ADEA)
- The Americans with Disabilities Act (ADA)
- The Fair Labor Standards Act (FLSA)
- The Genetic Information Nondiscrimination Act (GINA)
- Title VII of the Civil Rights Act
- Various Tax Laws & Tax codes
- Cafeteria Plan Regulations
Not all of these will apply to every health and wellness incentive program, but it is important to be aware of them and how they will affect your company’s health rewards program. We will briefly go over some of the legal requirements associated with each type of program, but it is also important to seek legal counsel or engage the services of a health and wellness incentive provider to make sure that all compliance issues are addressed. You can read more about health and wellness compliance requirements in our article Is Your Health and Wellness Incentive Program Compliant?
When crafting a plan for your health and wellness incentive program, it is important to research what your options are and how well each option will fit with your organization’s goals. Each program type has unique differences in both their legal requirements and in the manner of the program’s application. In this article, we will take an in-depth look at the four different health and wellness incentive program types.
Type 1 – General Educational or Participatory and not Health Plan-Related
General educational health and wellness programs consist predominantly of educational materials and non-mandatory classes related to health and wellness topics. It is important that these types of health and wellness programs are made available to everyone, not just employees who are eligible for the sponsoring company’s healthcare plan. These education programs can focus on encouraging behaviors that decrease employees risk of health-related issues, such as flu prevention or muscle strain, or the focus can be on addressing current health problems, such as diet issues or nicotine addiction.
Some examples of health and wellness educational material could include workplace posters showing the benefits of cutting back on sugar, providing pamphlets outlining different types of stretching exercises, or putting on lunch and learn classes to discuss health topics. When planning a general education health and wellness program, it is important to make sure that your educational material will be relevant and accessible to your employees. Additionally, regular updates to program material are important both for the sake of accuracy and to keep employees engaged. No one wants to look at the same health poster every day for five years.
Participatory programs that are not health plan related also fall under type 1 programs. Like the educational programs, Non-health plan related participatory programs must be made available to everyone, not just employees who are eligible for the sponsoring company’s healthcare plan. Some examples of health and wellness participatory programs that are not health plan related could including individualized exercise plan creation, a voluntary calisthenics class, or making fitness equipment available to employees. Additionally, some of these participatory programs may include rewards provided by a third party incentive provider. These rewards would be for participation and not dependant on the outcomes of the participation. Rewards could include things like receiving a sports water bottle for attending a class on proper hydration, receiving a prepaid visa reward card for participating in a smoking cessation program, receiving gym membership cost reimbursement, or receiving a $10 gift card for filling out a health survey.
As you can see, all of these activities are related to the participation, not an outcome. For example, a program offering a gift card for quitting smoking would not fall under type 1, as that would be outcome-based (type 4), rather than participatory. The ACA guidelines require that participatory programs do not require specific outcomes for employees to receive rewards. Nearly any reward is acceptable under a participatory program as long as it is not tied to specific outcomes. Including quality rewards increases the odds of employees participating in your health and wellness incentive program. When offering rewards it can be helpful to keep the rewards consistent with the goals of your program. For example, rewarding someone who participated in a company exercise program with a gift card to a health food store or smoothie cafe is probably a better choice than giving them a gift card for a dessert or donut shop.
Out of all the different types of health and wellness programs, both General Educational and Participatory and not Health Plan-Related health and wellness programs have the least amount of regulations regarding how they are conducted. The primary laws and regulations that are applicable to a type 1 program include ADEA, Title VII, FLSA, & Tax Laws. ADA will be applicable if the program includes a medical examination or a disability-related inquiry – if the program includes an inquiry of this type it must be voluntary and be reasonably designed to either preventing disease or promote health. GINA will also be applicable if the program includes an HRA. An HRA is a Health Risk Assessment which consists of a self-administered questionnaire on employee health-related risk factors and behaviors. An HRA may also include some form of clinical screening for the collection of biomimetic data like blood pressure, blood sugar levels, height, and weight information. To be considered legally compliant, feedback must also be provided to an employee after they complete an HRA.
Because type 1 programs are so flexible in nature they tend to be very attractive for some organizations. They also tend to be attractive to employees who enjoy the variety of reward opportunities or who are concerned about being required to achieve specific outcomes like quitting smoking or losing a specific amount of weight. The key factors to remember with Type 1 programs is that they must be voluntary, they must be made available to all employees – regardless of whether they are eligible for the company’s health care plan, there is no requirement to access information or to participate in any of the program’s activities, any rewards offered based on participation are not related to a health plan, and medical care is not provided under this type of program.
Type 2 – Health Plan-Related Participatory Programs
As the name implies, Health Plan-Related Participatory Programs are health and wellness plans in which all participants are enrolled in the company’s health care plan and the program involves some form of participation in order to receive a reward. Type 2 participatory programs are open to all employees who desire to participate in the program and are enrolled in the employer’s health plan. Like with type 1 participatory programs, type 2 programs are based on the employee’s participation, not the outcomes of their participation. These programs can either be tied to the company’s health care plan or can be a healthcare plan themselves. Examples of this could be programs that lower an employee’s health care contributions based off of their participation in a cholesterol level check, or getting a blood test, waiving copayments for pregnant women who get prenatal care, or offering premium holidays for employees who enroll in a tobacco cessation program – regardless of whether they stop using tobacco. It is important to note that these programs must provide a reasonable alternative if an employee is unable to meet the program’s original standard. For example, if an employee is not able to attend a smoking cessation class, a reasonable alternative might be having the employee read educational material regarding smoking cessation.
