Note to readers: Efforts are continuing in Washington to repeal and replace the Affordable Care Act. As of this writing, a revised version of the replacement bill, the American Health Care Act, is under consideration in the Senate. Please bear this in mind as you read the article below, and consult your benefits advisor for the latest developments.
Sometimes complying with federal regulations governing health care plans can be like skiing a slalom course. You have to weave through obstacles and be ready to make a tough decision at every twist and turn. Such is the case today for employers sponsoring wellness programs that feature certain design elements intended to maximize employee participation.
Years ago, the Affordable Care Act (ACA) codified parameters for the financial incentives you can offer employees to motivate them to take part in a wellness program. More recently, however, the Equal Employment Opportunity Commission (EEOC) issued regulations under the Americans with Disabilities Act (ADA) on the same topic. Unfortunately, they didn't entirely mesh with those previously issued by the Department of Labor under the ACA.
As of this writing, proposed legislation that could harmonize the two — known as the Preserving Employee Wellness Programs Act — has cleared the House Committee on Education and the Workforce. But the bill has subsequently gotten bogged down following a barrage of negative press accounts, including suggestions about the legislation's impact that was deemed "false" by fact-checking website snopes.com.
The controversy surrounds "outcome-based" wellness programs that predicate financial incentives on an employee's achievement of a particular health-based goal. Those programs differ from the milder "activity-based" wellness programs that automatically reward employees who participate in wellness activities, regardless of whether doing so results, for example, in achieving a weight loss goal or giving up tobacco products.
Financial incentives generally involve reductions in employee deductibles and premium cost-sharing arrangements. But they're not limited to these examples. Incentives can also include cash, time-off awards, prizes and gifts.
Under the ACA, the value of outcome-based wellness incentives is capped at 30% of the cost of medical coverage (the sum of both the employer- and employee-funded parts), whether the employee has single or family coverage. Incentives can also equal up to 50% of the cost of a smoking cessation program.
But, under the EEOC regulations, the cap is 30% of the cost of employee-only coverage, regardless of what type of health benefit the employee has. The effect could be to cut in half, or more, the maximum financial inducement for employees with family coverage to participate in an outcome-based wellness program.
Does that mean wellness programs with outcome-based incentives are obsolete? Not at all. But, to be on the safe side legally, employers need to base their programs on the more restrictive set of rules.
"In issuing this final rule, [the] EEOC sought to provide consistency with HIPAA [the other main law that impacts wellness programs] and the Affordable Care Act rules on wellness program incentives, while also ensuring that incentives would not be so high as to become coercive and render participation in the program involuntary.
Employees cannot be required to participate, denied the same freedom to choose health plan options as employees who do participate, or penalized for failing to achieve a specified health outcome. (A penalty is different from a positive incentive.)"
Because the EEOC regulations are based on the ADA, they have a particular focus on disability issues. Thus, according to the agency, its regulations "apply to all wellness programs that include disability-related inquiries and/or medical examinations," instead of just those applicable to group health plans.
Oblige employees to incur significant costs for medical examinations.
"Asking employees to provide medical information on a [health risk assessment] without providing any feedback about risk factors or without using aggregate information to design programs or treat any specific conditions would not be reasonably designed to promote health or prevent disease.
Naturally, employees will have to be fully informed about any wellness program if the employer expects strong participation. But the EEOC requires that, in your communications about it, you divulge to employees what medical information will be obtained, how it will be used, who will receive it and the restrictions on disclosure."
At first blush, some of the EEOC regulations might appear a bit daunting. Yet independent wellness program service providers already have digested them and will do their best to keep you in compliance.
Also, in theory, the EEOC's lower limits on financial incentives (compared with the ACA's) would affect only employees with spousal or family coverage. The "in theory" proviso is because your existing incentives (if you already have an outcome-based incentivized wellness program) might already fall within the EEOC limits. After all, 30% of employee-only coverage adds up to a significant amount of money.
The fate of the Preserving Employee Wellness Programs Act in Congress probably won't tip the scales in favor of or against building financial incentives into employer wellness programs. The variables that determine the viability and success of any wellness program aren't limited to financial incentives or even regulatory clarity.
An equal or perhaps greater determinant is the extent to which you have built a "culture of health" within your organization, with the wellness program representing just one manifestation of that spirit. Keep in touch with your benefits advisors regarding the latest developments on legislation affecting wellness programs, as well as how to best build and maintain your wellness program.
If you have questions about the EEOC and ACA's regulations concerning wellness programs, please contact Ron Present, Partner and Health Care Industry Group Leader, at rpresent@bswllc.com or 314.983.1358.