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Will Employers Soon Be Able to Offer Big Financial Incentives for Wellness Programs?

By Joseph Fawbush, Esq. on June 17, 2020 | Last updated on August 10, 2021

As work wellness programs have grown in popularity in recent years, there have been significant pushes by businesses large and small to encourage participation among employees. Wellness programs can involve weight loss and physical activity, behavioral treatment, smoking cessation, and medical examinations. In theory, this improves the health and productivity of workers and can help to lower costs for a business. That is why in 2019 over 80% of large businesses offered a wellness program of some kind. The problem, however, is getting employees to buy in to these programs. Historically, businesses have used financial incentives - or penalties - to encourage participation.

Federal Laws That Encourage Employer Wellness Programs

To help promote wellness programs and lower the burden on the health care system, the Affordable Care Act amended the Health Insurance Portability and Accountability Act to allow employers to reduce health insurance premium costs by as much as 30% for employees participating in certain wellness programs, including those that required a medical examination or health risk assessment. This, however, ran afoul of privacy protections in federal law. The Equal Employment Opportunity Commission (EEOC), which is tasked with creating a rule governing how employers can incentivize wellness programs, now believes it has a rule that complies with privacy laws. If it is issued as is, financial incentives could return to wellness programs.

Federal Law Prohibits Involuntary Collection of Medical Information

The Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act prohibit employers from requiring medical examinations or asking about disabilities or genetic information unless it is “consistent with business necessity." The ADA prohibits involuntary disclosure of medical information to help reduce discrimination. Also, and understandably, employees can be worried about revealing private health information to their employers for this reason.

That is why a federal court twice held that rules passed by the EEOC violated the privacy protections in the ADA. Some wellness programs involve a medical examination and/or questions about medical history and disabilities, such as a health risk assessment. Because not complying essentially amounted to a 30% insurance premium hike for not participating, a federal judge found that these programs were involuntary and therefore prohibited by the ADA.

After the rulings, the EEOC again went back to the drawing board. On June 11, by a 2-1 vote, the EEOC passed an amended rule to be sent to the White House Office of Budget and Management for approval. The rule is not yet available for public comment. The commissioner who did not approve the rule did so because of perceived remaining compliance issues with the ADA.

De Minimis Incentives

According to the EEOC, proposed new rule would again allow up to a 30% incentive to employees who participate in certain wellness programs. However, according to an EEOC statement, the proposed rule would allow “no more than a de minimis incentive to encourage participation" for most programs.

The details are still not clear. However, the public will have time to comment if the White House approves. Meanwhile, employers still have little clarity on how much they can incentivize wellness programs.

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