EEOC Readies Wellness Incentives Rule; Congress Responds

Liability safeguards outlined by former EEOC vice chair at SHRM conference

By Stephen Miller, CEBS Mar 27, 2015

Update: On April 20, 2015, the Department of Labor published in the Federal Register its long-awaited proposed rule on ensuring that worksite wellness programs that include financial incentives comply with the Americans with Disabilities Act and other federal statutes. The proposed rule included a 60-day public notice and comment period through June 19, 2015. See the SHRM Online article EEOC Issues Proposed Wellness Incentives Rule.



Confusion over the use of financial incentives in worksite wellness programs may be heading toward some clarity, depending on proposed regulations to be issued shortly by the U.S. Equal Employment Opportunity Commission (EEOC).

On March 20, 2015, the EEOC voted to send a notice of proposed rulemaking on the interplay of the Americans with Disabilities Act (ADA) and the Affordable Care Act (ACA) with respect to employer-sponsored wellness programs to the Office of Management and Budget (OMB) for clearance. The proposed rule would amend the regulations implementing the equal employment provisions of the ADA to address the interaction between Title I of the ADA and financial incentives as part of wellness programs offered through group health plans.

The submission of the proposed rule for review by OMB represents the start of the regulatory process. After OMB approval, which could be a matter of weeks, the proposed rule will be published in the Federal Register for a 60-day public notice and comment period. The proposed rule cannot be made public prior to its publication in the Federal Register.

Legislative Response

The EEOC and the Republican-led Congress have been at loggerheads over the acceptability of “aggressive” financial incentives in wellness programs. On March 24, the House Education and the Workforce Committee held a hearing on a proposed bill that would limit EEOC enforcement activity toward these initiatives—H.R. 1189, the Preserving Employee Wellness Programs Act.

In recent months, the EEOC has filed three lawsuits alleging that financial penalties imposed on employees who declined to participate in their employers’ wellness programs violated the ADA, because the incentives rendered the programs involuntary. The proposed legislation is intended to protect wellness programs that offer incentives that fall within the maximums established by the ACA: up to 30 percent of the cost of annual health coverage; and for tobacco cessation programs, up to 50 percent of the cost of health coverage.

In addition, the ACA and its implementing regulations require that wellness programs provide a reasonable alternative or waiver for achieving the incentive if someone cannot participate or achieve program goals due to a health condition or disability.

At least one of the companies sued by the EEOC, Honeywell International, contends that its wellness incentives were within the ACA maximums and that it met all other ACA requirements.

Wellness Program Safeguards

“Unresolved issues regarding wellness incentives don’t mean employers shouldn’t offer them,” advised employment attorney Leslie E. Silverman, who served as vice chair of the EEOC under President George W. Bush. Speaking on March 24 at the 2015 Society for Human Resource Management (SHRM) Law & Legislative Conference in Washington, D.C., Silverman, now a shareholder with Fortney & Scott LLC, said employers need to guarantee employee confidentiality—and let employees know what steps they’ve taken to do so—bearing in mind the following:

Employers should never have access to individual employee medical information, including health risk assessment and biometric/diagnostic test results.

Employers should communicate and explain the types of information they do receive, and make it clear that they never have access to individually identifiable information.

Silverman noted that the ADA includes a safe harbor for “bona fide” benefit plans, as confirmed by the 11th Circuit in Seff v. Broward County, and so “you’ll want to make your wellness program part of your group health plan” if possible. She pointed out the following:

To fall within the ADA’s safe harbor, a wellness program must be considered a term of an employer’s group health plan.

An employer should offer the wellness program to group health plan participants in connection with the open enrollment process.

Only employees and their spouses who participate in the health insurance program should be eligible to participate in the wellness program.

An employer’s summary plan description for the group health plan should clearly set forth all applicable provisions of the wellness program, including the biometric screening option.

Finally, Silverman advised employers to avoid these “obvious pitfalls”:

Do not threaten, discipline or terminate employees because they are unwilling to participate in a workplace wellness program.

Employees’ refusal to participate in a wellness program should not impact their eligibility for employer-provided health insurance, or result in their paying 100 percent of the health insurance cost/premium (COBRA rate).

Whenever possible, frame wellness benefits as a reward and not a penalty.

Provide diverse paths to participation and achievement that cater to your particular workforce, such as online courses and digital tools, “lunch and learn” seminars, and after-work healthy cooking classes.

By the Numbers: Incentives Drive Participation

Financial incentives appear to be a crucial factor in bringing unhealthy workers into workplace wellness programs, according to a March 2015 analysis by the nonprofit Employee Benefit Research Institute (EBRI).

Using administrative data from a large employer that provided anonymous participant information, EBRI analyzed the impact that financial incentives had on first-time participants in the employer’s wellness programs. Specifically, EBRI looked at those who completed a health risk assessment or biometric screening in the two or three years after financial incentives were offered to workers to participate.

The findings indicate that incentives have a strong impact at bringing in the kind of people who benefit most from the programs in terms of health improvement. For instance, older men were more likely to participate in programs with financial incentives. Moreover, individuals who first participated in wellness programs after incentives were introduced were found to be less healthy than earlier, pre-incentive participants. Prevalence rates of diabetes, high blood pressure and high cholesterol were all higher in the post-incentive groups than in the pre-incentive groups.

In addition, results released in March 2015 from a survey by Fidelity Investments and the nonprofit National Business Group on Health (NBGH) reveal U.S. employers will spend an average of $693 per employee on wellness-based incentives in 2015, up from $594 in 2014 and $430 five years ago. Of the 79 percent of employers that offer health improvement programs, larger companies—those with more than 20,000 employees—are spending the most on these programs: a per-employee average of $878, up from $717 in 2014. The average for companies with between 5,000 and 20,000 workers rose to $661, up from $493 in 2014.

The three most popular incentive-based wellness initiatives for 2015 are biometric screenings, health risk assessments and physical activity programs. But fewer than half (47 percent) of employees earned the full incentive amount available to them in 2014, while 26 percent earned a partial amount.

“As employers continue to look at ways to improve employee health and increase productivity, we expect to see employers continue to expand and evolve their wellness offerings, and find new and innovative ways to encourage employee participation levels and measure the success of their program,” said NBGH President and CEO Brian Marcotte.



Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

Related News Article:

Employers Boost Wellness Spending 17% from Yoga to Risk Assessments, Forbes, March 2015

Related SHRM Articles:

EEOC’s Silence on Wellness Programs Criticized, SHRM Online Legal Issues, February 2015

EEOC’s Wellness Lawsuits Target Incentives, Spark Criticism, SHRM Online Benefits, November 2014

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