EEOC Releases Wellness Program Guidance
The EEOC recently released proposed regulations about wellness programs. Key takeaways include a program safe harbor and when only de minimum benefits can be provided. Additionally, the guidance provides insights into the EEOC’s thinking on how wellness programs should be structured, which is valuable for any employer sponsoring or considering a wellness program.
January 2021: Proposed Regulations and a Freeze
On Jan. 7, the United States Equal Employment Opportunity Commission (EEOC) published two sets of proposed regulations on wellness program incentives. The first set was under the Americans with Disabilities Act (ADA) and the second set was under the Genetic Information Nondiscrimination Act (GINA) (collectively, the “Proposed Regulations”).
On Jan. 20, President Biden issued an executive order freezing many new and pending regulations. This includes the Proposed Regulations. Particularly, the freeze is to provide time for a review of the Proposed Regulations before finalizing. Without the freeze, and with Republican appointees still holding a majority of the decision-making votes at the EEOC, there is a good chance the Proposed Regulations would be finalized in a form similar to the current language. However, on further review, a lot could change before the Proposed Regulations are finalized.
Wellness Programs: A Short Summary
A wellness program, for purposes of the Proposed Regulations, is a system of providing health promotion and disease prevention other than employee health benefits (although a wellness program can be part of an employee health benefit). Specifically, wellness programs are voluntary, participatory, health-contingent programs that use incentives (monetary or otherwise) to encourage employees to increase their general wellness or health-oriented activities. Examples include educational opportunities relating to health, discounts on health benefit costs, vacation time, awards, other perks and incentives for employees who do (or sometimes try) certain activities such as mindfulness, yoga, biometric screens, getting a physical, quitting smoking, and the like.
Under the Proposed Regulations, Wellness Programs are split into two groups:
- Standalone or non-integrated wellness programs
- Wellness programs that are integrated with or a part of a group health plan
The type of wellness program an employer sponsors is important because there is a safe harbor for wellness programs that are integrated with or are otherwise a part of the employer’s group health plan. There are several factors in deciding whether a wellness program is integrated with or part of a group health plan. No one factor is determinative, and the overall facts and circumstances are assessed in making the determination. The factors include:
- Whether the wellness program available only to those who are participating in the employer’s health plan.
- Whether the benefits of participating limited to the cost sharing associated with the employer’s health plan.
- Whether participation limited to the plan year (or other relevant terms) of the employer’s health plan.
- If the wellness program is being administered by a third party, whether that third party is the insurance company providing the insurance associated with the employer’s health plan or another third party that contracted with the employer’s health plan.
Incentives for Standalone Non-Integrated Wellness Programs
Under the Proposed Regulations, the general rule on incentives for standalone non-integrated wellness programs is restrictive. These wellness programs can provide only de minimis incentives. De minimis is not defined in the Proposed Regulations. However, examples are given, including water bottles and modest value gift cards ($50 or less). This de minimis requirement is only for participation in standalone nonintegrated wellness programs that require the disclosure of information about the diseases, disorders, or other conditions the employee or their family members have had in the past or with which they are currently diagnosed.
There are two exceptions to the general de minimis rule for standalone non-integrated wellness programs. First, when the benefit will be provided in the same amount regardless of whether those components that require the provision of family medical history or genetic information are completed. Second, when the wellness program (or at least the benefit) is limited to participation designed to promote or encourage healthy lifestyles or meet specific goals associated with a specific health condition. The Proposed Regulations provide an example where, rather than the de minimis amount, a $150 benefit, is provided to an individual who had previously identified certain health conditions, and the benefit is paid if the individual participates in a wellness program designed to encourage weight loss and a generally healthy lifestyle. When a wellness program must provide de minimis incentives is critical and requires careful consideration of the specifics of the wellness program and Proposed Regulations.
Incentives for Wellness Programs Integrated with or Part of a Group Health Plan
There is a safe harbor for wellness programs that are integrated with or are a part of group health plans. Under the safe harbor, benefits need not be limited to de minimis amounts. Rather, incentives of up to 30% of the total cost of coverage under the group health plan (increased to 50% of the total cost for tobacco cessation) are allowed. To satisfy the requirements of the safe harbor, the wellness program must not only limit rewards to the 30% (or 50%) of the total cost of coverage limit but also:
- Provide individuals with the opportunity to participate at least annually (once per plan year);
- Have reasonable alternatives for those who (a) find it unreasonably difficult to achieve the requirements due to a medical condition or (b) it is medically inadvisable to attempt the particular activity at the current time;
- Disclose the reasonable alternatives in the wellness programs being made generally available to potential participants;
- Have requirements that are reasonably designed to promote health or prevent disease; and
- Ensure the requirements are not overly burdensome and are not a subterfuge for discrimination.
The wellness regulations are proposed, and much can change before they are finalized. In the meantime, If an employer has or is reviewing or considering adopting a wellness program there are some factors below to keep in mind:
- Is the wellness program integrated as part of the health benefit plan?
- Will the incentive amount, if any, be compliant with the proposed regulations and if applicable, the safe harbor?
- Is the wellness program properly documented and communicated to individuals who are eligible?
- What information is or has been collected and who has access to that information? This will ensure compliance with HIPAA, an important aspect of wellness programs not altered by the Proposed Regulations.
For more information or to discuss the specifics of your wellness program, contact our benefits team.