Benefits Strategy

What the EEOC says about Wellness Incentive Programs: What Employers Need to Know

Written by Allie

For several years, the U.S. Equal Employment Opportunity Commission (EEOC) has debated about the role that incentives play in an employee wellness program, and what aspects of those programs constitute violations of acts meant to protect vulnerable Americans.

The timeline of proposals, regulations, and guidelines stretches back many years and can be confusing for employers seeking guidance!

Here’s the latest as of February 2021. (Bookmark this post, as we will be sure to update as regulations change!)

What’s the issue?

Corporate wellness programs are designed to encourage employees to participate in a variety of healthy behaviors and increase their overall personal wellness.

The style and structure of these programs varies across the industry, and can include benefits such as educational opportunities, reimbursements for health and fitness related services, activity-based programs (such as our activity rewards or wellness challenges), and other perks and discounts to support a healthy lifestyle.

Many employers offer wellness incentives to encourage or increase participation in those programs.

However, those programs must be voluntary to comply with federal disability and genetic information laws.

Most wellness programs already are voluntary by design. Based on a 2016 ruling, the EEOC considers a wellness program to be voluntary if it:

  • does not require employees to participate
  • does not deny coverage under any of its group health plans (including benefit packages) for non-participation, or limit the extent of benefits for employees who do not participate
  • does not take any negative action against employees who do not participate
  • provides employees with a notice that generally explains what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential

Pretty simple! So how does it get complicated? Incentives.

If an employer is offering a significant financial incentive for participation, requesting information about family medical history, or tying incentives to health outcomes, is it really voluntary after all? That’s the big question that regulators have been debating for years.

How does the EEOC define wellness programs?

The EEOC splits programs into two categories: those integrated within an employer’s group health plan, and stand-alone wellness programs. The commission breaks those programs down even further based on program mechanics:

1. Health-contingent programs:

Any wellness program that requires you to meet requirements related to your health in order to earn your reward. These programs must comply with the Health Insurance Portability and Accountability Act (HIPAA). Health-contingent programs can be either activity-only or outcome-based:

  • An activity-based wellness program requires you to complete a health-related activity in order to receive a reward. For example, walking, exercising, or participating in a wellness challenge or educational program. Most IncentFit programs fall under this category.
  • An outcome-based health-contingent wellness program is one that requires you to meet or maintain a specific health outcome. For example, not using tobacco or hitting specific benchmarks in a biometric screening. Most IncentFit programs do not fall under this category.

2. Participation-only programs.

This category includes wellness programs that either do not not provide a reward OR do not require health-related conditions to receive rewards. For example, this type of program may reward employees receiving an annual physical or for completing a health risk assessment, regardless of the employee’s health status. Some IncentFit programs fall under this category as well.

How does this proposal affect incentives?

The guidance around incentives has flip-flopped several times. The current proposal is fairly restrictive about incentives, especially for stand-alone wellness programs.
The current guidelines suggest that wellness programs can provide only minor perks for any of these types of programs—examples include water bottles, t-shirts, and small gift cards (approximately $50 or less). Larger rewards, such as cash perks, free gym memberships, or a $50 reduction in the employee’s required monthly health insurance premium contribution are not considered de minimis.

However, corporate attorneys explain that while the EEOC says “most programs would be limited to these minor incentives, there is a significant exception for health-contingent wellness programs. And when the incentive is a part of, or qualifying as, group health insurance, employers can exceed the de minimis limit.”

Where does this proposal stand today?

As of early February 2021, we’re in a waiting period.

On January 7, 2021, the EEOC published the latest set of proposed regulations. However, on January 20, President Biden issued an executive order freezing many new and pending regulations for further review. That puts employers, vendors, and employer groups in a holding pattern once more — and the proposed regulations could change considerably once that review is completed. Some employer groups have called for specific guidance about how to incentivize Covid-19 vaccines.

So while the regulations are currently frozen, in a matter of weeks, the public should have an opportunity to submit public comments to be considered by the Commission. The next steps include review of those public comments, and possible revisions to the guidelines. For more information, see the EEOC’s announcement.

What are the implications for employers?

Under the current proposal, employers can only offer small incentives in exchange for an employee completing a health risk assessment, receiving a physical, or for providing information about family medical history.

However, employers can offer more significant incentives to employees who complete walking, dieting, or exercise goals, or who meet certain health outcomes (such as quitting smoking)…as long as the program is part of a HIPAA-compliant group health plan.

We feel that the current proposal is far too restrictive. Our research has shown that financial incentives improve participation in wellness programs—and our recommended annual incentive for activity-based programs is between $350-500 per employee.

If the proposed rules are finalized in their current form, employers may need to consider either reducing the incentives offered, not requiring disclosure of health information in order to earn rewards, or shifting entirely to an outcomes-based program (which we do not recommend).

How this affects IncentFit clients

We expect the proposed guidelines to undergo significant changes before they are finalized. However, our clients should know a few important things:

  • We guarantee compliance with all of the current state and federal regulations, including ADA, GINA, and HIPPA laws
  • Our Activity Rewards and Wellness Challenges products are fully compliant with the current guidelines
  • We can always provide alternative options to suit ADA needs
  • We can also provide guidance on how to offer “de minimis” incentives, including gift cards and items received through our rewards mall

We are keeping an eye on this evolving regulatory situation and will alert clients if there are any specific concerns about your plan structure! For more reading on this topic, stay tuned to the EEOC’s virtual newsroom.

Interested in discussing your program with us? We’re happy to provide guidance! Book time with our benefits experts for more information.

Corporate Wellness Benefit Managers having a discussion while looking at an electronic tablet.

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