Effective in 2014, the Patient Protection and Affordable Care Act allows employers to offer employees rewards—in the form of premium discounts, waivers of cost-sharing requirements or benefits that would otherwise not be provided—of up to 30% (currently 20%) of the cost of coverage for participating in a wellness program and meeting certain health-related standards.

As a strategy to contain health care costs through improved employee health, more employers are using outcomes-based incentives with their wellness program. Towers Watson’s 2012 Performance in an Era of Uncertainty Survey reports that 10% planned to reward or penalize based on biometric outcomes in 2012. In 2013, 23% of employers expect to require employees to satisfy a health status standard or biometric result to receive a reward.

Currently, 30% of our clients use outcomes-based incentives. However, research shows employers and employees have differing views when it comes to wellness program incentives.

To encourage employer use of outcomes-based incentives that are both effective and fair to all employees, and that improve health outcomes, the Journal of Occupational and Environmental Medicine recently published a consensus statement from respected organizations such as the American Diabetes Association, American Heart Association, American Cancer Society, the American College of Occupational and Environmental Medicine and the Health Enhancement Research Organization.

Everyone should remember that while incentives are a useful and powerful tool, incentives by themselves are not a replacement for good program design and a culture that supports and reinforces good health practices.

Below are highlights of the challenging environment for wellness programs and incentives, and the recent guidance on outcomes-based incentive design.