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The Ultimate Guide to Health Contingent Wellness Programs

13 min read
Last Updated on 16 May, 2024

Wellness means different things to different people.

For some, it's about losing weight and getting in shape. For others, it's about reducing stress or managing a chronic condition. Regardless of the goal, motivation and support are crucial components of a successful wellness journey.

In response to the varied wellness needs of employees, companies are increasingly adopting innovative strategies to promote healthier lifestyles within their workplaces.

One effective approach is the implementation of health-contingent wellness programs. These programs connect tangible incentives to the achievement of specific health outcomes, offering a dynamic way to engage and motivate employees.

This post delves into the mechanics of health-contingent wellness programs, exploring their types, legal frameworks, and best practices. Our goal is to equip employers with the essential knowledge to thoughtfully design and implement tailored health-contingent wellness initiatives that resonate with and benefit their unique workforce.

What is a Health-Contingent Wellness Program?

An employee benefiting from participating in Health-Contingent Wellness Program

A health-contingent wellness program is a type of workplace wellness program that bases rewards on employees meeting specific health goals or outcomes. These programs incentivize employees by offering benefits like reduced insurance premiums, gift cards, paid time off, or cash bonuses for achieving certain health metrics.

The health goals or standards set in a health-contingent program typically relate to exercise, nutrition, preventive care, or reducing health risks like high cholesterol, smoking, or high blood pressure. Some common examples of health-contingent wellness initiatives include:

  • Premium discounts for employees who have a BMI within the normal range
  • Lower deductibles for exercising a set number of days per week
  • Gift cards for employees who complete health risk assessments and follow through on recommendations
  • Cash bonuses for employees who quit smoking or lower their blood pressure

The key element of a health-contingent program is that the reward is contingent on the employee demonstrating improvement in a health behavior or risk factor. Participation alone is not enough - they must achieve the specified health goals to receive the incentive.

There are two main types of health-contingent wellness programs:

1. Activity-Only Wellness Programs

Employees happily working out together by taking part in activity-only wellness programs

Activity-only programs encourage employees to complete or participate in certain health-related activities but do not require them to attain any standardized health outcomes. Some examples of activity-only programs are rewarding employees for regular exercise, attending nutrition or health education seminars, or meeting with a health coach.

As long as employees complete the activity, they receive the reward regardless of whether it leads to improved health metrics.

2. Outcome-Based Wellness Programs

An employee attaining his targetted body-weight by taking part in outcome-based wellness programs

Outcome-based programs reward employees for actually attaining specific health goals like lowering cholesterol or blood pressure, losing weight, or quitting smoking. These programs usually involve a 3-step process:

  • Initial screening to establish a health baseline
  • Interventions targeted at employees who fail to meet health standards
  • Follow-up screening to measure outcomes and determine rewards

The key distinction is that outcome-based programs require employees to demonstrate health improvements, not just participation. Both activity-only and outcome-based programs aim to motivate employees to engage in healthy behaviors, leading to improved well-being.

By connecting financial incentives to health metrics, these programs aim to provide a tangible reward to drive behavior change. They are sometimes viewed as the "carrot" approach in contrast to penalizing employees for unhealthy behaviors (the "stick" approach).

Participatory vs. Health-Contingent Wellness Programs

Much like activity-only wellness programs, participatory wellness programs simply promote healthy behaviors and lifestyles. They do not base rewards on achieving any standardized health outcomes. These programs promote health by making services available and encouraging participation without any rewards or requirements. Examples of participatory wellness programs include:

  • Providing free flu shots
  • Hosting fitness challenges that reward participation
  • Offering health education seminars
  • Providing smoking cessation resources without tying quitting to incentives

Health-contingent wellness programs require employees to meet specific health goals or standards to obtain rewards or avoid penalties. As discussed above, the incentives are contingent on employees demonstrating improvements in health metrics.

While participatory programs take a passive approach focused on education and engagement, health-contingent programs actively motivate employees to change behaviors through incentives.

The key difference is participatory programs do not base rewards on an individual satisfying any health-related goals or standards. If the programs are made available to all employees regardless of health status, they comply with nondiscrimination laws without needing additional standards applied to health-contingent programs.

The health-contingent programs require employees to demonstrate health improvements, not just participation. Both these programs aim to motivate employees to engage in healthy behaviors leading to improved well-being.

Employers choose between the two formats based on their wellness objectives and organizational culture.

