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EEOC Clarifies Permissible Use of Incentives in Wellness Programs

by Martin Salcedo, Esq. - The Human Equation on 8/11/2016
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wellness programs

Can employers offer incentives to encourage participation in wellness programs that ask disability-related questions or require medical examinations? Though the Americans with Disabilities Act (ADA) permits health-related inquiries and medical examinations that are part of a voluntary health program, ADA regulations didn’t address whether employers may offer incentives to encourage employee participation in these health programs...until now.

The Equal Employment Opportunity Commission (EEOC) recently issued a final rule to clarify whether and to what extent incentives may be used in wellness programs offered as part of an employer-sponsored group health plan or as a separate employee benefit. The final rule permits employers to provide incentives to employees in exchange for answering disability-related questions or undergoing medical examinations. However, the final rule also places a number of restrictions on the use of incentives.

Reasonably Designed

There are different kinds of wellness programs offering various benefits, such as health risk assessment questionnaires to determine risk factors, medical screenings, flu shots, promotion of physical activities, classes to help employees stop smoking or lose weight and coaching to help employees meet health goals. Despite any variations, the final rule states that employee health programs, including any disability-related inquiries or medical examinations, must be reasonably designed to promote health or prevent disease.

For example, questions about health conditions, biometric screenings or other medical examinations that are used to alert employees to potential health risks would qualify as being reasonably designed to promote health or prevent disease. Asking employees for medical information without providing any feedback about risk factors would not. Neither would the use of a wellness program merely as a way to shift costs or predict future health expenses.

Additionally, to meet the final rule’s reasonably designed standard, an employee health program cannot:

  • require an overly burdensome amount of time;
  • involve unreasonably intrusive procedures;
  • be a trick or ploy to violate laws prohibiting employment discrimination; or
  • require employees to incur significant costs for medical examinations.
What's a Wellness Program?Voluntary

Wellness programs that include disability-related inquiries or medical examinations must be voluntary in order to comply with the ADA. To be considered voluntary under the final rule, an employer:

  • may not require employees to participate;
  • may not deny non-participating employees access to health coverage or limit plan options;
  • may not take any adverse action (retaliate, interfere, coerce, intimidate, threaten) against non-participating employees or employees who fail to achieve certain health outcomes; and
  • must provide a notice that clearly explains what medical information will be obtained, how it will be used, who will receive it and the restrictions on disclosure.

Permitted Incentives

The EEOC expressed concern that unlimited incentives could render a technically voluntary wellness program involuntary. Though financial and in-kind incentives (time-off, prizes, etc.) are permitted, there are limits. Under the final rule, the maximum allowable incentive is 30% of the total cost:

  • for self-only coverage, if a wellness program is open only to employees enrolled in a particular plan;
  • for self-only coverage, if only one health plan is offered and all employees are allowed to participate in the wellness program regardless of enrollment;
  • for the lowest cost major medical self-only plan, if more than one group health plan is offered and all employees are allowed to participate in the wellness program regardless of enrollment; or
  • that a 40-year-old non-smoker would pay for self-only coverage under the second lowest cost Silver Plan on the regional state or federal health care Exchange, if an employer does not offer health insurance but wants to offer an incentive for employees to participate in a wellness program.

Though the effective date is July 18, 2016, these and other provisions of the final rule will apply to wellness programs on the first day of the first plan year that begins on or after January 1, 2017, for the health plan used to determine the maximum allowable incentives. It’s worth noting that the EEOC also issued a final rule amending regulations under the Genetic Information Nondiscrimination Act (GINA) so employers may offer limited incentives for an employee's spouse to participate in a wellness program.

According to the EEOC, these final rules will permit wellness programs to operate consistently with their stated purpose of improving employee health, while protecting employees against discrimination. Hopefully, they will be interpreted and applied in a manner that allows employers and employees to enjoy the benefits of maintaining a healthy workforce.

Please contact us if you would like more information about implementing and managing an employee benefits program.

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2/14/2017 10:36:07 AM #

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