If your company’s health and welfare plan includes a wellness program, you will want to review your reward system soon to make sure that it does not run afoul of new restrictions under the Equal Employment Opportunity Commission’s (EEOC) recent wellness program regulations. The new rules are intended to make sure that employees are not coerced to participate in wellness programs, including through rewards that are so high that individuals feel compelled to participate or share their medical history information.
Wellness programs are subject to a number of laws, including laws prohibiting discrimination on the basis of a health condition or a disability and laws restricting an employer’s collection and use of genetic information. The Departments of Labor, Health and Human Services and Treasury have on numerous occasions published regulations on wellness programs, most recently in 2014. These regulations set limits on wellness program rewards, generally capping them at 30% of the cost of the coverage (but at 50% for programs aimed at tobacco use). But employers only had to count rewards toward the cap if the rewards affected the health plan—such as discounted premiums or lower deductibles—and were tied to some kind of health standard. As a result, rewards that individuals received simply for participating in the wellness program, or that were provided separately from the health plan, didn’t have to be counted at all.
The new EEOC regulations, however, change all of this. The EEOC is concerned that the total amount of rewards offered through wellness programs has grown to the point where individuals feel coerced to take health risk assessments or biometric screenings. To make sure that rewards are not coercive, the EEOC is setting a cap at 30% of the cost of individual coverage on all rewards—financial, in kind, or otherwise—offered to employees for wellness programs that include disability-related inquiries or medical examinations. The EEOC is also applying the 30% cap to incentives offered to spouses participating in the wellness program who provide information about their current or past health status. In that case, the incentive offered to the employee and the spouse each cannot exceed 30% of the cost of individual coverage. Even rewards that are offered outside of the health plan or that are provided for simply participating in the wellness program are included in this 30% calculation. To ensure that your company’s wellness program complies with these new requirements, you will want to consider all rewards—no matter the value—that are available to employees and their spouses under any and all wellness programs you operate, including where the value of the awards may vary for employees based on utilization, such as reduced co-pays or deductibles.
In addition to the new restrictions on rewards, the regulations require an employer to provide a notice to participants that’s easily understandable and that explains what medical information will be collected, how it will be used, who will receive it and the restrictions on its disclosure. The EEOC created a model notice for employers which is available on its website. If this information is already covered in your company’s wellness program materials, then you do not have to issue a separate notice. The EEOC has also clarified that collecting health information through risk assessments, biometric screenings or other methods is only reasonable if the employer uses that information to alert individuals about health risks and/or to design programs to treat conditions prevalent in the employer’s workplace.
The EEOC’s new regulations go into effect for plan years beginning on and after January 1, 2017. If you need assistance complying with the new rules, please contact Norbert F. Kugele (email@example.com or 616.752.2186) or Kent D. Sparks (firstname.lastname@example.org or 616.752.2295), or any other member of Warner’s Employee Benefits and Executive Compensation Practice Group.