The Evolution of Health Care and Insurance Risks

The Evolution of Health Care and Insurance Risks

Traditionally, health insurance premiums were calculated differently than other types of insurance, like life or automobile coverage. Premium costs for health care coverage were not based on an individual's health risks and behaviors. However, this model is shifting.

The fee-for-service healthcare system focuses on treating diseases after they develop rather than preventing them. Such treatments come at a high cost, especially for chronic, preventable diseases.

In recent years, healthcare costs have skyrocketed, often outpacing inflation. As a matter of fact, U.S. healthcare spending grew 9.7% to reach $4.1 trillion (about $13,000 per person in the US) dollars in the year 2021.

In response to unsustainable cost growth, the healthcare industry is transitioning towards a value-based risk-sharing model. Insurers, in this new paradigm, are beginning to factor in individual health risks when pricing premiums. Health contingent wellness programs align with the industry shift to risk-sharing.

These programs allow premiums and incentives to be calibrated based on each employee's unique health conditions and behaviors. Healthy employees pay less, while less healthy employees pay more. This model incentivizes individuals to actively manage their health.

And thus, employees who maintain a healthy lifestyle can reduce their insurance costs. Therefore, health contingent wellness initiatives give employees more control over their premium expenses based on the health choices they make.

Effective Implementation Strategies for Health Contingent Wellness Programs

If you decide to establish a health-contingent wellness program, careful planning and strategic implementation are the keys to success. Here are some best practices to maximize participation and health improvements:

Gain Leadership Buy-in:

Make sure senior management visibly supports the program. Employees are more likely to participate if they see the organization's leaders actively engaging.

When employees see executives actively engaging in health initiatives, they are more likely to participate themselves. For example, if the CEO of a company starts a walking challenge and invites employees to join her on morning walks, it demonstrates her commitment.

Involve Employees in the Design:

Get input from employees on what health goals and incentives would motivate them. This gives them ownership of the program.

Survey them to find out what health goals motivate them and what incentives they find most appealing. Giving them a voice leads to higher engagement. For instance, younger employees may prefer discounted gym memberships, while older ones want gift cards or paid time off.

Offer Incentives Valued by Employees:

Understand what motivates your workforce and provide rewards that appeal to their interests. Some popular incentives are paid time off, gift cards, prizes, and health insurance premium discounts.

Remember that incentives cannot exceed 30% of the total cost of coverage.

You can also tailor the incentives to what matters most to your people. A customized rewards program shows you've listened to their needs and want them to succeed. Don't rely solely on financial incentives; recognition and leadership attention are also powerful motivators.

Communicate Often:

Communication is the glue that holds a wellness program together. Ensure all employees understand how the program works, the required health metrics, and what they will gain by achieving goals. Use multiple communication channels like email, intranet postings, posters, and presentations.

When they feel informed every step of the way, they stay committed.

Provide Resources and Support:

Don't just set standards and expect employees to figure it out. Provide tools like health coaching and onsite fitness classes to improve health. This level of investment in their well-being builds loyalty and appreciation.

Start Small:

Pilot the program with a subset of employees before rolling it out company-wide. Work out any issues on a small scale first. Opening the program up slowly also builds buzz and momentum.

Evaluate Frequently:

Collect data and feedback from program participants. Then, use that data and feedback to improve the program over time and ensure it continues meeting employee needs. Refine, don't abandon it - with time and commitment, your wellness initiative can change lives.

Regular Assessment is Key.

When thoughtfully designed and communicated, health-contingent wellness initiatives can positively impact employee health while benefiting the bottom line through cost savings. Putting the effort upfront to create programs tailored to your workforce will drive better outcomes.

Invest in your employees’ well-being - and see the benefits pay off for years to come.

What Results Can an Effective Health-Contingent Wellness Program Achieve?

Research indicates that well-planned and administered health-contingent wellness programs can:

Reduce Employer Healthcare Costs:

Health Contingent Wellness Programs reduce Employer Healthcare Costs

These programs typically emphasize preventive healthcare measures such as regular check-ups, vaccinations, and screenings. By identifying health issues early or even preventing them altogether, employees are less likely to develop serious conditions that require expensive medical treatments.

A case study by Well Steps of a school district found their costs remained flat for 6 years after implementing a health-contingent program, reversing a rising cost trend. They achieved a 3.6:1 ROI.

Improve Employee Health Risks:

Health-contingent wellness programs often begin with a health risk assessment (HRA), which identifies risk factors that an employee or member may have by collecting lifestyle, medical history, and family history information.

