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Wellness Program Challenges in the ACA Era

EEOC guidelines to increase regulatory oversight of wellness programs.

Runaway healthcare costs and poor health habits of today’s workforce have led many organizations to institute wellness programs. Employers who do so are generally in a stronger position to manage medical trends year-over-year and avoid triggering the Cadillac Tax, while simultaneously increasing  employee engagement, satisfaction and loyalty.

Until recently, federal agencies that govern wellness have been very supportive of these programs, only stipulating that post-hire medical testing be generally restricted and that the wellness program operate as “voluntary” in nature.

That landscape is now changing, following the U.S. Equal Employment Opportunity Commission (EEOC)’s issuance of newly proposed rules for wellness programs under the Americans with Disabilities Act (ADA), with implications extended to the Patient Protection and Affordable Care Act (PPACA). These rules strive to ensure truly “voluntary” participation and avoid discrimination against workers based on medical conditions. Final rules are expected at the end of 2015.

“At any given time a plan sponsor can count on about 20% of a group’s healthcare plan participants driving 80% of that organization’s plan costs. It is the fear of the EEOC that if wellness screenings were to reveal who those 20% are, the employer could ‘fix’ their problem by firing or discriminating against them,” said Dennis Fiszer, senior vice president, chief compliance officer, Eastern Region, HUB International. “Furthermore, wellness initiatives raise concern as to whether they make the program voluntary. The EEOC sees incentives as tending to corrupt the voluntary nature of these programs.”

Viable Wellness PracticesSpelling out the scope of changes

While employer-funded wellness programs have been loosely regulated in the past, the EEOC’s new proposed guidelines will:

1. Define what it means for employee wellness programs to be “voluntary.” A wellness program is voluntary as long as the employer neither requires participation nor penalizes employees who do not participate.

2. Cap total employer incentives at 30% of cost of coverage for both tobacco and good health. (A departure from wider incentives contemplated under the health care reform law.)

3. Expand confidentiality requirements for notifications applicable to medical information, requiring employees to be clearly informed of what medical information will be obtained, how it will be used, who will receive it and how it will be kept confidential. This information is required to be distributed to all employees in the same manner as group health information.

A lack of clarity remains

There are key differences in how the EEOC applies wellness and how they contrast compliance with other federal agencies that contribute to a lack of clarity within the proposed guidelines specifically as it relates to spouses, tobacco and health plan eligibility.

Spouses and wellness: The EEOC has not provided clear guidelines as to how wellness rewards or penalties can be applied to spouses and family plans. The rules appear to cap the total incentives based on the single rate. This could be a sore point for employers, though, since a 30% reward at the family tier level is a lot more than the same discount at the single tier, and the larger dollar amounts would seem more influential in driving healthier behavior.

Tobacco: The EEOC takes a drastically different approach to tobacco than other agencies. The EEOC allows only for a 30% penalty when testing/screening for tobacco use, while PPACA allows for a 50% penalty.

Plan eligibility: One popular approach to wellness focuses on linking participation with plan eligibility, but this approach may not render the program “voluntary.” The U.S. Department of Labor (DOL) said this is possible as long as the employer never uses the information collected from the screening in a punitive way, but simply to make choices available to the employee. The EEOC objects to this and says employers can’t place those that deny a wellness screening into a default coverage plan option.

What is permitted?

While we await the EEOC’s final guidelines, there are a number of current wellness practices that still remain viable.

Outcomes-based wellness initiatives, as opposed to participation only or activity only programs that don’t require health improvement, are the most powerful tool for behavioral change. These can include programs to actually lower high cholesterol or promote weight loss. Under the new EEOC proposed rules outcome based programs are still allowed, but they must relate to a valid mechanism to prevent disease.

Generally, incentives can be used as part of a wellness program tied to group health plan premiums and routine biometric and tobacco screenings can still be facilitated up to the EEOC’s prescribed limits.

Health risk assessment questions, including self care inquiries and those about the employee’s general well-being will be permitted. Self-care questions include: Does the employee see a doctor for routine care? How many servings of fruits/vegetables does the employee consume daily? General well-being questions include: Does the employee perform required job functions? Do they use drugs/alcohol in the context of on-site activity?

Common Scenarios

Understanding how the EEOC’s proposed rules apply to your wellness program offers important insight about what is likely to satisfy compliance after the final rules are released. Here are two common scenarios:  

Company A: Company A offers a 20% tobacco differential ($100/month), a 15% wellness differential ($75/month) and the ability to earn an extra PTO day for completing wellness related activities. According to the new EEOC guidelines, the combined incentive – 35% - is too high (must be 30% total). Plus, the non-financial incentives (the minimum value of the PTO day) will need to be factored into the 30% as well.

Company B: Company B offers employees a chance to earn $750 toward their health savings account (HSA) for participation in an annual health screening and attending two on-site health lunch and learns. The EEOC proposed rule would impose new duties on the plan sponsor. Did the organization offer a reasonable alternative to earn the same $750 for the employee who doesn’t participate in the annual screening? Did they accommodate notices that disclose the medical information required, how it will be used and who will receive it?   

Contact your HUB employee benefits consultant or compliance officer to find out how your business can structure or restructure its wellness program to achieve compliance.