Wellness Programs and Incentives
Federal regulations are complex – understand the rules for "participatory" and "health contingent" wellness programs and related incentives.
Many employers offer wellness programs to support employees and their family members in improving their health. In addition to encouraging a culture of health, these programs are designed to reduce health care costs for both employees and the company.
The current trend in wellness programs is toward health-contingent programs that reward employees for outcomes such as smoking cessation, weight loss, and managing chronic conditions like diabetes and high blood pressure and cholesterol.
The Affordable Care Act (ACA) regulations on wellness programs were finalized in 2013 and took effect in 2014. The regulations focus on:
- Two types of wellness programs: participatory and health-contingent (activity-only or outcome-based)
- Requiring reasonable alternatives in health-contingent programs so everyone has the opportunity to earn the full reward
- Establishing the value of incentives that can be awarded for some types of programs
- Requiring employers to offer the opportunity to earn incentives at least once per year
Other wellness program rules and regulations
The ACA rules are just one set of federal regulations that impact employer wellness programs. On May 16, 2016, the EEOC issued final regulations for the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) that employers also need to consider when designing wellness programs.
- Americans with Disabilities Act (ADA)
- Under the ADA regulations, employers are allowed to ask disability-related questions and conduct medical exams for voluntary wellness programs that promote health or wellness. There are several key differences between the ACA and the ADA:
- 30% incentive limit is based on self-only coverage costs and is a combined limit of health-contingent and participatory program rewards
- There are four ways for an employer to calculate the incentive limit depending on how employers offer participation
In this situation: Calculate to this plan: Enrollment in the plan is a condition for participation in the wellness program The group health plan in which the employee is enrolled The employer offers a single health plan, but enrollment is not a condition for participation The group health plan offered by the employer The employer offers multiple health plans, but enrollment is not a condition for participation The lowest cost self-only coverage under a major medical plan offered by the employer The employer offers no group health coverage The second lowest cost Silver Plan available on the Exchange for a 40-year-old non-smoker in the employer's primary place of business
- Reasonable accommodations must be provided if an employee is unable to complete part or all of a wellness program for disability-related reasons (a reasonable alternative under the ACA can be considered a form of reasonable accommodation under the ADA)
- Employers may only receive information from wellness programs in aggregate, any individually identifiable information received is considered PHI
- Privacy notices describing the handling of medical information, and procedures for safeguarding information privacy must be distributed to all wellness program participants
- ADA safe harbor not applicable
- The statutory text of the ADA provides a safe harbor that allows medical inquiries and examinations to be conducted in connection with a "bona fide benefit plan." This statutory language has been interpreted to include employer-sponsored wellness programs within that safe harbor, and the courts have agreed.* The final ADA regulations clearly state that the "bona fide benefit plan" safe harbor does not apply to rewards and penalties offered in connection with an employer's wellness program that includes disability-related inquiries or medical examinations, and go on to state that the EEOC does not agree with the outcome of the cases on this issue.
- Genetic Information Nondiscrimination Act (GINA)
- Under GINA, employers may offer financial incentives as part of a wellness program that solicits genetic information from the employee, so long as it is made clear that disclosing this information is voluntary. Additional regulations issued in May 2016 further clarify these rules by providing an exception under which employers can offer financial incentives connected to a spouse's completion of a health risk assessment that asks about the spouse's health (but not genetic) information.
Other key differences between GINA and ACA include:
- Limits use of genetic health information collected through a wellness program
- Regulates sharing of health information collected from spouses
- Prohibits health and genetic information collection from employees' children
- Prohibits the sale of genetic information provided through a wellness program to other vendors
In combination, it is clear that compliance with one set of regulations does not necessarily ensure compliance with all the others. Employers should review their wellness programs and incentives against all regulations, and consult with legal counsel if their current wellness programs don't align with the EEOC regulations.
*EEOC v. Flambeau, Inc., (No. 14-cv-638-bbc (December 31, 2015) and Seff v. Broward County, 778 F. Supp.2d 1370 (S. D. Fla. 2011) both ruled in favor of the employer.