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Wellsource Blog

EEOC Temporarily Removes its Limits on Employee Wellness Incentives

Written by Wellsource, Inc.

February 15, 2019

Disclaimer: The following article should not be construed as legal advice but is for educational purposes only. To evaluate the legality of incentives offered as part of a wellness program for employees, you should engage legal counsel to help guide you through the myriad of applicable laws.

If you were hoping to have an answer by now on how much a wellness Employee-Wellness-Incentives program can legally incentivize employees to participate, you’re not alone. It appears new guidance won’t be available until June 2019. That’s the time frame the Equal Employment Opportunity Commission (EEOC) has given for publishing a new preliminary rule on the use of employee wellness incentives. 

Back in 2016, the EEOC—which is the federal agency tasked with enforcing the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), among other laws—introduced new rules that allowed employers to offer employee wellness incentives (including penalties) of up to 30% of the total cost of an employee’s health plan and still consider participation in the wellness program “voluntary.” This cap aligned, in principle, with the 2013 HIPAA nondiscrimination rule for wellness programs, and helped bring some consistency between HIPAA and the ADA, which previously had been at odds.

Just months after the EEOC colored in the gray area, however, its 30% incentive threshold was vacated by a federal judge, who faulted the agency for not adequately evaluating the economic impact of a 30% penalty on average and low-income families. As a result, in December 2018, the EEOC went ahead and removed the incentive limits in its wellness rules. But the agency didn’t just remove them; it reserved the deleted paragraphs, presumably because the Commission intends to replace them with new authorized incentive levels in the near future.

What Part of the EEOC Rules Remains Intact?

While the EEOC works on developing new incentive levels, it has left the majority of its wellness regulations intact, only removing the 30% threshold for determining whether participation is voluntary. The following requirements are still in effect as of January 1, 2019:

  • Wellness programs that collect employee health information must be reasonably designed to promote health or prevent disease.
  • Wellness programs that collect employee health information will be considered voluntary so long as the employer:
    • Does not require employees to participate;
    • Does not deny or limit coverage for employees who do not participate;
    • Does not take adverse employment action or retaliate against, interfere with, coerce, intimidate or threaten employees; and
    • Provides employees with a written notice that meets certain requirements.
  • Except as needed to administer the health plan, employers should not receive employee health information through a wellness program unless it is in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of an employee.
  • Even if an employer complies with the ADA wellness rules, employers must still comply with other laws relating to employee wellness programs, such as GINA, Title VII, HIPAA, and the Age Discrimination in Employment Act.
  • The ADA safe harbor provisions do not apply to wellness programs, even if such plans are part of an employer’s health plan.

Will the Employee Wellness Incentives Allowed by the EEOC Go Up or Down?

There is a certain amount of skepticism over whether the EEOC will have a quorum to even issue new rules by June. Due to political discord in the U.S. Senate, the confirmation of several nominees to fill vacancies on the Commission has been delayed. It’s possible new rules won’t be issued for public comment until the empty seats are filled. How they are filled could also influence the outcome. Some speculate that having more Republicans on the Commission (if the existing nominees get confirmed) could translate into more employer-friendly wellness rules than we saw from the EEOC under the Obama Administration. 

On the other hand, the court that vacated part of the EEOC’s wellness rule made clear that a 30% differential in health premiums could have a chilling effect on the working class, possibly causing them to feel coerced into participating in their company wellness program because they couldn’t afford not to (which could violate the “voluntary” language of the ADA). So it’s likely the allowable incentives will go down rather than up.

Where Does This Leave Wellness Programs?

Since we’re back to the land of uncertainty regarding the amount of incentives that can be used to encourage participation in employee wellness programs, you or the employers you serve should carefully consider the use of incentives in wellness programs.

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 is highly unlikely the EEOC would challenge 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 continue to sue 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 or your clients choose will depend on how risk-averse and legally conservative the organization is inclined to be. 

Want more on helping the populations you serve make better choices? Read our white paper, Change Readiness: The Critical Component to Wellness Engagement.

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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