Currently, guidance on permissible incentives (whether in the form of a reward or penalty) to participate in a wellness program is in a state of flux, but some clarity may be forthcoming sometime after July 1, 2022.
That is the date on which one of the five seats on the Equal Employment Opportunity Commission (EEOC), currently held by Republican Janet Dhillon, becomes available for President Biden to fill. The Commission’s current roster of three Republicans and two Democrats has been blamed for delays, including two consecutive failures, in the fall of 2020 and spring of 2021, to publish the Commission’s regulatory agenda. President Biden’s pick for the slot, Cohen Milstein, et al. attorney Kalpana Kotagal, failed to secure confirmation upon initially appearing before the Senate in May of this year. However Senate Majority Leader Chuck Schumer may bring Ms. Kotagal’s nomination to a full Senate Floor vote under rules that apply when there is no majority for either party in that house of Congress.
By way of background, the EEOC issued proposed regulations in January of 2021 that would have required that, to be considered “voluntary,” incentives for “participatory” wellness programs must be “de minimis,” such as a water bottle or t-shirt. Voluntariness is a requirement under the Americans with Disabilities Act whenever an employer performs a medical examination – which would include biometric testing under a wellness program – or makes a disability-related inquiry, which could be part of a Health Risk Assessment under a wellness program. Both biometric testing and HRAs are examples of participatory wellness programs in that they do not require any physical activity or health outcome, and these types of wellness programs are in wide use across the country. (For more background information on the EEOC and wellness incentives, including removal of incentive provisions under 2016 EEOC regulations, check out our earlier post.)
The Biden Administration required the EEOC to withdraw the 2021 wellness regulations before they were published in the Federal Register, as part of a regulatory freeze pending review. It is possible that, if Biden’s nominee to the EEOC secures confirmation, the proposed regulations containing the de minimis rule may be revived in their original or a modified form. Below is a brief summary of existing wellness incentive rules and some thoughts on what a de minimis incentive rule might look like, if enforced.
- If we ignore the EEOC withdrawn proposed regulations, what are the rules on wellness incentives?
Keep in mind that withdrawal of the 2021 EEOC proposed regulations followed withdrawal of the incentive provisions of 2016 EEOC final wellness regulations, which would have capped incentives even for participatory programs at 30% of the cost of self-only coverage if the program involved a physical examination or asked disability-related questions. Many employers are still using the 30% cap even for participatory wellness programs that involve biometric testing or HRAs.
In the absence of both sets of withdrawn EEOC guidance, the rules are set forth in HIPAA regulations and are as follows:
Participatory wellness programs (require no physical activity or health outcome) do not have any limit on incentives.
Health-contingent programs (require physical activity or health outcome) have a maximum incentive that is an amount equal to 30% of the individual premium under the most affordable group health plan option, or 50% if the program is designed to reduce or stop tobacco use.
Important Note: the cap on financial incentives is just one aspect of wellness compliance; there are also design parameters, notification duties, and other criteria that apply under HIPAA wellness regulations. One example of a required design criteria for a health-contingent wellness program is that an alternative means of earning a wellness incentive be made available to persons who are prevented from meeting (or attempting to meet) the original criteria due to medical conditions or issues. Another is that a participatory wellness program be made available to all similarly situated individuals.
- If the de minimis incentive rule is revived, for participatory wellness programs that include physical exams/disability-related questions, what type of incentive might qualify as de minimis?
The withdrawn regulations give the example of a water bottle or gift card of modest value and indicate that premium surcharges of $50 per month ($600 per year), an annual gym membership, or airline tickets would be more than de minimis. If a water bottle suffices, presumably other low-cost items – such as a t-shirt, towel, or stress ball – would also work. “Modest value” gift cards probably mean $10 or $15 or less. Note that these items may be taxable compensation. Any gift card would be, but a water bottle, t-shirt or other small item may qualify as an excludible de minimis fringe benefit under Internal Revenue Code Section 132(a)(4).
Clearly, there is a good bit of daylight between the HIPAA rules for participatory programs (unlimited incentive) and the de minimum rule under withdrawn EEOC guidance. And the voluntariness of incentives to take part in biometric testing is still being challenged in the courts, as evidenced by a recent court case from the Northern District of Illinois. Hopefully changes in the EEOC will be followed by guidance that brings some clarity to an area that has been frustratingly confusing for employers for a number of years.
The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. © 2022 Christine P. Roberts, all rights reserved.
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