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Wellness Program Incentive Limits - How much is too much?

news.jpgThe Equal Employment Opportunity Commission (EEOC) continue to be busy bees in the wellness program arena. Two recent events involving the EEOC and wellness programs have popped up in the news lately, both of which employers will want to take note.


EEOC Loses Another Wellness Lawsuit

On January 25, 2017, in Equal Employment Opportunity Commission v. Flambeau, Inc., the Seventh Circuit rejected an EEOC challenge to an employer (Flambeau) wellness program. Here the court had the opportunity to address whether the employer’s wellness program was an involuntary medical examination pursuant to the Americans with Disabilities Act (ADA), but to the disappointment of many, the court avoided answering the ultimate issue of establishing set ADA guidelines for wellness programs. Instead the court took the easy way out and found this matter to be moot. 

A Quick Recap

Flambeau’s wellness program subsidized health insurance for employees who participated in a health risk assessment and biometric screening. The district court found that the wellness program was permissible because it fell within the safe harbor provision of the ADA with respect to bona fide benefit plans. The court held that Flambeau’s wellness program was voluntary because an employee could decide not to participate in the wellness program and still remain employed.

This initial court result was a bitter pill for the EEOC who subsequently “retaliated” by issuing new regulations in 2016 which attempted to reverse the effect of the Flambeau decision. In these regulations the EEOC asserted that the ADA safe harbor provision does not apply to employer wellness programs and that the Flambeau wellness program would now be regarded as involuntary. 

In this latest battle the Seventh Circuit affirmed the earlier decision (a dismissal) on the grounds that the case was now moot, and there was no relief that could be granted to the parties because Flambeau had previously discontinued the wellness program (for unrelated reasons) and the employee had resigned at Flambeau several years ago –before the lawsuit was even filed. Also, the EEOC could not demonstrate that the employee had suffered any damages or emotional distress, or that the Flambeau acted with malice or reckless disregard to support an award of punitive damages. While the position taken by the Seventh Circuit was legally accurate, it was very disappointing for all parties involved who were hoping that clarity would be provided to this ongoing dispute between the EEOC and certain employer wellness programs.

What should you do with your wellness program?

Unless you want the EEOC bearing down on your business, I would suggest employers attempt to be in compliance with the EEOC 2016 regulations despite the facts that

  1. There have been no published court decisions which have interpreted or applied the EEOC's 2016 regulations, and
  2. No appellate court decisions have addressed the EEOC's assertion that the insurance safe harbor can never apply to an employer-sponsored wellness programs.

However, there may be further clarity or closure in the near future. This past fall, a lawsuit was filed in the U.S. District Court for the District of Columbia -- AARP v. EEOC,  where AARP is seeking to invalidate the EEOC's 2016 regulations. One of the several allegations made by AARP was that the EEOC acted arbitrarily and capriciously in issuing the 2016 regulations because they are “counter to congressional intent, and conflict with prior agency guidance that imposed more stringent standards for wellness programs to be deemed voluntary”. This writer agrees with that position 100%.  One would think that if the Trump administration wants to stick their nose into this issue, it would peel back these onerous EEOC regulations.

Stay tuned…..and seek out your HNI benefits representative for assistance and guidance when establishing a wellness program and creating wellness program incentives.

EEOC Issues Clarifications on Incentive Limits

The EEOC also recently issued an informal discussion letter to address incentive limits under the ADA and the Genetic Information Nondiscrimination Act (GINA). The Letter was issued by the EEOC in response to an employer’s request for clarification of how to apply the ADA’s 30% limit on incentives to different employer wellness program designs.

ADA Notice Requirement

An ADA notice requirement is required unless other acceptable measures are taken. In addition, the EEOC has suggested that a wellness program that requires employees to complete multiple activities throughout the year may want to provide the ADA notice more than once. Even though no such legal requirement exists (multiple notices), the EEOC asserts that this might be a good idea since employees might not remember the initial ADA notice. I personally do not think multiple notices are necessary.

Determining Incentive Limits

The letter confirmed that when monitoring the 30% incentive limit in situations where the employer offers more than one health plan, employers should always base the calculation on their lowest-cost option.

Other Takeaways
  • If an incentive is available for a wellness program at the beginning of an upcoming plan year then employers should provide the ADA notice towards the end of the prior plan year.
  • Where an incentive is earned based on activities completed in the one plan year, but not paid until the following plan year, the ADA limits on wellness incentives do not apply. The Letter does contain examples so please reference that for further clarity.
  • Incentives provided to a spouse or dependent for providing proof of a physical exam from a physician are not subject to GINA because proof of a physical does not constitute genetic information under GINA. Compare that with when an employee must provide proof of having had a physical to receive incentives. Under this scenario the program is subject to the ADA wellness rules because the employee is being asked to have a physical examination to earn the wellness incentive.

As always, wellness rules and programs can be complicated and this area remains a hot topic with the EEOC.  

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