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