Benefits, Health Care Reform, Wellness Programs

Wellness Program Incentive Amounts for 2019: What to Do?

If you currently have a Wellness program or you are considering one for 2019, you need to read this!

Employers with wellness programs are no doubt aware of the federal court ruling (in AARP v EEOC, December 2017) that invalidates, as of January 1, 2019, the EEOC’s rule limiting incentives/penalties to 30% of group health plan premiums, for wellness programs subject to the Americans with Disabilities Act (ADA) and/or to the Genetic Information Nondiscrimination Act (GINA).

Wellness Programs with Health Risk Assessments (HRAs) or biometric screening are subject to the ADA and/or GINA (as well as HIPAA and ACA rules).  Other Wellness programs are only subject to HIPAA and ACA rules and are not affected by this court decision.

For employers with January 1 renewals, planning for 2019 wellness program design is just around the corner. What are the options employers should consider, since the EEOC has said it is unlikely to issue new guidance before the end of 2018?

  • The most conservative approach is to have no wellness incentive/penalty for programs subject to the ADA or to GINA.
  • The riskiest approach is to have (or continue) a wellness incentive/penalty equal to 30% of the total cost of employee-only group health plan coverage.
  • Any amount in between poses some level of risk  (the lower the amount perhaps the lower the risk).
  • For wellness programs that are not subject to the ADA or GINA (see below), an employer could still offer incentives/penalties of 30% (or more, in some cases), but in the past many employers felt these types of wellness programs did not meet their goals in having a wellness program.  However, there are various creative wellness tools that would not render a program subject to the ADA or GINA and that might be effective in promoting healthier habits and awareness.

Does this Change in Maximum Limits Apply for All Wellness Programs?

No, this only applies for wellness programs that are subject to the ADA (Title I) or to GINA. The ADA prohibits discrimination based on a disability, so it applies to wellness programs that include biometric screening or other medical exams or ask employees to complete Health Risk Assessments (HRAs). GINA prohibits the use of genetic information, and the EEOC considers spouse’s family history to be genetic information, so GINA applies if employees’ spouses are asked to complete HRAs or other medical questionnaires. Note that the court’s ruling only invalidates the 30% maximum limit on incentives; the EEOC requirements on notice and consent still apply.

Wellness programs are also subject to the HIPAA rules, which prohibit discrimination in eligibility or premiums based on health-related factors, but has exceptions for certain wellness programs. The Affordable Care Act (ACA) amended the HIPAA rules to allow a 30% maximum limit, plus an additional 20% for tobacco cessation programs. These limits are not affected by the court’s invalidation of the EEOC’s 30% maximum, but for programs that are subject to both the ADA and HIPAA rules this is a practical dilemma for plan sponsors. Additionally, the HIPAA-ACA limits on incentives apply only to “health-contingent” wellness programs, which require participants to attain a specified health-related outcome. No limits on incentives apply to wellness programs that are only participatory but do not require attainment of a specified outcome.

Examples of Wellness Programs Subject to Various Limits on Incentives

  • Tobacco cessation program that does not test for the presence of nicotine, but only asks participants if they use tobacco products: Subject to HIPAA-ACA incentive limits but not to ADA or GINA.  Could impose an incentive/penalty of up to 50% of the total cost of coverage (for the tier in which the employee is enrolled).
  • Non-tobacco, health-contingent wellness program that rewards participants for meeting a specific health outcome, such a attaining at least a particular score on a health quiz (not an HRA), and does not include a medical exam or screening:  Subject to HIPAA-ACA incentive limits but not to ADA or GINA.  Could impose an incentive/penalty of up to 30% of the total cost of coverage (for the tier in which the employee is enrolled).
  • Participatory wellness programs that reward based solely on participation, such as for completing a healthy eating program, completing a health quiz (no particular score required), attending an on-site seminar (including smoking cessation) or participating in various types of exercises:  Not subject to the ADA or to the HIPAA-ACA 30% maximum.  Could include an incentive/penalty of any amount.
  • Participatory wellness program with HRA or biometric screening that does not require attainment of a specific outcome:  Subject to ADA and GINA, but not to HIPAA-ACA limits.  Court decision invalidates 30% maximum, so safer to eliminate incentive or offer a lower amount (10%, 20%).

Why is the 30% Maximum Changing?

Under the ADA and GINA, a medical exam or health questionnaire is allowable only if it is “voluntary,” a term that is not defined under either  law.  Last year the AARP filed suit against the EEOC for allowing a wellness incentive/penalty of up to 30% of the total cost of employee-only group health coverage, for wellness programs that are subject to the ADA or to GINA, on the grounds that a 30% penalty is coercive so renders the program involuntary.

