What is an employer to do when there are no guidelines for incentivizing participation in wellness programs?

Certain federal rules governing wellness program incentives were recently nixed. This leaves employers without guidelines for incentivizing participation in wellness programs without rendering them involuntary under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

When is an incentive/penalty “voluntary”?

The ADA and GINA largely prohibit employers from asking employees and their families about their health, unless answering those questions is “voluntary.” Since neither the ADA nor GINA defines voluntary, employers that wanted to implement wellness program incentives asking for such health information welcomed the Equal Employment Opportunity Commission’s (EEOC) final rules published in May 2016. Those rules provided that employers could use an incentive or penalty of up to 30 percent of the cost of self-only coverage to encourage employees to participate in a wellness program without rendering it involuntary. This certainty, however, was short-lived. A federal court struck down the rules and basically told the EEOC to try again.

When can employers expect new guidance?

There is no telling when the EEOC will issue new rules. It has been reported that the EEOC’s target is summer 2019, but government agencies do not always meet their projected deadlines. And, even if the EEOC issues new rules in the coming months, it could still be years until they are finalized.

How should employers proceed now?

Until the EEOC issues new rules, employers should proceed with caution based upon their appetite for risk when it comes to encouraging healthy behavior in the workplace. For 2019 and beyond, the three best options for incentives for wellness programs that are subject to the ADA or GINA generally are:

Highest risk: Retain any incentive/penalty that is equal to 30 percent of the total cost of employee-only group health plan coverage. But keep in mind that, although 30 percent was not rejected as coercive, a federal court previously noted that such a reward/punishment could render a wellness program involuntary and thus in violation of the ADA and GINA. Moderate risk: Reduce the incentive/penalty to an amount small enough for an employee’s participation to be considered voluntary, regardless of his/her income. There is little doubt that an incentive/penalty is generally permissible under the ADA and GINA. The question that remains is what amount the EEOC will consider coercive. This approach likely decreases the risk of challenge by the EEOC or individuals because they generally only go after incentives/penalties that they consider noncompliant. The lawsuits generally have not been successful unless they were challenging a particularly aggressive incentive/penalty. Lowest risk: Eliminate the incentive/penalty and wait for the EEOC to issue new rules.

Are all incentives/penalties impacted?

Keep in mind that only wellness program components that are subject to the ADA and GINA are impacted. Thus, even in the absence of guidance from the EEOC, employers can still promote healthy habits in ways that are not subject to the ADA or GINA, such as a gym membership or lunch-and-learn programs. Such offerings could, of course, be subject to the Health Insurance Portability and Accountability Act and the Affordable Care Act or be considered taxable fringe benefits.

Assess, monitor and consult

Going forward, given the absence of guidance from the EEOC, employers need to assess their current wellness program incentives and their appetite for risk. They should also monitor for developments in proposed rules and consult with experts when planning their wellness program strategies for the next few years.

A partner at Fisher Phillips, Mathew Parker defends employers against a wide range of employment claims ranging from unlawful discrimination, harassment and retaliation to wrongful discharge and wage-and-hour violations.

As a Fisher Phillips associate, Melissa Shimizu focuses on helping employers navigate the Employee Retirement Income Security Act (ERISA) and other state and federal laws impacting the design, implementation and ongoing compliance of their employee benefit plans and programs.