Health Law Daily Wrap Up, HEALTH CARE REFORM—OTHER AGENCY DOCUMENTS: Agencies ease retroactive-reward rule for wellness programs, (Aug 31, 2026)

By WK Editorial

Federal agencies will not pursue plans and issuers that limit a wellness-program reward to the period after a participant completes a reasonable alternative standard, provided the program meets all other applicable requirements.

The Departments of Labor, Health and Human Services, and the Treasury provided enforcement relief for group health plans and health insurance issuers that do not apply wellness-program rewards retroactively to the beginning of a plan year. The guidance addresses uncertainty over the Affordable Care Act requirement that the full reward under a health-contingent wellness program be available to all similarly situated individuals. Until the departments issue further guidance or regulations, they will permit a plan or issuer to provide the reward only for the period after an individual satisfies a reasonable alternative standard, if the program otherwise complies with the governing wellness-program regulations (FAQs About Affordable Care Act and Health Insurance Portability and Accountability Act Implementation Part 74 (Aug. 26, 2026)).

HIPAA generally bars group health plans and issuers from discriminating in eligibility, benefits, or premiums based on a health factor. An exception permits premium discounts, rebates, cost-sharing changes, or additional benefits when individuals participate in qualifying health-promotion or disease-prevention programs. The regulations divide wellness programs into participatory programs and health-contingent programs. A health-contingent program conditions at least one reward on satisfying a standard related to a health factor, such as not smoking, meeting a biometric target, or completing an exercise goal.

For an outcome-based health-contingent wellness program, the 2013 final rules require plans and issuers to offer eligible individuals an opportunity to qualify for the reward at least annually. The total reward generally may not exceed 30 percent of the cost of employee-only coverage, although the limit rises to 50 percent for programs designed to prevent or reduce tobacco use. The program also must be reasonably designed to promote health or prevent disease, and it must make the full reward available to all similarly situated individuals. When an individual does not meet an initial standard based on a health-related measurement, test, or screening, the program must offer a reasonable alternative standard or waive the original standard.

The regulatory text did not clearly resolve whether a participant who completes a reasonable alternative standard partway through the plan year must receive the reward for the entire year. The preamble to the 2013 final rules said the participant must receive the same full reward provided to individuals who met the initial standard for that plan year. It illustrated the requirement with a calendar-year plan offering a premium discount: if a participant completed an alternative standard on April 1, the plan would provide the discounts attributable to January through March. The preamble also allowed plans and issuers to deliver the retroactive portion through a payment or on a pro rata basis over the rest of the year, so long as the individual received the full amount. Those statements, however, did not appear in the regulatory text.

The new FAQs respond to continuing requests for clarification about that difference. The departments will not take enforcement action when a plan or issuer declines to provide the reward retroactively to the start of the plan year but provides the reward attributable to the period after the participant completes the reasonable alternative standard. The relief applies only when the plan or issuer otherwise satisfies the requirements in the applicable Internal Revenue Code, ERISA, and Public Health Service Act regulations.

The enforcement policy does not alter the substantive protections governing wellness programs. Based on all relevant facts and circumstances, a program must remain reasonably designed to promote health or prevent disease. It may not operate as a subterfuge for discrimination or underwriting based on a health factor. Plans and issuers also must furnish a reasonable alternative standard and give participants sufficient time to complete it and receive a reward. HHS encouraged states with primary enforcement authority over the Public Health Service Act provision to follow the same approach and said it would not treat a state as failing to substantially enforce the law because the state adopted that policy.

The FAQs also clarify when plan materials must describe the availability of a reasonable alternative standard. A plan or issuer must include the notice in all materials that describe the terms of a health-contingent wellness program. For an outcome-based program, the notice also must appear in any communication informing an individual that the person failed to satisfy an initial outcome-based standard. The notice must provide contact information for obtaining an alternative standard and state that the plan or issuer will accommodate recommendations from the individual’s personal physician.

Materials that merely mention the availability of a wellness program without describing its terms do not trigger the disclosure requirement. For example, a summary of benefits and coverage that states cost sharing may vary based on participation in an outcome-based wellness program need not include the notice if it does not describe the program’s standards. The regulations provide sample language that plans and issuers may use to satisfy the notice requirement.

ReportsLetters: AgencyDocuments HealthReformNews