Human Resources News & Insights

EEOC finally issues wellness rules: 8 things employers will want to know

It took a while, but employers finally have some sold guidance on how to design their wellness program incentives so they don’t violate the ADA.

The EEOC has been promising for a while now to issue rules to clear up the confusion it’s created around what kinds of wellness incentives are legal — and when non-participation penalties become so steep as to render a program “involuntary” and, thus, illegal under the ADA.

Well, the EEOC has finally kept its promise, and its new proposed rules outline, in its words, “how Title I of the Americans with Disabilities Act (ADA) applies to employee wellness programs that are part of group health plans …” The regs will be published in the Federal Register on Monday.

But the EEOC did offer a sneak peek of the proposed rules on its website.

How we got in this mess

But before we get to them, here’s what got us to this point.

This past summer, the EEOC decided it was going to go after employer wellness programs it felt punished employees too harshly for not participating in wellness initiatives.

Example: In the first of three lawsuits the agency filed, it claimed Orion Energy Systems’ wellness program non-participation penalty for failing to complete a health risk assessment was so steep it rendered the program “involuntary.”

The ADA says a program can’t submit employees to medical inquiries that aren’t job-related and consistent with business necessity, unless those inquiries are part of a “voluntary” wellness program.

Orion charged employees who didn’t complete a health risk assessment their entire health plan premium, plus a $50 dollar non-participation penalty.

In the third lawsuit the EEOC filed, the one that’s gained the most prominence, it went after Honeywell International for slapping employees who didn’t submit to health screenings with a penalty worth roughly $4,000 in some cases. The EEOC felt this rendered Honeywell’s wellness program illegally “involuntary.”

Why this is such a mess

Employers have been complaining that by filing these lawsuits, the EEOC has overstepped its bounds.

Their argument: The EEOC hasn’t released any specific guidance as to what kinds of penalties would be so steep as to render a wellness program involuntary.

Some members of the GOP have even blasted the agency’s actions.

In some cases, employers and members of the GOP have said the EEOC’s actions fly in the face of the wellness regulations enacted by the Affordable Care Act, which state employers can offer wellness incentives/penalties as long as they don’t exceed 30% of the value of an individual’s insurance premiums (50% if the incentives are tied to smoking cessation).

In response to these allegations, the EEOC promised to issue regulations clearing the air on what kinds of wellness program incentives are legal once and for all.

What the proposed rules say

Employers that feared the new rules would be a tangled mess of confusing rules and exemptions (what federal law isn’t?) will likely be pleasantly surprised.

The rules appear to be pretty straightforward.

Here’s a rundown of the key points:

  1. The proposed rule clarifies that the ADA allows employers to offer incentives up to 30% of the cost of employee-only coverage to employees who participate in a wellness program and/or for achieving health outcomes.
  2. The rule also allows employers to impose penalties on employees who do not participate or achieve certain health outcomes. The maximum allowable penalty an employer can impose on employees is 30% of the total cost of employee-only coverage.
  3. The total cost of coverage is the amount the employer and employee pay, not just the employee’s share of the cost. Example: If a group health plan’s total annual premium for employee-only coverage (including both employer and employee contributions towards coverage) is $5,000, the maximum allowable incentive an employer could offer to an employee in connection with a wellness program that includes disability-related questions (such as questions on a health risk assessment) and/or medical examinations is $1,500 (30% of $5,000).
  4. Asking employees to complete a health risk assessment or have a biometric screening for the purpose of alerting them to health risks (such as having high cholesterol or elevated blood pressure) is acceptable under an employee health program (a.k.a., a wellness program).
  5. Collecting and using aggregate information from employee assessments to design and offer programs aimed at specific conditions prevalent in the workplace (such as diabetes or hypertension) is also acceptable under a wellness program.
  6. Asking employees to provide medical information (like that obtained through a health risk assessment) without providing any feedback about risk factors or without using aggregate information to design programs or treat any specific conditions would not be acceptable under a wellness program.
  7. For a wellness program to be voluntary, it must not: A) require employees to participate, B) deny access to health coverage or generally limit coverage under its health plans for non-participation; and C) take any other adverse action or retaliate against, interfere with, coerce, intimidate, or threaten employees (such as by threatening to discipline an employee who does not participate or who fails to achieve certain health outcomes).
  8. If a health program is considered a wellness program that is part of a group health plan, an employer must provide a notice clearly explaining what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure.

What’s next?

The public has until June 19, 2015 to comment on the proposed rules.

The EEOC will then evaluate all of the comments it receives and make revisions to the rules if deemed necessary. The agency will then vote on a final rule. After it’s approved, the final rule will be sent to the Office of Management and Budget and will be coordinated with other federal agencies before it is published in the Federal Register.

So it’ll likely be several months before the final rules are enacted.

It’s also unclear what effect, if any, the proposed rules will have on the wellness program lawsuits the agency’s filed against employers. We’ll keep you posted.

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