While wellness programs have long been a feature of employer-based healthcare plans, doing the right thing, at least from a health perspective, was not reward enough for those at greatest risk from such behaviors as obesity, smoking and other behaviors. An incentive, such as cash, was clearly needed, but companies held off on cash proposals, until the rules were clear.

Now there may be an explosion of wellness programs, thanks to a joint declaration issued in December 2006 by the Internal Revenue Service, the Department of Labor and the Department of Health and Human Services formalizing the regulations. The IRS, Labor and DHHS said, among other things, that the reward can take the form of a premium discount, a premium rebate or a waiver of all or part of such cost-sharing mechanisms and not exceed 20% of the cost of coverage.

In an April 2007 survey by the National Business Group on Health (NBGH), 62% of respondents said financial incentives are used in their premiums or in their health plan. "That's way up from a few years ago," says NBGH president Helen Darling. Adds Watson Wyatt senior consultant Bruce Kelly: "Finalization of the regulations has given confidence to a number of companies that are seriously considering such incentives."