New Rules for Employee Wellness Program Sponsors!
May 16, 2016



The federal Equal Employment Opportunity Commission recently released a new set of rules governing the administration of employee wellness programs, and all employers sponsoring or considering sponsoring such plans should take note.  Here are some of the main takeaways.

There’s No ADA Safe Harbor.

The new regulations make clear that the EEOC does not consider an employee wellness program a bona fide benefit program, and therefore do not qualify for a safe harbor from Americans With Disabilities Act enforcement. This puts a crimp on employers who want to provide incentives or penalties to convince employees to fill out health questionnaires.

HIPAA’s Reach Has Been Dramatically Expanded. 

First and foremost, the new rules put employers on notice that the Health Insurance Portability and Accountability Act – previously generally applicable to health plans and not wellness programs, now covers the latter as well.

Furthermore, the 30 percent cap on incentives for successful accomplishment of individual health goals that previously applied only to ‘outcome-based’ employee wellness plans now apply to participation-only programs, as well.

At issue is how to ensure that the administration of workplace employee wellness programs comply with 1) HIPAA, 2) the Americans with Disabilities Act (ADA) and 3) a less well-covered law in HR circles that is finding increasing prominence as technology advances – the Genetic Information Nondiscrimination Act, or GINA.

Employers have faced a dilemma: How can an employer offer any kind of incentive for participation in an employee wellness program without getting into hot water with the EEOC?  If the incentive was meaningful, the worry was that the incentive would make the program, well, not-so-voluntary.

If the program was found to be involuntary, that could potentially trigger a set of penalties designed to discourage employers from ‘buying’ or coercing employees into providing sensitive health data which the company could use to discriminate against them — for example, by denying them health insurance.

Under the new rules, released last week by the EEOC, however, wellness programs that provide any incentive or penalty for providing medical information must meet the following provisions:

Employers may not overpay employees to participate. 

Incentives may not exceed 30 percent of the total cost of providing employee health coverage under a designated benchmark plan. If the employer does not offer a health plan, the incentive to participate may not exceed 30 percent of the total cost for a non-smoking 40-year old to purchase coverage for himself or herself only (that is, excluding family members) under the second lowest-premium “Silver Plan” available on the public individual health insurance exchange in the state in which the employer (not the employee) operates its principal place of business.

Got all that? Good. We’re just getting started.

If the enrollment in a particular health plan is a requirement of participation, the incentive to participate must not exceed 30 percent of the total cost of employee-only coverage for that specific plan.

If enrollment in a health plan is not a requirement for participation, then the incentives for participation (or penalties) may not be greater than 30 percent of the cheapest self-only plan the employer offers. 

Now, here’s a twist to the cap, as it were: If the program includes incentives for not using tobacco, employers are free to increase the participation bonus (or absence of penalty) to 50 percent of such health plan costs, rather than 30 percent, if the employer does not test participants for compliance. If the program is based simply on employees certifying compliance on the honor system, employers can provide incentives up to 50 percent of said health plan costs.

Participation must be truly voluntary. 

The EEOC has ruled that no employer may make participation in an employee wellness program mandatory, nor may they require participation in the wellness program a condition for enrollment in the employer-sponsored health plan. Furthermore, employers may not retaliate against employees who do not participate in workplace wellness programs.

Workplace wellness programs must be “reasonably designed to promote health or prevent disease.”

In practice, you have to run a true employee-facing wellness program, providing meaningful benefits to the employees themselves. A plan to get employees to complete a health risk assessment (HRA) cannot be a way to give the HR department some numbers to crunch and try to figure out whom should be sacked first and replaced with a younger, fitter employee or machine.

The program must also provide meaningful communication back to the employees. If they fill out a health screening questionnaire, for example, they should at a minimum receive back some actionable suggestions for improving their health.

Any program that is deemed to exist primarily to shift costs from the plan sponsor to the employee is not going to cut it. Nor will efforts to get employees to fill out such questionnaires solely for the purpose of projecting future health care costs.

Employers must provide adequate notice to employees. 

Specifically, employee wellness plan sponsors must provide notice to employees detailing what medical information they plan to collect, how they will use it, who will possess the information, and what restrictions on disclosure will be in place. The EEOC says they will provide some model language or a sample notice this month.

Any information the employer obtains is subject to strict confidentiality requirements. 

The rules now require employers to receive only aggregated information that cannot reasonably be boiled down to expose identities of specific individuals (except as necessary for plan administration). Additionally, employers cannot require the employee to waive privacy rights or sell data, or to forfeit any confidentiality in order to receive any incentive to participate in a workplace wellness program.

What now? 

Employers should consider taking the following steps:

  • Make any changes to employee wellness programs required to bring them into compliance with the new regulations not later than January 1, 2017.
  • Ensure you have provided reasonable accommodations to ensure your disabled employees or family members are able to participate in the workplace wellness program.
  • Don’t require employees to participate in a wellness program, nor deny health insurance coverage to those refusing to participate.
  • Do not take adverse actions against employees because they did not participate in your wellness program or failed to achieve the desired outcome.
  • Take steps to ensure the confidentiality of all medical information collected in the process of managing your workplace wellness program.
  • Set your wellness program up in such a way that your company receives aggregated health data. New rules prohibit employers from receiving any individually identifiable data at all. All data they receive must be aggregated data only.
  • Do not require workers to agree to sell data to a third party provider in order to qualify for health coverage, pay raises, premium discounts or any other incentive.
  • Remove the requirement to sell or transfer health data in order to qualify for an incentive.