Federal Agencies Announce Temporary Enforcement Relief for Wellness Program Rewards

The Department of Labor's Employee Benefits Security Administration, along with the Departments of Health and Human Services and the Treasury, issued guidance on August 26, 2026, regarding enforcement of wellness program rules under the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA).

Until further guidance or regulations are issued, the FAQ states that the agencies will not take enforcement action against plans or issuers that fail to provide the wellness reward retroactive to the beginning of the plan year after an individual satisfies a reasonable alternative standard, provided the reward applies prospectively, and the plan or issuer otherwise complies with the applicable requirements.

What Does This Mean for Employers? 

The underlying wellness program rules have not changed. However, the agencies acknowledged that additional clarification is needed regarding two key compliance issues: 

• when a reward must be provided to an individual who satisfies a reasonable alternative standard, and 
• how the availability of reasonable alternative standards must be communicated to participants. 

The agencies reaffirmed their support for wellness programs that promote health and well-being while complying with HIPAA's nondiscrimination requirements. This temporary enforcement relief is intended to provide plans and issuers with time while the agencies develop and issue additional guidance.   

What Has Not Changed? 

Importantly, the guidance does not suspend or modify existing wellness program requirements. Health-contingent wellness programs must continue to comply with HIPAA's five nondiscrimination standards, including providing a reasonable alternative standard and properly communicating its availability to eligible participants.   

Action Items 

Although the agencies have announced enforcement relief, litigation risk remains. Hylant continues to monitor ongoing class-action lawsuits involving tobacco-related wellness incentives and surcharges.   

Employers should continue to follow established compliance best practices, including: 

• offering a reasonable alternative standard to individuals who do not initially satisfy the program's requirements, allowing participants to avoid a surcharge or earn the applicable reward through that alternative standard; and 
• providing required disclosures regarding the availability of the alternative standard in all plan materials describing the wellness program. 

For employers seeking the most conservative compliance approach, consider providing rewards retroactively or refunding surcharges back to the beginning of the plan year once the reasonable alternative standard has been completed.   

Looking Ahead 

Regulatory scrutiny and litigation involving wellness program incentives continue to evolve. Employers should review their wellness program design, administrative processes, and participant communications to help ensure compliance with current HIPAA requirements while awaiting additional federal guidance.  

Reach out to your Hylant health strategies consultant with questions about how this guidance may affect your wellness program. 

Related Reading: New Wave of Lawsuits Targets Health Plan Tobacco Surcharges

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.