New FAQs Clarify Wellness Program Rules

This article summarizes wellness reward requirements, disclosure obligations, and practical implications of the recently released wellness program guidance for plan sponsors.

On August 26, 2026, regulatory authorities issued FAQs that provide guidance on health-contingent wellness programs under HIPAA and the Affordable Care Act. The FAQs address two issues at the center of recent litigation involving tobacco-use surcharges.

Issue #1: Are participants who complete a reasonable alternative standard mid-year entitled to receive the wellness reward retroactive to the start of the plan year?

Issue #2: What are the requirements around disclosing the availability of an alternative standard in wellness plan materials?

Wellness Program Basics

Wellness programs must be reasonably designed to promote health or prevent disease, comply with applicable limits on rewards, and offer reasonable alternative standards when required. In addition, HIPAA generally prohibits group health plans from discriminating in eligibility, benefits, or premiums based on a health factor. That said, an exception exists that permits qualifying wellness programs to provide rewards (such as premium discounts, rebates, or reduced cost sharing).

There are three classifications of wellness programs, and how these rules are applied is based on the type of program.

1. Participatory. These wellness programs do not condition a reward on satisfying a health-related standard.
2. Health-contingent – Activity Based. These wellness programs condition a reward on participants satisfying specific activity metrics.
3. Health-contingent – Outcome Based. These wellness programs condition a reward on participants achieving specific, defined health metrics.

Lastly, health-contingent wellness rewards may not exceed 30% of the cost of applicable coverage or 50% of the cost of applicable coverage for wellness programs designed to prevent or reduce tobacco use.

Reward Rules
Under the 2013 final regulations, a health-contingent wellness program generally must meet the following five criteria:

1. Offer an opportunity to qualify for the reward at least once each year
2. Limit the reward to 30% of the total cost of coverage (50% for programs designed to prevent or reduce tobacco use)
3. Be reasonably designed to promote health or prevent disease
4. Make the full reward available to all similarly situated individuals, including through a reasonable alternative standard or waiver where required
5. Disclose the availability of a reasonable alternative standard in materials that describe the program’s terms
   
   

Issue #1: No Retroactive Reward Required
Supplemental benefits should fill local gaps rather than duplicate benefits employees already receive.

Before introducing a new program, employers should understand what payroll taxes and statutory contributions provide in each country. This includes medical coverage, retirement income, disability protection, paid leave, survivor benefits, and other social programs.

Issue #2: Disclosure Requirement is Tied to the Level of Detail
Confusion has also existed about the requirements for notification of the availability of reasonable alternatives for obtaining wellness rewards.

The FAQs clarify when a notification about the availability of reasonable alternatives must be included in health-contingent wellness program communications.

No Need to Include: A document that merely states that a wellness program exists (without explaining its conditions or reward structure) does not trigger the disclosure requirement. For example, a Summary of Benefits and Coverage that only notes that a participant’s cost sharing may vary based on participation in a wellness program generally need not include the reasonable alternative disclosure.

Must Include: By contrast, enrollment guides, wellness program notices, summaries, websites, and other communications that explain how a participant earns a premium discount, avoids a surcharge, or earns a different reward must include the required disclosure about reasonable alternative methods to earn the reward.

Employers should be mindful of the distinction between a passing reference to a wellness program and a substantive description of such a program.

Employer Action Items

1. Review rewards. Review wellness incentives (including tobacco surcharges) to determine if they are subject to the health-contingent wellness program requirements.
2. Reasonable alternatives. Confirm that reasonable alternatives are available for any outcomes-based, health-contingent wellness programs.
3. Confirm prospective administration. Verify that the reward or removal of a surcharge begins promptly when a participant completes the reasonable alternative standard.
4. Audit participant communications. Identify materials that describe program terms and confirm that they include the required notice regarding a reasonable alternative standard for obtaining rewards.
5. Coordinate reward process. Confirm who receives completion data, who adjusts payroll or premiums, and how quickly the adjustment takes effect.
6. Preserve records. Maintain program terms, notices, completion records, premium adjustments, and vendor instructions to support compliance.
   
   

Resources

• Wellness Programs FAQ Document