In the current litigation environment surrounding wellness programs, the FAQs offer welcome relief and best practice reminders to employers.
On August 26, 2026, the Departments of Labor, Health and Human Services and the Treasury published FAQs addressing certain critical components of the Health Insurance Portability and Accountability Act (HIPAA) wellness program rules. The FAQs were welcomed by employers, as the HIPAA wellness program rules have been the subject of more than 80 class action lawsuits claiming that wellness programs imposing premium surcharges for tobacco use violate the Employee Retirement Income Security Act of 1974 (ERISA).
At the heart of those cases is whether or not employers can prospectively remove the premium surcharge when a participant who uses tobacco completes a wellness program’s “reasonable alternative standard” (for example, a tobacco cessation course). Plaintiffs argue that employers are required to provide retroactive reimbursement of the total amount of premium surcharges tobacco-using participants paid during a plan year before they completed the tobacco cessation course. Many programs are designed to only remove the premium surcharge prospectively upon satisfaction of the reasonable alternative standard.
Department Enforcement Relief on Retroactive Rewards
The three U.S. Cabinet departments announced that they will not take enforcement action against a plan that provides a wellness program reward only on a prospective basis rather than retroactively to the first day of the plan year. Such enforcement relief is conditioned on the plan (1) providing the reward corresponding to the period after the reasonable alternative standard is satisfied and (2) otherwise satisfying the applicable wellness program regulations.
The enforcement relief is welcome guidance, as federal courts have been grappling with the language from the preamble to the wellness program rules that individuals who complete a reasonable alternative standard are entitled to the “same, full reward” as those who meet the health standard initially. Certain federal district courts have determined that the preamble’s language is not binding, while others have applied the preamble’s retroactive reimbursement requirement. The FAQs, along with the enforcement relief, may bode well for the future dismissal of claims based upon a plan’s failure to provide retroactive reimbursement.
That being said, federal courts may not view the FAQs as determinative in this area, and uncertainty remains with respect to how the FAQs will be viewed by both federal district courts upon their determination of motions to dismiss and federal courts of appeal that are examining the lower courts’ prior rulings. As a result, employers sponsoring wellness programs are encouraged to work with their advisors and legal counsel to ensure that the design of their programs remains compliant and in line with the enforcement relief set forth in the FAQs. In particular, employers that offer retroactive rewards are encouraged to closely examine the issue prior to making any changes in design.
Reasonable Alternative Standard Notice Requirement
In addition to the enforcement relief, the FAQs reiterate the requirement that the availability of a reasonable alternative standard must be disclosed in all plan materials describing the terms of a wellness program. Such disclosure must include (1) contact information for obtaining a reasonable alternative and (2) a statement that the recommendation of an individual’s personal physician will be accommodated. However, materials that merely mention the existence of a wellness program, without describing its terms, do not trigger this notice requirement.
Therefore, only plan materials that discuss the wellness program specifics are obligated to set forth the availability of the reasonable alternative standard. Employers should revisit all wellness program materials to ensure compliance with the applicable notice requirements.
Conclusion
In the current litigation environment surrounding wellness programs, the FAQs offer welcome relief and best practice reminders to employers. However, employers may wish to await the response of federal courts on this topic before making significant prospective changes to the design of their wellness programs.
About Duane Morris
To learn more about the recent guidance and its implications for employers, join the Duane Morris Institute for “Wellness Program Update: What Recent Guidance Means for Employers” on October 21, 2026, from 1:00 to 2:00 p.m. Eastern. The webinar will discuss prospective wellness rewards, notice requirements for reasonable alternative standards and considerations for employers amid ongoing litigation. Registration is now open.
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