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EEOC Issues [Somewhat] Clearer Rules for Wellness Programs

Compliance Advisor at HNI

The EEOC recently issued new proposed rules regarding non-discrimination requirements for wellness programs. 

If the proposed rules are adopted, the standards for non-discrimination held by various federal agencies/statutes will be better aligned and there will be opportunities for additional wellness program innovation without the threat of federal penalties. However, there remain areas where compliance requirements are unclear or conflict with one another. 

The Background of Wellness Program Non-Discrimination Concerns

A lot of the complexity surrounding wellness program compliance comes from the number of “cooks in the kitchen.” Several federal agencies are involved in the process of setting compliance requirements, and at times, the guidance has been conflicting. 

GavelIn 2006, several federal agencies (the Treasury, Department of Labor and HHS) issued wellness rules that outlined requirements for wellness program to be considered nondiscriminatory – in other words, to ensure a wellness program does not discriminate against anyone based on health status.

Subsequent wellness regulations were issued in 2013 in order to implement modifications to the wellness rules established by the Affordable Care Act. These modifications included increasing the amount of financial rewards allowed. The new maximum for wellness benefits was up to 30% of the cost of coverage and up to 50% for programs geared to tobacco cessation.

Under the final ACA rules, this cap is applicable to health contingent programs (programs that drive specific activity and health outcomes) but there is no stated cap for “participatory only” programs.

THE TWIST: the EEOC Challenges the ACA’s Definition of Non-Discriminatory

With final ACA rules in place, many employers went ahead initiating or expanding their corporate wellness programs to take advantage of the increased incentives they were allowed to offer employees.

Late last year, however, the EEOC charged three employer-sponsored wellness programs with allegations of discrimination based on disability, which would have violated the Americans with Disabilities Act (ADA).

The most recent of the three EEOC actions was against Honeywell. This was the most controversial, as their program appeared indisputably compliant with the final ACA regulations. 

Many employers who had pursued changes to their wellness programs due to the ACA guidelines feared similar legal exposure, even though their plans were seemingly compliant with the latest set of regulations. 


Last month, the U.S. House Education and the Workforce Committee issued a press release announcing the introduction of a bipartisan bill representing Congress’s commitment to employee wellness programs. They classified the EEOC’s move to seek a court order to halt a company’s healthcare premium discount program as an “overreach.”

On April 20, 2015, the EEOC issued a Notice of Proposed Rulemaking indicating that they would “harmonize the ADA's requirement that medical inquiries and exams that are part of an employee health program must be voluntary, and HIPAA's goal of allowing incentives to encourage participation in wellness programs”. 

Where There are Still Discrepancies

 Despite the EEOC’s stated intent to “harmonize” various compliance requirements, some discrepancies remain, including:

1) The tobacco incentive doesn’t match the ACA-allowed amount

The EEOC’s proposed rules do not provide for an increased financial incentive of up to 50% for programs targeting tobacco use. Rather, it sets a cap of 30% for all wellness programs that involve “disability related inquiries” (including “participatory only” programs).

So, if a biometric test or exam is used to assess the presence of nicotine, the 50% cap would not be allowed as such testing would be considered a prohibited “disability related inquiry”.

2) The EEOC incentive limits don’t apply to spousal and family coverage

The EEOC maximum percentage is applied to the cost “employee only” coverage. The ACA verbiage, in contrast, permits the financial incentive to be applied to “employee + spouse” or “family” coverage if certain conditions are met.

3) Variations in the “reasonable alternative standard” availability and notice requirements

Under the ACA rules, employers must include a notice of the availability of a reasonable alternative standard in all communication materials for health contingent programs. 

No notice requirement applies for participatory programs. 

The EEOC rules, however, require a “reasonable accommodation” for all types of programs (including participatory only) and a related disclosure on all communication materials. The verbiage of the disclosure notice is not the same as the ACA’s verbiage.

4) Confidentiality of Information

The EEOC rules stress the importance of maintaining confidentiality of information obtained in the course of administering a wellness program. The rules suggest that:

“As a best practice, individuals who handle medical information that is part of an employee health program should not be responsible for making decisions related to employment, such as hiring, termination, or discipline.”

For small employers with limited HR staff, this may be difficult, or even impossible, to accomplish. It appears that the EEOC recognizes this possibility in stating:

“If individuals who handle medical information obtained through a wellness program also act as decision-makers (which may be the case for a small employer that administers its own wellness program), they may not use the information to discriminate on the basis of disability in violation of the ADA.”

Larger, self-insured employers may already have security policies, programs, and training in place that could incorporate the EEOC confidentiality standards. Smaller employers that offer wellness programs which do not have such practices already in place may wish to consider adopting confidentiality policies, programs and training. 

What Happens Next

The new EEOC proposal is open for public comments through June 19, with final rules expected later this year. Those that wish to submit a comment to the EEOC regarding the proposed rules, may do so at this link (see green “Submit a Formal Comment” link on top right of page).

We’re here to help – if you have specific questions regarding your wellness program structure and compliance risk, contact your Relationship Manager or post your comments below. 


Topics: HR / Employee Benefits