EEOC Pivots to Smaller Incentive detail

Proposed Wellness Program Changes Issued as EEOC Pivots to Smaller Incentive Strategy for Participation

02/16/2021 Written by: Nathanael M. Alexander, Esq., Director of Compliance

On January 7, 2021, the Equal Employment Opportunity Commission (EEOC) issued their proposed wellness program rules. Applicable to both the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), the newly proposed rules are in response to the federal court decision in AARP vs. EEOC, which vacated portions of the prior EEOC wellness rules that outlined the types of incentives employers could offer employees for their participation in wellness programs. If finalized, the new rules would reduce the allowable incentive for participation in an employer-sponsored wellness program from the current amount (up to 30% of the total cost of employee-only coverage in a group health plan) to a truly “de minimis” amount. While the EEOC does not strictly define the term here, some examples they provide of a de minimis offering include a t-shirt, water bottle, or a gift card of modest value. More extravagant gifts such as paying for an employee’s annual gym membership or providing them with airline tickets to encourage their participation in the company’s wellness program are prohibited.

While it should be noted that the Biden Administration has halted the proposed regulations from being finalized under a Regulatory Freeze Pending Review, the proposed rules are indicative of the EEOC’s desire to substantially minimize the incentives associated with participatory wellness programs and are of potential importance to employers down the line since certain administrative adjustments may need to be made to comply with the new rules.

The primary issue at the heart of the matter here is if employees receive money or other benefits for participating in an employer-sponsored wellness program or are penalized in some way for their decision not to participate, is the program truly voluntary?

ADA Considerations

Employer-sponsored wellness programs which include a medical plan requirement and/or feature a disability-related inquiry component must be completely voluntary in order to comply with the ADA. A medical plan requirement in the realm of wellness programs is more commonly referred to as a “biometric screening” and a disability-related inquiry could be made via a “health risk assessment”, for example, but can come from any question designed to elicit such information. Wellness programs that do not make such inquiries and do not require medical assessments are more so considered educational in nature and are not subject to these regulations as a result.

The proposed regulations maintain the previous standard that coverage under an employer’s health plan may not be conditioned on wellness program participation but add in some key differences as well. Particularly of note is the portion of the regulations regarding “health-contingent” wellness programs, which will allow employers to continue offering more substantial incentives to employees for their participation as an exception to the de minimis guidelines. To be considered health-contingent, a wellness program must make an incentive available that is based on a particular health outcome being accomplished (i.e., a healthy blood pressure reading or target BMI) or the performance of an activity tied to an individual’s health status (i.e., hitting certain exercise goals or walking a certain amount of miles evert month).

Additionally, there are five requirements for health-contingent wellness programs under the 2013 HIPAA final regulations that remain intact and must be complied with. Plans that do not comply with the below regulations will be subject to the de minimis limits for employee incentives.

They are as follows:

  1. Individuals eligible for a health-contingent wellness program must be given the opportunity to qualify for a reward at least once per year;
  2. The total reward offered to an individual under a health-contingent wellness program cannot exceed an incentive limit of 30% of the total cost of employee-only coverage (or up to 50% if the wellness program is also intended to minimize or prevent the usage of tobacco products);
  3. The program must be reasonably designed to promote health or prevent disease;
  4. The full reward under the program must be available to all similarly situated individuals unless the program allows a reasonable alternative standard (or waiver of the standard) for obtaining the reward for any individual for whom the standard is unreasonably difficult to satisfy due to a medical condition;
  5. In all plan materials that provide details about the wellness program, the plan must disclose the availability of a reasonable alternative standard to qualify for the reward (or waiver if applicable)

GINA Considerations

Generally speaking, GINA regulations are applicable whenever a wellness program seeks to collect genetic information. This extends to the collection of information not simply regarding an employee’s medical condition but to the medical history of their family as well, spouse included. The EEOC’s proposed changes to the GINA wellness program rules primarily address the previously acceptable practice of offering incentives to an employee in exchange for the employee’s spouse and/or children willingly providing their own personal health information to the plan even though there is no genetic link between an employee and his or her spouse. To encourage spouses to participate and share their personal health data, the wellness plan could previously incentivize the employee up to 30% of the cost of self-only coverage to do so. However, the EEOC has now altered their direction as to this approach all together which signals a significant shift in policy, as incentives are no longer offered for the participation of spouses or children in disclosing their health information beyond a de minimis amount. Employers are of course barred from taking adverse action against an employee if a family member does not want to provide their health information, aside from denying them the de minimis incentive associated with the completion of this task. 

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