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Financial Incentive Guidelines for Wellness Programs

/// Posted by Tom Connors


Happy New Year to all, and get those Super Bowl plans ready!

Unless you are currently offering a well-organized & exciting wellness program that encourages your employees to get out and take walks at lunch, count their steps, eat healthy, and even consider throwing that pack of cigarettes (or vapes for you youngsters) in the trash,  all those wellness programs that took a ton of our time to plan and got approved by management, that seemed progressive and many times “fun”, just got a kick in the pants!  Where do we go from here?

In response to the AARP lawsuit vs. the EEOC regarding incentives, on December 20, 2018, the Equal Employment Opportunity Commission (EEOC) removed or “vacated” the 30% wellness incentive provision of its final wellness program regulations that were issued back in 2016.  No more incentives, at least not clearly permitted (nor prohibited) as of January 1, 2019 should be part of your programming.

Due to this recent EEOC action, employers are left with no clear guidance regarding financial incentives in wellness programs.  This includes what level of incentives could affect whether the program would be considered “voluntary” or not, which was AARP’s biggest issue with wellness programs and the incentives (or penalties) that came with them. 

First, let’s take a look at some history and what has just transpired:

  • The affected incentive rules were implemented in May 2016, under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).  
  • At that time, the EEOC published what was considered final rules regarding wellness-based incentives.  An employer was allowed to offer incentives in the form of rewards (many want to think they were really penalties).  The rules stated that employees could be offered up to 30% of the cost of self-only medical coverage to encourage participation in a wellness program. These incentives could be as high as 50% for participation in tobacco cessation programs, or having the current status as a non-tobacco user.
    • The ADA rules previously required that a wellness program that asked questions about employees’ health or included medical examinations was not voluntary if the incentive to encourage employee participation in the program exceeded 30% of the total cost of self-only medical coverage.   
    • While GINA rules required that an employer could not offer an incentive that exceeded 30% of the total cost of self-only medical coverage to an employee to encourage a spouse’s participation in a health risk assessment. 
  • The AARP subsequently filed suit against the EEOC challenging the incentive rules, mostly on the grounds that incentives in the range of up to 30% (again many labeled as penalties) did not create a voluntary situation – far from it!  
  • In August 2017, the U.S. District Court for the District of Columbia agreed with AARP, and ruled that this limit on incentives was arbitrary and didn’t ensure voluntary participation.
  • The court then ordered the EEOC to reconsider these regulations.  They left the current incentive limit in place temporarily to avoid any disruption to existing wellness programs, until a better plan could be decided and agreed upon.
  • The EEOC then responded that it would not be able to reasonably issue a revised regulation that could be effective before 2021*.
  • As a result of this delay in action, the court then decided to vacate the 30% safe harbor for incentives effective January 1, 2019.



What do we do for now? 

With the removal of EEOC’s guidance, current regulations don’t expressly prohibit nor permit the offering of incentives.  According to Patricia Anderson Pryor of the law firm Jackson Lewis, “The EEOC left employers back in the quandary they were in before.  Neither the law, nor the remaining regulations, expressly prohibit (or permit) incentives”.

We recommend that any portion of a wellness program that asks employees to complete a questionnaire or take any kind of health examination (i.e. biometrics), be free of any incentives until the EEOC formally issues regulations.  If your wellness program includes these elements, make sure that you follow these guidelines to avoid any regulatory actions:

  • Participation is absolutely not required of any employee or dependent – and is truly voluntary
  • Non-participation does not in any way, deny, limit or affect the benefits covered for those employees who do not participate vs. employees who actively participate in these components of your wellness program
  • Obviously, non-participation does not affect employment, appear to cause adverse employment status or threaten employees in a way – perceived or actual.
  • Employees are provided a notice that is easily understood by all employees. The notice would define the program, and clearly describe how any medical information gathered would be used, and its dissemination would be restricted in all ways (HIPAA)

As always, we recommend working closely with legal counsel and your benefit advisor when designing or maintaining wellness programs to maximize benefits and ensure compliance standards.

*Based upon recent Fall 2018 EEOC publishing(s) revised regulations may be posted as early as June 2019.

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