Short answer: A wellness program offers employees activities or incentives (screenings, coaching, fitness, tobacco cessation) to improve health and, ideally, reduce claims. Federal rules cap incentives and require reasonable alternatives, especially for health-based programs.
Workplace wellness programs aim to improve employee health and contain medical costs through activities like biometric screenings, health coaching, fitness challenges, and tobacco-cessation support. They generally fall into two types: participatory programs (a reward simply for taking part, such as attending a seminar) and health-contingent programs (a reward tied to a health factor or outcome, such as a tobacco surcharge or hitting a target).
Health-contingent programs are regulated under HIPAA and the ACA. The total reward (or penalty) is generally capped at 30% of the cost of coverage, rising to 50% for tobacco-related programs, and the program must give a reasonable alternative standard so people who cannot meet a target for medical reasons can still earn the reward. The ADA and GINA add rules about voluntariness and the confidentiality of any health information collected.
Whether a program actually lowers costs depends on design and participation; many employers see the biggest return from targeted efforts like tobacco cessation and chronic-condition management. Build the program with compliance in mind, keep participation truly voluntary where required, and protect employee health data.