United States: EEOC's Proposed Rule Would Restrict Wellness Program Incentives

Last Updated: January 26 2016
Article by Ron M. Present, CALA, CNHA, LNHA, FACHCA

As more employers establish employee wellness programs, the challenges of these initiatives are coming further into focus. One notable issue is that, to pinpoint the health care objectives pertinent to employees and their dependents, programs need access to medical information.

Typically, this data is gathered using a health risk assessment. But many employees aren't inclined to submit to these assessments, or even participate in wellness programs in the first place. For this reason, many employers offer tangible incentives for participation.

Recently, the Equal Employment Opportunity Commission (EEOC) proposed a rule governing how far employers could go with wellness program incentives when gathering information on employee spouses. Although the proposal would provide some regulatory clarity, it may create confusion as well.

Too many cooks

The uncertainty in question may arise by virtue of "too many cooks in the kitchen." The Department of Labor, IRS and Department of the Treasury have already issued guidance — known as the "Tri-Agency Regulations" — on the same topic. And these regulations differ somewhat from the EEOC's proposed rule.

Plus, last April, the EEOC itself proposed related regulations interpreting how wellness incentives, as modified by the Affordable Care Act, can be fashioned in a manner consistent and permissible with the Americans with Disabilities Act (ADA). These regulations are distinct from the more recently proposed rule.

Exceptions to GINA

What's underlying the EEOC's latest proposed rule is the Genetic Information Nondiscrimination Act (GINA) — a federal law governing the disclosure of such information. GINA bans employers from:

  • Discriminating against job applicants and employees based on their genetic information,
  • Using genetic data in making decisions about employment, and
  • Requesting, requiring or buying genetic information.

GINA does, however, provide for a few narrow exceptions. One, according to the EEOC announcement of the proposed rule, "applies when an employee voluntarily accepts health or genetic services offered by an employer, including such services offered as part of a wellness program." Genetic data includes information about the "manifestation of a disease or disorder in family members (including spouses) of an individual."

While striving for consistency, the EEOC has expressed a desire to limit the scope of this exception to the general ban on genetic data sharing. Accordingly, the exception applies only to spouses, not to employees' children. Why? "The possibility that an employee may be discriminated against based on genetic information is greater when the employer has access to information about the health status of the employee's children versus the employee's spouse," according to the EEOC.

Limited incentive

The EEOC's proposed rule clarifies that employers may offer, as part of a health plan, a limited incentive to an employee whose spouse:

  • Is covered under the employer's health care plan,
  • Receives health or genetic services offered by the employer (including under a wellness program), and
  • Discloses information about his or her current or past health status.

The limited incentive may take the form of a reward or penalty, according to the proposed rule. It may also be financial or an "in-kind" incentive such as time off from work or "prizes or other items of value."

The crux of the proposed rule is the definition of "limited." In an earlier set of rules under the ADA, "limited" was defined as no more than 30% of the total cost of the health benefits. This same standard is used under the EEOC's GINA-based proposed rule.

Rule vs. regulations

A closer look at how the incentive limits would work reveals a distinction between the EEOC's proposed rule and the Tri-Agency Regulations. Specifically, let's say an employee and spouse both participate in a health plan using self and family coverage, and that coverage is worth $14,000. In this case, the maximum wellness program participation incentive the employer could offer would be $4,200 (that is, 30% of $14,000).

Under the same parameters, if only the employee participated in the wellness program, his or her maximum incentive would be 30% of what he or she would have had to pay for single coverage — not the full value of the plan. So if that single coverage was worth $6,000, the maximum incentive would be $1,800. What this seems to suggest — though it's still not entirely clear — is that the $2,400 difference between the $4,200 total and the $1,800 max employee incentive could be offered to the spouse as an incentive.

Typically, however, plans that include wellness programs with an information requirement offer equal incentives based on employee and spousal participation. And the Tri-Agency Regulations are more consistent with this common practice. Thus, another potential wrinkle is that, where the Tri-Agency Regulations allow an incentive of up to 50% for tobacco cessation programs, the EEOC rule doesn't provide this exception to the 30% limit. Unless the differences are resolved, employers may face the conundrum of trying to comply with both the rule and the Regulations, which would prove difficult at best.

Power to decide

Another potential concern about the EEOC's proposed rule is the following language:

The Commission further proposes to add to the existing ... requirements a requirement that any health or genetic services in connection with which an employer requests genetic information be reasonably designed to promote health or prevent disease.

In other words, the EEOC wants to give itself power to decide what's reasonable and what's not. The Tri-Agency Regulations stake out no such broad authority.

Developments ahead

The deadline for comments on the EEOC's proposed rule came and went at the end of 2015. And it will be months before the final rule is issued — perhaps in a modified form to address some of the concerns mentioned.

In the meantime, employers that actively encourage employees and their spouses to share medical information as part of a wellness program will need to monitor developments closely. These organizations may need to scale back their approach to requesting such data, depending on the final regulatory outcome.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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