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Wellsource Blog

Is Your Wellness Program Incentive Really Voluntary?

February 14, 2018

Across the nation, wellness coordinators are again pondering wellness employee incentives. Only this time, AARP is behind the question:  How much of an incentive can companies offer their employees to take a health risk assessment (HRA), or undergo a biometric screening, before it’s no longer “voluntary”?  It turns out, the answer isn’t as straightforward as the EEOC initially thought.

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The 30% Threshold

The Americans with Disabilities Act (ADA) prohibits employers from requiring medical examinations or inquiring about whether an individual has a disability unless the inquiry is both “job-related” and “consistent with business necessity.”  However, employee health programs such as HRAs and biometric screenings are allowed so long as the employee’s participation in the program is “voluntary.”

In an effort to provide some definition around how much of an incentive makes a program involuntary, and to harmonize the law with other wellness regulations, new ADA rules on wellness programs went into effect in 2017.  The new rules allowed employers to offer wellness incentives—including penalties—of up to 30% of the total cost of an employee’s health plan. This cap aligned, in principle, with the existing HIPAA nondiscrimination rules for wellness programs, and clarified the extent to which employers could offer wellness incentives without them being deemed “coercive.”

EEOC on the Defense

Shortly after the 2017 ADA rules on wellness programs went into effect, however, they were challenged in court by AARP as being inconsistent with the “voluntary” requirements of the ADA. The court agreed, giving the agency that issued the rules until January 1, 2019, to either revise or vacate the new regulations, and faulting the agency for not adequately evaluating the economic impact of a 30% penalty on average and low-income families.

What’s an Employer to Do?

So where does this leave employers on the use of wellness incentives after 2018?

Even if the EEOC were able to propose revised rules before next January, it’s unlikely any new regulations would become effective until later in 2019, at the earliest. So it’s possible that beginning next year, employers will again be faced with the legal uncertainty of offering wellness incentives until new clarifying rules can be issued.  

In cases where the wellness incentive is tied to a group health plan, we expect many organizations will choose to continue to rely on the HIPAA nondiscrimination rules as the sole support for their incentive program. It seems unlikely the EEOC would immediately revert back to challenging employee wellness programs while it’s re-working its rules on incentives.

However, in the absence of clear legislation, there is always the risk that employees will persist in initiating legal action against employers on the grounds that wellness incentives (or penalties) undermine the “voluntary” language of the ADA. That risk alone could lead some employers to discontinue the use of incentives until new rules are issued.

Which course of action you choose will depend on how risk-averse your organization is and how legally conservative it wishes to be. You can read a more in-depth legal update here.

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"Good health is your greatest asset. You will never regret a decision to take better care of your health."

Don Hall, DrPH, CHES, Founder Wellsource

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