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EEOC’s New Round of Proposed Rules on Wellness

Employers will recall the numerous rules surrounding wellness programs and the limits placed on any incentives offered to employees for their participation in certain types of programs. We now have a new set of proposed rules from the EEOC which align in many ways with the original rules, but restrict rewards more stringently.

The two main categories of wellness programs under HIPAA rules are classified as participatory programs and health-contingent programs. The new proposed rules alter the rewards permitted under these plan designs. 

Participatory programs involve the requirement to participate in, or complete an activity that is not related to a health factor, and there is no requirement that any specific result is achieved. An example would be offering a taxable cash reward to employees that complete a health risk assessment. There has generally been no limit tied to the reward or incentive permitted under a participatory wellness program; however, the new proposed rules change this. Only ‘de minimis’ rewards will be permitted under the new rules. The EEOC goes on to state that a $50 cash award or a monthly gym reimbursement would not meet the de minimis standard. Only items such as a water bottle or very small gift card would be permitted.

Health-contingent programs offer an incentive to employees who perform an activity that is related to a health factor, or require certain results are achieved in the completion of a program. Examples include receiving the reward if an employee lowers his/her BMI to a designated range, or if the employee participates in an specific exercise program (since specified exercise can be related to a health factor). The new proposed rules, like the original rules, allow rewards/incentives for health contingent wellness programs if they meet a list of requirements:

  • the program is offered to everyone

  • the incentive is offered annually (at least)

  • there is an alternative to obtain the reward for employees that cannot participate or achieve the result, due to a medical factor

  • *the reward cannot exceed 30% of the total premium for either the single tier (if the reward is fo employees only) or family tier (if the incentive is available for employees and enrolled family members)

  • *Tobacco cessation programs may offer a reward up to 50% of the premium

*Note that the EEOC’s new rules allow the 30% premium reward/50% for tobacco cessation only if the program also meets the ADA safe harbor (discussed below). Otherwise, the reward must be ‘de minimis’ to be considered voluntary, just like rewards for participatory wellness programs. Examples of acceptable de minimis rewards include a water bottle, but as noted above, they DO NOT include a $50 taxable cash amount or a monthly gym membership.

If a health-contingent program meets the ADA’s safe harbor, it generally may offer rewards of up to 30% of the premium amount (50% for tobacco). The safe harbor requires that the program is designed based on health risks (and not to evade the ADA’s protection provisions), and that the program is integrated into the group health plan subject to HIPAA. Participatory only wellness plans generally may still offer any reward or incentive they choose. However, employers should still take note of the EEOC’s new emphasis on ‘de minimis’ rewards even though they are in the context of health contingent wellness programs at this time. The rules are still in proposed form, with comments being collected until mid March.

These new rules, when finalized, will likely alter some participatory employer wellness programs that offer rewards. Now is a good time to identify any rewards that are not likely to be considered ‘de minimis’ under the new standard.