Heads up: You may have to adjust your wellness program participation incentives following some new guidance from the feds.
The EEOC has been promising for a while now to clear the air when it comes to what kinds of wellness incentives are legal — and when non-participation penalties become so steep as to render a wellness program “involuntary” and, thus, illegal under the ADA.
Here’s the problem the final rule was meant to address: When the ADA was passed in 1990, it said it was permissible for employers to conduct medial inquiries and examinations of employees as part of “voluntary” “health programs” (a.k.a., wellness programs). The problem was those two terms were never clearly defined.
Then along came HIPAA and the ACA, which said employers could offer incentives to encourage employees to participate in wellness programs — so that’s what employers did.
Fast forward to 2014. With healthcare costs skyrocketing, some employers got pretty aggressive in their wellness plans, tying bigger incentives (i.e., penalties) to non-participation.
Then the EEOC got the itch to start going after employer wellness programs it felt punished employees too harshly for not participating in wellness initiatives.
Example: The agency sued Orion Energy Systems for asking employees to submit to medical inquiries that as part of a health program the EEOC deemed “involuntary.” Orion’s wellness plan charged employees who didn’t complete a health risk assessment their entire health plan premium, plus an additional $50 penalty.
The EEOC said those penalties — having to foot the entire bill for health insurance, plus the $50 — pushed the wellness program into “involuntary” territory.
Other, similar, lawsuits followed, and employers started complaining. They said that the EEOC had overstepped its bounds because it hadn’t released any specific guidance on what kinds of penalties would be so steep as to render a wellness program involuntary.
The EEOC’s solution
The new final rule is meant to set the record straight.
But before getting into what the rule says, it’s important to know that the rule only covers programs that make medical inquiries and conduct medical exams — because that’s as far as the ADA’s jurisdiction lies.
The primary goal of the rule is to establish once and for all the definitions of “voluntary” and “health program.”
The rule states a voluntary health/wellness program that includes medical inquiries and exams is one that:
- does not require participation
- does not deny access to health insurance or benefits to an employee for non-participation
- does not retaliate against, interfere with, coerce, intimidate, or threaten any employee who does not participate or fails to achieve certain health outcomes
- provides a notice that explains the medical information that will be obtained, how it will be used, who will receive it, and the restrictions on disclosure (more on this later), and
- complies with the rule’s incentive limits (see below).
What’s a ‘health program’?
An employee health program (i.e. wellness program) that includes medical inquiries and exams is one that must be reasonably designed to promote health or prevent disease.
For that to be the case, it must:
- have a reasonable chance of improving the health of, or preventing disease in, participating individuals
- not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease
- not exist merely to shift costs to employees based on their health
- not be used only to predict an employer’s future health costs
- use the health information collected from participants to provide follow-up information or advice to those participants or design a program that addresses at least some conditions identified, and
- not impose unreasonably intrusive procedures, an overly burdensome amount of time for participation, or significant costs related to medical exams on employees.
To be classified as voluntary, the incentive limits health programs must abide by are:
- 30% of the total cost of the self-only version of the plan in which the employee is enrolled — when the employer requires the employee to be enrolled in a particular health plan in order to participate in the wellness program
- 30% of the lowest cost major medical self-only plan the employer offers — when the employer offers more than one self-only health plan and does not require the employee to be enrolled in a particular health plan to participate in the wellness program, and
- 30% of the total cost to a 40-year-old non-smoker purchasing self-only coverage under the second-lowest-cost silver plan available on the state or federal exchange in the location that the employer identifies as its principal place of business — when the employer does not offer a health plan, but offers a wellness program that is open to employees.
(Note: The ACA’s incentive limit for programs designed to prevent or reduce tobacco use of 50% of the total cost self-coverage is still in place. However, that higher incentive limit can only be applied to such programs that donot include medical inquiries and/or exams).
To ensure employees’ participation in a health program is voluntary, the final rule has added a new notice requirement for employers.
An employer must now 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.
If an employer already provides this information to employees — say through an email or handout — it won’t have to create a new notice.
Stay tuned: The EEOC will provide a sample notice on its website that satisfies the requirement.
The final rule applies as of the first day of the first plan year that begins on or after Jan. 1, 2017 for the health plan used to determine the level of incentives permitted under the rule.
Example: If the plan used to calculate the incentive limit begins on Jan. 1, 2017, that’s when the final rule’s incentive and notice provisions kick in. If the plan used to calculate the incentive limit begins March 1, 2017, that’s when the rule’s provisions kick in.
Other provisions, like the non-retaliation requirement, are in affect now.