iOS : Use of HKObserverQuery's background update completionHandler
When should the handler be called?
Call it after you are done your job. Your code should not do complex operations. The app is in the background and the user does not see what's changed. You can just set a "flag" that data is updated and do complex operations after the user launched the app. If your decision about either notifies the user or not based on complex operations, then try to refactor code so that all necessary data is pre-calculated (e.g. in UserDefaults) and extra data is simply fetched with that data. So, 1-2 seconds is enough for your calculation.
Why is this needed?
All such handlers have completion closures. They are needed for iOS to know if your app works fine. If your app will eat too much CPU time, then iOS could become slow. Hence, Apple wants to be sure that iOS works fine despite bad apps.
If you hit the background update 3-strikes and HK stops sending updates is that permanent?
No.
Does HK ever start sending the background updates again?
Yes. But it depends on many factors. It may try to call your app again in 1-2 days. If nothing changes it will call it rarely.
Does HK keep your app running in the background until the handler is called?
This is unknown. It depends on many factors. Probably if iPhone is charging it will allow running your app longer just to estimate if the completion handle is called or not. If your iPhone is not charging and closed to 0% battery, then more likely iOS will kill your app. So, you should not do any job after you called the completion handler. And try to keep it simple.
Recommendations
You should process new data as quickly as possible. If you need to fetch a lot of data, then try to optimize this and pre-calculate it when the app is in foreground, then save somewhere (UserDefault), and use new data with cached data to make a decision (e.g. notify user about something; I believe you need background updates exactly for that).
1-2 seconds or less is a good time for background updates.