Up-to-date information for employers on topics and issues that may affect workplace operations. The posts are current as of the date of the posting.


by Jennifer Brown Shaw and Eric J. Glassman | The Daily Recorder | Jun 8, 2016

When it comes to healthcare, two facts are evident: costs keep increasing and we could all do more to stay healthy. So, voluntary employer-sponsored wellness programs would seem to be a win-win. By incentivizing employees to give up smoking, eat less and move more, for instance, employers can control health insurance costs and ensure a healthier workforce. Employees benefit from the financial incentives offered by their employers, and the long-term effects of healthier living.

Not surprisingly, a tangled web of federal statutes and regulations make it difficult for employers to know how to implement a “legal” wellness plan. The Health Insurance Portability and Accountability Act (HIPPA), as modified by the Affordable Care Act, sets forth one set of rules. However, until recently, those rules collided with the federal Equal Employment Opportunity Commission’s (EEOC) interpretation of two key federal laws, the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act.

On May 17, 2016, the EEOC published two final rules related to wellness programs that provide some clarity for employers. The new rules are effective on the first day of the applicable health plan year that begins on or after January 1, 2017. For example, if an employer’s health plan begins on March 1, 2017, the new rules will apply to the employer’s wellness program on the same date.

Applicability of the New Rules

Wellness programs generally come in two types: those that require employees to provide personal health data to earn a reward or avoid a penalty, and those that do not. Examples of the second type include employee-sponsored yoga classes and webinars on nutrition. The new EEOC rules do not address these kinds of voluntary programs, except to remind employers that they must offer such programs to all employees and provide reasonable accommodations to employees with disabilities. So, an employer would need to provide a sign language interpreter for an employee who is deaf and wishes to participate in an employer-sponsored smoking cessation class. Employers remain free to offer any incentives to employees who voluntarily participate in these kinds of programs, provided employees are not required to provide health data as a condition of participation. For instance, an employer could give $1,000 to each employee who signs an “honor pledge” to exercise daily.

The new EEOC rules are focused on voluntary wellness programs in the first category; that is, programs that require employees to answer disability-related questions or undergo medical examinations to receive an incentive or avoid a penalty. Typical examples of such requirements are asking employees to answer questions on a health risk assessment (HRA) or to undergo biometric screenings for risk factors such as blood pressure or cholesterol. As described in more detail below, the new rules seek to clarify when such programs are deemed voluntary and what incentives employers may provide to participants.

When is a Wellness Program “Voluntary”?

Participation in employer-sponsored wellness programs must be voluntary. According to the new rules, a wellness program that includes medical inquiries or examinations is only voluntary if it:

  • does not require employee participation;
  • does not deny access to health insurance or benefits to an employee who chooses not to participate; and
  • does not result in adverse action against an employee who chooses not to participate or who fails to achieve certain health outcomes.

Programs must meet all of these requirements.

In addition, the program must be reasonably designed to promote health or prevent disease. The program cannot be a subterfuge for an employer to collect employee health information to shift costs to employees based on their health conditions. If an employer requires employees to complete an HRA, the information provided must be used either to provide feedback to participants about risk factors or aggregated to design programs to prevent diseases.

What Incentives are Appropriate?

The new rules set maximum incentive limits for employee participation. These limits are tied to the cost of self-only coverage under employer-offered health plans:

  • If the employer requires the employee to be enrolled in a particular health plan to participate in a wellness plan, the incentive is capped at 30 percent of the cost of the self-only version of the health plan.
  • If the employer offers more than one health plan and does not require employees to be enrolled in a particular health plan to participate in a wellness plan, the incentive is capped at 30 percent of the cost of the self-only version of the lowest cost major medical self-only health plan offered.
  • If the employer does not offer a health plan, but offers a wellness program, the incentive is capped at 30 percent of the cost that a 40-year-old non-smoker would pay for self-only coverage under the second lowest cost Silver Plan under the ACA.

Employers may offer incentives to spouses of employees as well, subject to the requirements above. Employers may not offer incentives to employees’ children, even if they are adults.

There is an interest twist for tobacco use incentives. The 30 percent caps above apply to programs designed to prevent or reduce tobacco use. However, if a tobacco cessation programs does not include medical inquiries or examinations, the ACA’s incentive limit of 50 percent of the cost of a self-only health plan applies. So, an employee who agrees to participate in a smoking cessation program that requires blood testing for tobacco use could be eligible for less of a financial incentive than an employee who simply participates in a series of informational classes on the dangers of smoking.

Notice Requirements

The new rules require employers to provide a notice to employees that explains what medical information will be obtained, how it will be used, who will receive it, and restrictions on the disclosure of this information.

Tips for Employers

Employers should evaluate their health data contingent wellness programs now to determine what changes may be necessary to comply with the new rules. Employers should ensure their programs are “voluntary” and within the 30% incentive cap. They should also prepare appropriate notices regarding the use of employee-provided medical information.