EEOC Proposes Wellness Incentive Limits

Author: Emily Scace, XpertHR Legal Editor

The Equal Employment Opportunity Commission (EEOC) has released a pair of proposed rules that would amend the incentives employers may offer to encourage participation in wellness programs that require disclosure of medical or genetic information without violating the Americans with Disabilities Act (ADA) or the Genetic Information Nondiscrimination Act (GINA).

The proposed rules are partially in response to a 2017 court decision that a previous limit on the value of wellness incentives - 30 percent of the total cost of health insurance - contravened ADA and GINA requirements that participation in wellness programs involving medical questions and exams be "voluntary." The court reasoned that a 30 percent incentive limit was too high to give employees a meaningful choice about participation in these programs. It also held that the EEOC had not provided sufficient explanation for the basis behind the 30-percent limit, and consequently vacated the incentive sections of ADA and GINA wellness program regulations.

Under the proposed rules, one addressing the ADA and the other addressing GINA, any employer-sponsored wellness programs that include disability or genetic information inquiries or medical exams would be allowed to offer no more than a de minimis incentive, such as a water bottle or a gift card of modest value.

According to interpretive guidance accompanying the proposed ADA rule, the following incentives would impermissibly exceed the de minimis standard:

  • Charging an employee who does not complete a health risk assessment an extra $50 per month for health insurance;
  • Paying for an employee's annual gym membership; and
  • Rewarding an employee with airline tickets.

Wellness programs that do not include such inquiries or medical exams, such as those rewarding employees for attending a smoking cessation class or providing general health and educational information, would not be subject to the de minimis limit.

An exception would also apply to health-contingent wellness programs that are part of, or qualify as, group health plans under the so-called insurance safe harbor. Insurers and benefit plan administrators may use information from health risk assessments and biometric screenings to require employees to satisfy a health-related outcome, such as achieving a certain blood pressure level, to receive an award or avoid a penalty under a qualifying group health plan. These incentives would not be subject to the de minimis limit but instead to limits contained in 2013 Health Insurance Portability and Accountability Act (HIPAA) regulations.

Factors that help determine if the insurance safe harbor exception applies include whether:

  • The program is only offered to employees enrolled in an employer-sponsored group health plan;
  • Any incentive offered is tied to cost-sharing or premium reductions under the group health plan;
  • The program is offered by a vendor that has contracted with the group health plan or insurer; and
  • The program is a term of coverage under the terms of a group health plan.

The proposed rules will be open for public comment for a period of 60 days after publication in the Federal Register.