Wellness programs are a popular component of many employee benefit plans. Employers use these programs to encourage healthy behaviors among their employees, thereby reducing long-term medical costs. In addition, these programs often provide financial incentives to employees to engage their interest and sometimes include contests and classes that promote camaraderie and improve the workplace culture.
Over the last fifteen years, I have worked with several employers in a variety of workplaces to design and implement wellness programs. The employers are usually concerned about how to balance the costs and benefits of the programs and how to measure whether the program has a positive impact on employee health. It is also important to focus on changing behaviors that employees can control, while not penalizing them for health issues they cannot control.
On April 20, 2015, the EEOC released a Notice of Proposed Rulemaking addressing how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs.
Previously, federal regulations defined acceptable wellness programs under HIPAA. After passage of the Affordable Care Act in 2010, several government agencies approved wellness programs that offered financial incentives to employees, so long as the incentives did not exceed 30% of the cost of coverage to employees. Incentives of up to 50% of coverage were permitted for programs related to preventing or reducing the use of tobacco products.
However, the EEOC was not one of the agencies involved in the earlier regulatory effort. The EEOC took the position that wellness programs designed under the earlier regulations may not comply with Title VII of the Civil Rights Act of 1964 or the ADA. The EEOC challenged several wellness programs in court, most notably in a lawsuit filed against Honeywell International, Inc. Honeywell’s program imposed a penalty on workers who refused to undergo biometric testing. Such penalties are a common component in wellness program design.
The EEOC’s enforcement efforts against Honeywell and other companies has made many employers hesitant to develop new wellness programs, despite the desire of employers to promote healthy behaviors among their employees and to manage their rising health care costs.
With its recent Notice of Proposed Regulations, the EEOC is finally providing guidance on how to design wellness programs it believes are acceptable under the ADA.
First, the EEOC says, wellness programs must be voluntary.
Wellness programs must be voluntary.
- Employees may not be required to participate in a wellness program, may not be denied health insurance or given reduced health benefits if they do not participate, and may not be disciplined for not participating.
- Employers also may not interfere with the ADA rights of employees who do not want to participate in wellness programs, and may not coerce, intimidate, or threaten employees to get them to participate or achieve certain health outcomes.
- Employers must provide employees with a notice that describes what medical information will be collected as part of the wellness program, who will receive it, how the information will be used, and how it will be kept confidential.
Next, the programs can only offer limited incentives for employee participation or for achieving health outcomes.
Employers may offer limited incentives for employees to participate in wellness programs or to achieve certain health outcomes.
- The amount of the incentive that may be offered for an employee to participate or to achieve health outcomes may not exceed 30 percent of the total cost of employee-only coverage.
- For example, if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum incentive for an employee under that plan is $1,500.
This 30% “incentive” basically accepts the existing HIPAA regulatory definition of “reward”, although there are some differences. Most notably, the EEOC proposed regulations cap smoking cessation rewards at 30%, instead of the HIPAA 50%, although if all the employer requires is that the employee answer a question about tobacco use, then a 50% incentive is permitted.
The Notice also limits incentives to 30% for programs that ask an employee to respond to a disability-related inquiry or undergo a medical examination. This is contrary to the HIPAA safe harbor exempting bona fide benefit plans from the ADA prohibition on medical examinations.
The Notice also specifically states that compliance with the proposed rules will not mean that an employer has complied with Title VII of the Civil Rights Act, nor with the Age Discrimination in Employment Act. Thus, the EEOC’s proposed rules are narrowly limited to compliance with the ADA.
Moreover, the rules state that employers must provide reasonable accommodations to disabled employees who seek to participate in wellness programs, such as sign language interpreters at classes for hearing-impaired participants.
Thus, the EEOC’s proposed regulations are of limited help to employers seeking to design wellness programs. It is of some benefit to know that 30% incentives are acceptable, but the regulations do not go far enough.
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What should employers do as a result of the new EEOC Notice of Proposed Rulemaking?
- Read the proposed regulations and evaluate your wellness programs for compliance
- Consult your attorney and/or benefit plan advisors about possible changes to your wellness plans.
- Send your comments on the proposed regulations to the EEOC by June 19, 2015, if you so choose.
What has been your experience with employee wellness programs? What has worked best at your company?