Defining “wellness” for any one person is no simple task and neither is deciphering a given wellness program’s compliance under the law. In 2016, when the Equal Employment Opportunity Commission (EEOC) released its final regulations defining a “voluntary” program under the Americans with Disabilities Act (ADA), we thought we knew the entire landscape (at least what can be seen on a hazy day). But thanks to AARP’s successful challenge to these regulations and the EEOC’s recent acknowledge of the demise of its incentive limitations, we have now re-entered the “Wild West” for wellness compliance. That being said, we have all been here before — and we actually have more than we had — so let’s take a moment to take in the view.
The guidance we have under the Health Insurance Portability & Accountability Act (HIPAA) remains unchanged. So whenever you have a wellness program that is integrated with a health plan or otherwise constituting a health plan itself, you will want to assess whether the plan is “purely participatory” or “health contingent.” The health contingent plans (which condition the award of incentives on accomplishing a health goal) will require additional compliance considerations, including (but not limited to), incentive limitations, reasonable alternative standards (RAS), and notice requirements. In my personal experience, I have seen the RAS missed most out of the compliance parameters. Often there is an “accidental” program such as a tobacco surcharge, and the employer does not even realize the wellness rules are implicated, or the employer’s RAS is another health-contingent parameter that actually necessitates another RAS. The DOL is actively enforcing compliance in this area, so employers will want to take care.¹
The EEOC’s ADA (and GINA) regulations are still largely in force. This seems to be a common misconception. I have heard every perspective ranging from a celebration of no rules to a lament for the end of incentivized wellness programs that include disability-related questionnaires (like your average health risk assessment) or medical examinations (including biometric screenings). The truth is somewhere in the middle. The guidance I covered in my last article on wellness programs still applies. The ADA’s own RAS and notice concepts still apply. All that has changed is that the EEOC has declined (again) to tell us at what point an incentive turns a program compulsory. So employers sponsoring wellness programs subject to the ADA have three choices,² based on risk tolerance:
Run incentives for ADA plans up to the 30% cap that existed before. This is the riskiest approach. To take this route, you have to rely upon HIPAA’s similar (though not exactly the same) incentive limitations as indicative of non-compulsory levels. The fact that Judge Bates did not accept this argument in the AARP case advises against this approach, but this case does not have global application. If you choose this path, it will be imperative to document your analysis as to why this incentive preserves voluntariness for your participants.
Keep the incentives below the previous 30% cap but incentivize the program. This approach does have risk because no one knows at what point an incentive takes choice away from participants. However, the incentive is a useful tool to motivate and reward health-conscientious behavior. The wellness incentive limitations stood at 20% under the HIPAA regulations for quite some time without much concern, so this could be a relatively safe target. But the most important thing you can do is carefully assess the overall structure of the program(s) offered, consider the culture and demographics of the employees who may participate, and balance your desire to motivate against the particular tensions of the program to decide on a reasonable incentive. Make sure to document this analysis and reconsider it every time a program changes.
Not incentivize the program at all. This is the most conservative approach from a compliance perspective but ultimately not required. Before the EEOC’s 2016 regulations, employers were incentivizing programs subject to the ADA, and nothing about the AARP case or the EEOC’s response to it prohibits incentives.
As you can see, the wellness compliance landscape has not changed too much over this last year, but this is also just the tip of the iceberg. With enforcement heating up, it is imperative you carefully consider compliance, document the reasonableness of your incentive choices, and lean on trusted counsel.
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¹ Dorel Juvenile Group just paid the DOL $15,000.00 in penalties and reimbursed employees over $145,000.00 for inappropriate tobacco surcharges. This is the third such case the DOL has settled recently. The DOL is still pursuing Macy's, Anthem, and CIGNA on similar and additional charges.
² In truth, there are four options, but charging above the ADA's previous incentive limitations would be excessively risky.