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Federal guidance on wellness incentives receives qualified welcome

Federal guidance on wellness incentives receives qualified welcome

Health benefits experts say there are some holes that need to be filled and clarifications that need to be made in long-awaited federal rules that would govern the use of financial incentives in workplace wellness programs.

The rules proposed April 17 by the U.S. Equal Employment Opportunity Commission include stricter limits on the structure and dollar value of incentives that employers can use to drive employee participation and better health outcomes through a wellness program, as well as new notification requirements for employers that collect workers' medical information.

The proposals, long anticipated due to conflicts between the Americans with Disabilities Act and the federal health care reform law, have gotten a generally positive reception from business groups and health benefits experts, though many say changes are needed.

“The proposed rules clarify a major concern, but we still have some concerns about the details and will be addressing them when we submit our comments,” Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington, said in an email. “We hope that the effect of the rules will be to promote employer-sponsored wellness initiatives and not stifle them.”

Annette Guarisco Fildes, president and CEO of the Washington-based ERISA Industry Committee, said the EEOC plan is “a step in the right direction” and that the employer benefits lobbying organization plans to work with the agency “to further refine these rules to enable employers to aggressively seek to improve the well-being of employees and their families while also protecting the rights of all individuals.”

The EEOC's proposal would revise existing rules under Title I of the ADA to more closely align them with provisions of the Patient Protection and Affordable Care Act and the Health Information Portability and Accountability Act that raised limits on the dollar value of incentives tied to certain types of wellness and health management programs.

Last year, EEOC sued Honeywell for discrimination after the company said it would impose a $500 annual surcharge on employees' health premiums for those that did not participant in the company's wellness program. Similar federal lawsuits were recently filed against a pair of Wisconsin-based employers, Orion Energy Systems Inc. and Flambeau Inc.

Under the EEOC's plan, the value of financial rewards and penalties tied to participatory and health-contingent wellness programs — including but not limited to health insurance premium discounts and surcharges, cash gifts and employer contributions to health savings accounts, health reimbursement arrangements and flexible savings accounts — would be capped at 30% of the total annual cost of self-only coverage under the employer's group health plan.

Incentives tied to smoking-cessation programs would remain limited to 50% of the annual cost of self-only coverage, provided they do not seek employees' medical information.

Health benefits experts said capping incentives for participation-based wellness programs at 30% would significantly expand current restrictions under the ACA and HIPAA, which now apply only to rewards or penalties based on an employee's completion of a wellness activity or achievement of a specific health outcome.

“Applying the 30% limit to participation-based programs does take away some the flexibility employers currently have. But on the other hand, it does protect employees from some of the more draconian program designs out there,” said Derek Newell, the Palo Alto, California-based CEO of health benefits technology provider Jiff Inc. “I would guess that employers probably will want more flexibility, and I expect that a fairly substantial number of our clients will be taking advantage of the public comment period to ask for it.”

Another key difference between existing rules and those proposed by the EEOC is a provision that would bar employers from using “gated health plans” to drive wellness program participation.

Under the EEOC's proposal, employers would not be allowed to limit employee access to a particular group health plan or coverage packages within a group health plan for not participating in a wellness program.

They could, however, impose higher deductibles or other financial penalties.

The EEOC proposal also would require employers whose wellness programs collect employee medical information, including health risk assessments and biometric screenings, to provide participants with a written notice of what information will be collected, how it will be used, who can access it and in what form, and steps they will take to prevent improper disclosure of the information.

However, experts said it's unclear when participants would have to be notified, and to what extent employers would need to report delivery of the notices to the EEOC.

An important question left unanswered, experts said, is whether the final rules would be enacted prospectively or retrospectively, and how long employers would have to adjust their wellness programs.

“The amount of lead time that employers need to properly design a wellness program is a big undertaking, especially when there's a new notification or reporting requirement involved,” said Tami Simon, a managing director at Buck Consultants at Xerox in Washington.

The current deadline for comments on the EEOC's plan is June 19.

“I've rarely ever seen a situation where proposed rules are enacted as written,” said J.D. Piro, a Norwalk, Connecticut-based senior vice president at Aon Hewitt. “I think all of these issues will probably be addressed in the public comment period.”

Until then, experts suggest employers begin reviewing their wellness programs for potentially noncompliant elements.

“Something comprehensive will come out of all this, but I think we're still a ways away from seeing something final,” said Philip Voluck, a managing partner at law firm Kauffman, Dolowich & Voluck L.L.P. in New York.

“My advice would be to get out in front of this now,” he said. “To the extent that you can mold your program so that it complies with these — albeit proposed — rules, there's no downside.”