Recent Impacts to Wellness Program Incentives

Posted by: Eileen Fallis
Date: January 5, 2018

All of the holiday hustle and bustle may have allowed the recent American Association of Retired Persons (AARP) vs. Equal Employment Opportunity Commission (EEOC) decision to go unnoticed. To get you caught up, Judge John D. Bates of the United States District Court authored a revision stating that two things must happen across 2018:

  • First, the EEOC must outline new boundaries of “voluntary” for wellness programs.
  • Second, employers need to implement any newly approved regulations by January 1, 2019.

Perhaps a brief refresher on the underlying foundation and key events that make this decision important would be helpful. Employers may offer incentives, including health insurance premium discounts or rebates, to employees in return for their participation in a wellness program. Up to 30 percent off coverage costs may be awarded in return for an employee meeting a health-related goal. Alternately, employees can be financially penalized for not participating in wellness programs through premium increases of up to 30 percent. This is where it becomes challenging.

In order to build the wellness goals that the employee may be measured against, many times, sensitive medical information needs to be collected. The Americans with Disabilities Act (ADA) prohibits employers from requiring medical exams or asking about employee disabilities unless there is a business need. However, the ADA makes some exceptions for employee wellness programs, allowing collection of this medical information as long as the employee’s participation in the programs is voluntary. However, the term “voluntary” is not clearly defined by the EEOC. It was not considered whether penalties make these exams and inquiries forced and what hardships workers might face if they should choose to exercise their right to keep private information private.

Implementation of the aforementioned penalties, imposed by an EEOC rule, took effect in January 2017, despite the AARP objection and motion filed to block them. Skip forward to August 2017, where the rules were judged arbitrary, but not dead. The EEOC was tasked with defining exactly what the term “voluntary” means and providing a justification for the 30 percent incentive level.

So, while the December 2017 revision still favors AARP, what is different – and why this is important – is the timeline for change decreases from three years to one year. In his most recent opinion, Judge Bates requires an update from the EEOC on progress by March 30, 2018. By August 31, 2018, new rules need to be available for employers. This schedule shortens the window for EEOC action while allowing employers time for their programs to comply.

Even with the changes ahead, there are elements of employer wellness programs that can stay as they are today. For example, guidance indicates that employers can continue to offer medical exams OR use incentives or fines.The difference for 2019 will be that the programs requiring forfeitures cannot also include forced medical exams. The court ruled that employers cannot demand that employees complete “voluntary” exams using the influence of large sums of money.

This will not be the last time this decision tops headline news. The final rules have to be written and approved by the U.S. District Court for the District of Columbia. The BeneFIT Corporate Wellness team will continue to monitor this story for updates in the months ahead. In the interim, we encourage all employers to consult their insurance broker or legal advisor to ensure incentive rewards are offered lawfully in accordance with EEOC regulations. You can refer to the EEOC website for updates.

If you have any questions about this ruling, want to talk about incentives and incentive management, or are interested in learning more about corporate wellness programs, I invite you to reach out directly or visit Benefit Corporate Wellness.