The court agreed that the EEOC had failed to provide any evidence that the 30% limit was not coercive, and on December 20, 2017, the court vacated the 30% maximum in the current EEOC regulations but delayed the effective date to January 1, 2019, and invited the EEOC to issue new regulations or to provide evidence why the 30% is justified. The court did not say that some lower maximum would be allowable (e.g., 20%, 10%), or that only 0% would be allowable, or even that 30% would not be allowed if the EEOC presented acceptable justification for the 30% limit.

The EEOC filed a status report with the court on March 30th, in which the EEOC stated it “does not currently have plans to issue a Notice of Proposed Rulemaking addressing incentives for participation in employee wellness programs by a particular date certain, but it also has not ruled out the possibility that it may issue such a Notice in the future.” I talked with an EEOC attorney in June, and he also noted that two of the EEOC’s top positions remain unfilled (EEOC Chair and one Republican Commissioner seat), with both nominees awaiting Senate confirmation, which makes major policy-making difficult.

What Should Employers Do?

Employers need to decide what level of risk they are comfortable with, because it is unlikely that before the end of 2018 the EEOC will issue new guidance or provide justification to the court for the 30% maximum, or that the court will approve the 30% or some lower maximum amount if the EEOC does take action.  It is also unlikely that Congress will pass legislation in 2018 to amend the ADA and GINA and to specify an allowable maximum percentage for wellness program incentives/penalties.

Keep in mind that the ADA and GINA only apply to wellness programs with biometric screening or other medical exams, or with HRAs.  Other programs are not subject to the ADA or GINA so are not affected by the court’s ruling in the AARP v EEOC case.

For programs that are subject to the ADA and GINA, employers still must comply with EEOC wellness rules on notice and consent, because the court’s decision only vacates those parts of the EEOC rule that addressed the maximum limits on wellness incentives/penalties.

Employers who will continue to offer a wellness incentive/penalty in 2019 on wellness plans that are subject to the ADA or GINA should add language to any employee communications notifying them that the reward might not be allowed after 2018. Possible language to use:

  • Due to the currently undetermined impact on wellness regulations from the AARP v EEOC case, the incentive limit may change at some point during 2019. Please note that we will notify health plan members of any changes, and adjust incentive rates accordingly.

The most conservative approach is to have no wellness incentive/penalty for programs subject to the ADA or to GINA.

The riskiest approach is to have (or continue) a wellness incentive/penalty equal to 30% of the total cost of employee-only group health plan coverage.

Employers who want to continue to offer some level of incentive for employees to complete HRAs and/or biometric screenings might consider limiting the amount to no more than 10%, 15% or 20% of the total cost of employee-only coverage. This should decrease the employer’s risk to some extent, because in the past most legal challenges were brought by the EEOC against employers it considered to be non-compliant. It seems unlikely the EEOC will challenge employers who are compliant with the EEOC’s own guidance.  However, lawsuits could be brought by individual employees or by organizations such as the AARP.  (Just to be clear, courts do not initiate lawsuits against employers who do not comply with the court’s decision in other cases, so the AARP v EEOC court is not going to take action against employers who continue to use a 30% maximum.)

Employers who have been imposing a penalty if an employee’s spouse did not complete an HRA or health screening might want to drop that component of their wellness programs. Before the current rules were issued, there was general consensus that a wellness program subject to the ADA could impose some level of incentive, but there was not general agreement that penalties were allowable under GINA if an employee’s spouse did not complete an HRA.  The reason this is subject to GINA is because the EEOC considers an employee’s spouse’s medical information to be genetic information as to the employee.

For wellness programs that are not subject to the ADA or GINA (see examples above), an employer could still offer incentives/penalties of 30%, or more in some cases (e.g., 50% for tobacco cessation programs that do not test for the presence of nicotine, or unlimited amounts for programs that only require participation but not attainment of a specified outcome and do not include medical questionnaires or medical screening or exams).

Another option is to replace HRAs or biometric screening with wellness activities that are not subject to ADA or GINA rules, such as health quizzes that provide information but do not ask individual-specific questions or ask about family history.  It might be possible to offer such health quizzes as an alternative to (and in addition to) an HRA or biometric screening and still include the 30% incentive/ penalty (since a participant could do the health quiz to get the incentive.

Potential Penalty Amounts

There are not specific dollar amount penalties for violating the ADA Title I, but the potential remedies that might apply to an employer who violates Title I by imposing too high a wellness penalty include restored benefits (i.e., refunding the penalty amount), attorneys’ fees, expert witness fees, and court costs. Compensatory and punitive damages also may be available in cases of intentional discrimination. The irony is that any complaint alleging a violation of the ADA must be filed with the EEOC or a state human rights agency, and the EEOC is unlikely to impose penalties on an employer who complies with the EEOC rules (even though the AARP disagrees with those rules).  Thus, it seems the potential penalties an employer might face would likely come from a state agency or from the court if an individual (or the AARP) sued the employer.
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