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Wellness Programs and Incentives

Federal regulations are complex – understand the rules for "participatory" and "health contingent" wellness programs and related incentives

Many employers offer wellness programs to support employees and their family members in improving their health. In addition to encouraging a culture of health, these programs are designed to reduce health care costs for both employees and the company.

The current trend in wellness programs is toward health-contingent programs that reward employees for outcomes such as smoking cessation, weight loss, and managing chronic conditions like diabetes and high blood pressure and cholesterol.

A consistent set of wellness program and incentive limit rules were adopted under the Affordable Care Act (ACA) by the Department of Labor (DOL), Health and Human Services (HHS), and the Internal Revenue Service (IRS) and made effective January 1, 2014. The regulations focus on:

  • Two types of wellness programs: participatory and health-contingent (activity-only or outcome-based)
  • Requiring reasonable alternatives in health-contingent programs so everyone has the opportunity to earn the full reward
  • Establishing the value of incentives that can be awarded for some types of programs
  • Requiring employers to offer the opportunity to earn incentives at least once per year

Other wellness program rules and regulations

The ACA rules are just one set of federal regulations that impact employer wellness programs. Rules adopted in 2016 by the fourth agency, the Equal Employment Opportunity Commission (EEOC), under the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) also need to be considered by employers when designing wellness programs.

The incentive limits in EEOC's 2016 rules were challenged by the American Association of Retired Persons (AARP) as being too high and potentially coercive. The D.C. District Court found the limits to be insufficiently justified, and issued an order to vacate the rules on January 1, 2019 if clarification or new rules were not issued. The EEOC has formally removed incentive limits from ADA and GINA, but has not provided insight on an anticipated date for new rules. ADA and GINA incentive limits are no longer effective as of January 1, 2019. It is important to note that the remaining sections of the ADA and GINA rules (e.g., ADA's reasonable accommodations and GINA's limited use of collecting genetic information) remain in effect.

Americans with Disabilities Act (ADA)

Under the ADA regulations, employers are allowed to ask disability-related questions and conduct medical exams for voluntary wellness programs that promote health or wellness. There are several key differences between the ACA and the ADA:

  • Reasonable accommodations must be provided if an employee is unable to complete part or all of a wellness program for disability-related reasons (a reasonable alternative under the ACA can be considered a form of reasonable accommodation under the ADA)
  • Employers may only receive information from wellness programs in aggregate, any individually identifiable information received is considered PHI
  • Privacy notices describing the handling of medical information, and procedures for safeguarding information privacy must be distributed to all wellness program participants

ADA safe harbor not applicable

The statutory text of the ADA provides a safe harbor that allows medical inquiries and examinations to be conducted in connection with a "bona fide benefit plan." This statutory language has been interpreted to include employer-sponsored wellness programs within that safe harbor, and the courts have agreed.* The final ADA regulations clearly state that the "bona fide benefit plan" safe harbor does not apply to rewards and penalties offered in connection with an employer's wellness program that includes disability-related inquiries or medical examinations, and go on to state that the EEOC does not agree with the outcome of the cases on this issue.

Genetic Information Nondiscrimination Act (GINA)

Under GINA, employers may solicit genetic information from the employee as part of a wellness program, so long as it is made clear that disclosing this information is voluntary.

Other key differences between GINA and ACA include:

  • Limits use of genetic health information collected through a wellness program
  • Regulates sharing of health information collected from spouses
  • Prohibits health and genetic information collection from employees' children
  • Prohibits the sale of genetic information provided through a wellness program to other vendors

In combination, it is clear that compliance with one set of regulations does not necessarily ensure compliance with all the others. Employers should review their wellness programs and incentives against all regulations, and consult with legal counsel if their current wellness programs don't align with the EEOC regulations.

Read our Wellness Fact Sheet

*EEOC v. Flambeau, Inc., (No. 14-cv-638-bbc (December 31, 2015) and Seff v. Broward County, 778 F. Supp.2d 1370 (S. D. Fla. 2011) both ruled in favor of the employer.