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EEOC Issues Final Wellness Regulations

The EEOC has issued final regulations under the ADA and GINA that address the extent to which employers may use incentives to encourage employees and their spouses to participate in wellness programs that involve disability-related inquiries or medical examinations. Although the regulations allow limited incentives, there are a number of conditions and restrictions. And there are some important differences between the EEOC's rules and other rules governing wellness programs, such as guidance under HIPAA and the ACA. Here are the highlights.

What Wellness Plans Are Covered?

These regulations apply to any wellness plan that involves a disability-related inquiry or medical examination. This will include most wellness plans that require completion of a health risk assessment or biometric screening. It also includes tobacco-related wellness plans that involve any type of medical test to screen for the presence of nicotine, but it does not include tobacco-related programs that merely ask an employee to certify whether they use tobacco (and do not require any other medical examinations).

In an important change from the proposed regulations, the final regulations apply to a wellness program without regard to whether the program is offered in connection with a group health plan. For example, an employer that offers a cash reward to employees for completing a health risk assessment or biometric screening may be subject to the limitations under the final regulations.

What Limits Apply to Wellness Incentives?

For a wellness plan covered by these regulations, the incentive offered to any employee may not exceed 30% of the full cost of self-only coverage. An additional incentive may be offered to an employee’s spouse, subject to the same dollar limit. For example, if the full cost of self-only coverage for a year is $6,000, the annual wellness incentive offered to an employee cannot exceed $1,800, and the annual wellness incentive offered to an employee’s spouse also cannot exceed $1,800.

The regulations provide rules on how to calculate the 30% limit. The rules address a variety of scenarios, including (1) when the wellness incentive is tied to enrollment under a particular group health plan, (2) when an employer offers a group health plan but the wellness incentive is not tied to enrollment under the group health plan, (3) when an employer offers multiple group health plans and the wellness incentive is not tied to a particular group health plan, and (4) when an employer offers no group health plan.

The 30% limit applies to all types of wellness programs that are covered by the regulations. This includes so-called “participatory plans” that are not subject to any incentive limit under the HIPAA and ACA regulations. It also includes certain tobacco-related plans that are subject to a 50% incentive limit under the HIPAA and ACA regulations. Where a wellness plan is subject to conflicting incentive limits under different regulations, an employer will need to design the incentives to comply with all applicable requirements, which may require limiting the incentive to the lowest applicable limit.

What Other Conditions Apply?

In addition to limiting the amount of the incentives offered in connection with a wellness plan, an employer must:

  • Provide a notice about what will be done with the information collected under the wellness program. The EEOC is preparing a model notice.
  • Maintain the confidentiality of information collected in connection with the program.
  • Not limit or deny health plan coverage for, or otherwise retaliate against, an employee or spouse that chooses not to participate in the wellness program.

What About the Bona Fide Benefit Plan Safe Harbor?

In a recent federal court case (EEOC v. Flambeau), the court rejected the EEOC’s claim that an employer’s wellness program violated the ADA. The court concluded that the wellness program was protected by a “safe harbor” rule in the ADA that permits bona fide benefit plan underwriting practices. At least one other federal case (Seff v. Broward County) has reached the same conclusion.

In the final ADA regulations, the EEOC expressly disagreed with these courts. The final rule specifically says that the bona fide benefit plan safe harbor does not apply to wellness programs that involve disability-related inquiries or medical examinations.

This tension between the courts and the EEOC creates some uncertainty for employers, particularly those employers that would like to offer more aggressive wellness programs than permitted under the EEOC’s regulations. Courts will usually give significant deference to a federal agency’s interpretation of law. But the courts have already shown a willingness to rule against the EEOC on this issue.

Given this tension, there will likely be further litigation over the scope of the bona fide benefit plan safe harbor. In the meantime, employers that want to be conservative will follow the EEOC’s guidance. Employers that want to be more aggressive may have a basis for doing so, but would also risk enforcement action by the EEOC.

When Must Employers Begin Complying?

The final rules technically take effect soon. But employers are not required to begin complying with the notice requirement and incentive limits until plan years beginning on or after January 1, 2017.


Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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