This assessment helps employers or insurers provide recommendations on how the person can reduce their risks through specific treatments, lifestyle changes, or disease management plans.

Employers work with employees to set goals based on individual objectives related to physical activity, nutrition, and other health factors. Such programs also offer incentives for employees to meet their health goals, such as cost-sharing health insurance plans and other financial incentives or rewards.

A study by The Journal of Occupational and Environmental Medicine observed that individuals who reduced one health risk improved their presenteeism by 9% and reduced absenteeism by 2%, controlling for baseline risk level, age, gender, and interaction of baseline risk and risk change.

Increase Productivity:

Health Contingent Wellness Programs Increase Employee Productivity

When employee health is looked after with care, they struggle less when it comes to performing at work. Resources that aid their wellness with mental health support, physical wellness challenges and so on see a fruitful outcome in their productivity levels.

In fact, according to a study published in Research Gate, sick and healthy individuals who improved their health through wellness programs increased productivity by about 10%.

Boost Engagement and Morale:

Health-contingent wellness programs offer incentives and rewards for employees who meet specific health goals or standards. These incentives can be financial, such as lower health insurance premiums or deductibles, or non-financial, such as extra time off or access to on-site fitness classes.

They also experience a sense of accomplishment and pride in their ability to make positive changes in their lives.

Attract Talent:

A company that implements health contingent wellness program attracts top talent

A SHRM study showed over 70% of U.S. employees rank health and wellness offerings as an important consideration when evaluating a new job. Your employees will feel valued, loyal, and satisfied knowing you want them to succeed. These positive emotions compound over time, nurturing an engaged culture.

The benefits of health-contingent wellness initiatives extend across positive financial returns, a healthier and happier workforce, and talent acquisition advantages. Employers who thoughtfully implement these programs based on best practices are well-positioned to realize measurable improvements.

Five Key Steps to Developing an Effective Health-Contingent Wellness Program

Follow these best practices when creating a results-driven health-contingent wellness program for your organization:

1. Build a Supportive Culture

Kick things off by fostering a culture that enables healthy choices. Make wellness a clear priority from the top down. For instance, executives could begin holding walking meetings, and leaders could discuss wellness in all-hands meetings.

Adjust policies to promote healthy behaviors like providing standing desks, offering healthy snacks, and allowing flex time for exercise. Employees will feel motivated when wellness is woven into their DNA.

2. Design an Appealing Incentive Structure

Incentives drive program engagement, so tailor them to what your people value most. Offer health insurance premium discounts to save money, gift cards to favorite retailers, paid time off to relax, or points that can be redeemed for prizes.

To maximize participation, collaborate with employees to identify the incentives with the highest perceived value and promote them heavily in your communications.

3. Set Reasonable Health Goals

Employees are more likely to sustain healthy behaviors when standards feel achievable. Make it a conversation by inviting staff to share thoughts on realistic goals based on their health risks and needs.

For example, if many struggle with weight loss, set a goal of losing 5% body weight versus an overwhelming 20%. When defined together, goals feel personal rather than imposed.

Vantage Fit’s founder, Mr. Anjan Pathak, once said, “The true success of a wellness program lies in convincing the least active individuals to take significant strides towards improving their health.

4. Offer Tools and Resources

Give employees every tool for success by offering convenient health coaching, self-monitoring apps, onsite gyms and workshops, and access to nutritionists and trainers. If employees have no barriers to better health, they have no excuses not to participate.

Resources demonstrate your commitment to their well-being.

5. Measure, Evaluate and Optimize

Use data and feedback to refine your program continuously. Track participation rates, health metric improvements, cost savings, and employee satisfaction. Identify what's working well and what's not to guide your enhancements. An iterative, employee-centered approach ensures the program evolves with your workforce's needs.

Thus, a strategic approach delivers the greatest impact. While it takes effort to build a results-driven health-contingent wellness program, the significant benefits are well worth the investment.

What are the Key Requirements for Health-Contingent Wellness Programs?

When designing your health-contingent wellness program, following best practices that align with federal laws is crucial. Adhering to these standards creates fair and equitable programs while avoiding legal pitfalls.
Specifically, the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA) govern lawful practices for health-contingent wellness programs. Here are some of the key requirements:

Annual Opportunity to Qualify

Give employees at least one chance per year to meet health goals and earn rewards. This ensures continued participation. For example, if you offer a health assessment in January, employees who miss it can still complete it in May to qualify.