Type 2 programs may involve medical care. Medical care includes care that is both provided by a trained professional and individualized to the participant. Medical care, among other things, includes amounts paid for diagnostics, treatments, mitigations, and preventions of disease, payment for medical-related transportation, and payment for medical care insurance. Some examples of medical care related to a type 2 program would include biometric screening, coaching by a trained nurse, flu shots, and counseling from a therapist. Health and wellness incentive programs that include medical care will have to comply with additional regulations.
Type 2 health and wellness incentive programs have several regulations to comply with. If the program provides medical care it will need to comply with HIPPA, ERISA, and COBRA. Regardless of whether medical care is provided, type 2 programs must comply with PPACA, ADEA, ADA, Title VII, FLSA, Cafeteria plan, and various tax laws. Additionally, if a health risk assessment is offered, the program will also need to be in compliance with GINA.
It is important to remember that outcome-based programs must be compliant with nondiscrimination laws and requirements. Participation in these programs must be available to all similarly-situated employees who are also enrolled in the company’s healthcare plan. Type 2 programs offer an appealing option for companies that want to offer an incentive program to their employees who are enrolled in their healthcare plan.
Type 3 – Health Plan-Related Activity-Only Programs
Health Plan-Related Activity-Only Programs provide rewards to participants based on the completion of certain health and wellness activities by participants enrolled in the company’s healthcare plan. Some examples of these Health Plan-Related Activity-Only Programs could be offering a reduction in employee health plan contributions if the employee exercises for at least 3 hours a week, a reduction in employee health plan contributions if the employee decreased their sugar consumption, or rewarding an employee for sticking to a diet plan – regardless of the outcome. As with all health and wellness incentive programs, it is important to make sure that the program is accessible to all your employees. All similarly situated employees should have equal opportunity to complete the program’s activities and those with disabilities or other issues that keep them from completing the activities must be offered reasonable alternative options.
Type 3 health and wellness incentive programs must be compliant with the same regulations as a type 2 program. If the health and wellness incentive program provides medical care it will need to comply with HIPPA, ERISA, and COBRA. Regardless of whether medical care is provided, type 3 health and wellness incentive programs must comply with PPACA, ADEA, ADA, Title VII, FLSA, Cafeteria plan regulations, and various tax laws. Additionally, if an HRA is offered, the program will also need to be in compliance with GINA.
Type 4 – Health Plan-Related Outcome-Based Programs
Health Plan-Related Outcome-Based Programs provide rewards based off of certain program-specific outcomes to employees enrolled in their company’s healthcare plan. These plans could include rewards such as a reduction in employee health care contributions for things like having a body mass index below 30, or for employees who manage to quit using tobacco products. Tobacco cessation programs are among some of the most popular type 4 programs. An outcome-based program will often start with a health screening in order to establish a baseline for the employee’s health, making it significantly easier to track their progress through the program. As with other programs, it is important that there is an alternative standard available to employees who cannot meet the initial standard of the program. It is important to note that a doctor’s note cannot be required as proof that a participant is medically unable to satisfy the program’s requirements. Alternative standards can be created on an as-needed basis and do not need to be in place prior to the beginning of the program.
Type 4 programs can be appealing to both employers and employees because they reward results. It is very satisfying to see hard data confirming that progress has been made and it is even more satisfying to be rewarded for that hard work and progress. However, some type 4 programs may include penalties for employees who do not meet certain health standards. Examples of this could be requiring higher health plan contributions from employees who smoke or have a BMI of over 30.
Type 4 programs are the most highly regulated of the health and wellness incentive programs. Type 4 programs must comply with HIPPA, ERISA, COBRA, GINA, PPACA, ADEA, ADA, Title VII, FLSA, Cafeteria plan, and various tax laws – particularly in regard to incentive values.
Regardless of the type of health and wellness incentive program chosen, it is important the program is well-designed, compliant, relevant, and effectively executed. Studies continue to show that the right health and wellness incentive program can generate outstanding results. A 2014 study published by the Journal of Occupational and Environmental Medicine found evidence showing that a well-designed and well-executed health and wellness incentive program will achieve both health and financial rewards. Johns Hopkins University’s Institute for Health and Productivity Studies (IHPS) has conducted a number of studies on workplace wellness programs and discovered that one of the signs of a successful workplace health and wellness program is using incentives to encourage employee participation. Programs that offered reward incentives rather than penalizing employees showed a much higher rate of success.
When planning your health and wellness incentive program, it is important to decide whether type 1, type 2, type 3, or type 4 will be the best choice for your organization’s needs and goals. At All Digital Rewards, we understand the importance of choosing the right health and wellness incentive program. We can recommend a long term points based program or shorter duration activity based incentive solution that may be better suited for the wellness event at hand. Either way we know you value your employees’ health and want your program to be a success from beginning to end. We can help you navigate compliance requirements and craft a program that is fully customizable and branded for your organization. Our health and wellness incentive program experts are standing by to answer your questions and to help you design and execute your organization’s new incentive program. Consider our Our Healthy Choice Rewards, Living Well™ Debit Reward Card, and our robust Health and Wellness points-based platform technology, Live Well™ all of which can be fully branded and personalized for your company. To get started on your journey to a healthier, more productive workplace call our Health and Wellness Reward Program experts at 866-415-7703 or click the “Schedule a Demo” button below!