Limits on Reward Size

Incentive amounts are capped at 30% of total health plan costs or 50% for tobacco cessation programs. Staying within these limits prevents financial coercion. To illustrate, if your company's total health premium cost is $5,000, the maximum permissible reward would be $1,500.

Suggested Read: 7 Wellness Incentive Ideas To Boost Your Corporate Programs

Promote Health, Don't Punish

Your program must use evidence-based activities, like coaching sessions or workout classes, that truly improve employee health. It should not impose overly difficult requirements just to save costs. The focus is positive behavior change through reasonable methods.

Provide Alternatives

If employees can't meet a health standard due to a medical condition, you must offer reasonable alternatives to still qualify for the full reward. This removes barriers for those who can't satisfy the initial requirement.

Transparent Communication

Explicitly state in all materials that alternatives are available for individuals unable to meet health goals. Provide specific instructions on requesting an alternative method to earn the full incentive.

Avoid Discrimination

Program incentives and penalties must apply equally to all employees in similar health circumstances to prevent discrimination. For example, all smokers pay the same surcharge for not completing a cessation program.

Safeguard Data

If collecting health data, describe how it will be stored securely and used ethically. Protecting sensitive information maintains trust.

Keep incentive amounts within legal boundaries. Exceeding the 30% or 50% total cost thresholds can trigger financial penalties.

Following these best practices ensures your program operates fairly and legally. Work closely with experts like legal counsel, HR, and insurers when creating health-contingent wellness initiatives to guarantee proper implementation. It's well worth investing time upfront to do it right - and avoid issues down the road.

Certain legal considerations come into play when developing health-contingent wellness programs. Here are some tips to avoid legal risks:

  • Employees should not feel coerced into participating or sharing private health details. Offer rewards and communications reinforcing the voluntary nature.
  • Follow all HIPAA and ADA regulations around confidential medical data from screenings, health risk assessments, etc. Only share anonymized aggregate data.
  • Ensure alternate options are available if an employee can't meet a health standard or finds it medically inadvisable.
  • Limit incentives to 30% of total health premium costs (50% for smoking cessation programs) to comply with discrimination laws.
  • Foster a workplace culture that generally supports health to avoid perceptions of coercing behavior or discrimination.
  • Use data to demonstrate the program's financial benefit so rewards are viewed as health plan cost adjustments rather than penalties for non-compliance.
  • Have legal counsel review all wellness program policies, communications, and requirements to flag any areas that may raise legal concerns.
  • Design the program based on best-practice recommendations from sources like the CDC, the Society of Human Resource Management, and wellness associations.

What Is the Most Common Mistake in a Health-Contingent Wellness Program?

The most common pitfall of health-contingent wellness programs is solely focusing interventions and resources on the highest-risk employees identified through health screenings. Initially, targeting employees with the poorest health metrics may seem logical since they likely incur the highest health costs. However, this approach is short-sighted.

Research shows employee health risks fluctuate over time. The highest risk segment will substantially change year-to-year as some risks improve and others emerge. Only addressing the current high-risk population leaves many at-risk employees unengaged in programs to prevent their health from declining.

The best practice is to promote health across all employees - low, moderate, and high-risk. Offer programs and incentives encouraging healthy behaviors for the total employee population. This holistic approach leads to optimal risk reduction, sustainable health changes, increased productivity, and control of healthcare spending growth over the long term.


Health contingent wellness programs can be important in engaging employees in health improvement and combating rising healthcare costs. However, these programs require careful design, implementation, and monitoring to reward positive health changes without penalizing employees or violating anti-discrimination protections.

Following proven best practices around strategic planning, meaningful incentives, whole population engagement, integrated interventions, legal compliance, and continuous evaluation will lead to optimal results from health-contingent wellness investments. The aim is to build a culture of health with programs tailored to your workforce's unique needs and risks.

With thoughtful leadership and administration, health-contingent wellness initiatives provide a "win-win" for employees and employers alike - lower risks and healthcare costs are rewarded with financial incentives supporting healthy, happy, and productive workers.

This article is written by Bijaya Lakshmi Sarma, who is a content marketer and wellness expert at Vantage Circle. As an avid runner for over a decade and a keen reader of books on holistic wellness, Bijaya aims to guide people toward lifestyle changes that help them surpass their wellness vision. To get in touch, reach out to

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