Health Insurance

Obama administration issues rules for employee-wellness plans

The Obama administration is finally giving employers the rules of the road for structuring wellness programs that won't violate health privacy and discrimination regulations, nearly a year after first proposing them.

"We now have rules. And I think it's very important to underscore that," said Kathryn Wilber, American Benefits Council senior counsel for health policy. "Employers want certainty. They want to be able to offer plans to employees and not worry about being out of compliance."

The new guidelines offer a balance between employers' efforts to reward workers for improving their health, and regulations that protect health privacy, such as the Health Insurance Portability and Accountability Act, said Jenny R. Yang, chair of the Equal Employment Opportunity Commission. They also prevent discrimination based on health conditions, such as the Americans with Disabilities Act, she said.

Employee wellness programs guidelines won’t violate health privacy and discrimination regulations.
Braun S | Getty Images

"The commission worked to harmonize HIPAA's goal of allowing incentives to encourage participation in wellness programs with … provisions that require that participation in certain types of wellness programs is voluntary," Yang said in a statement. She added that the rules try to "provide important safeguards to employees to protect against discrimination."

The rules come almost two years after the EEOC sued three large employers, including industrial conglomerate Honeywell, charging that their wellness health screening programs punished workers who opted out of participation.

A spokesman for Honeywell cautiously welcomed the clarity offered by the new guidelines.

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"While we are still reviewing the EEOC's wellness rules that were posted today, they don't appear to contain any major surprises that would be objectionable from our standpoint," said Robert Ferris, director of external communications at Honeywell. "We would have liked even more flexibility — especially with respect to tobacco incentives — but at least we can continue to promote and administer our wellness programs without any further threat of litigation."

Benefits experts said the EEOC guidelines now align more closely to the Affordable Care Act, which allows companies to offer financial incentives worth no more than 30 percent of a health plan value, for undergoing health screenings. The ACA allows larger incentives for smoking cessation programs than the EEOC, which caps anti-smoking incentives at 30 percent.

"The rules recognize the value of incentives to participate in wellness programs," said Leslie Anderson, a partner at health benefits firm Mercer. "Wellness programs that ask employees or their spouses to complete health risk assessments or undergo biometric screening will need to comply with the notice and other rules required by the EEOC, including the 30 percent incentive limit."

In order to comply with health privacy and nondiscrimination laws, the EEOC said employers must also notify workers of what will happen with the health data, and assure them of confidentiality by encrypting their private information, and provide notice if there is a data breach.

The wellness screening programs must also be voluntary. Critics, including officials from AARP, say the financial incentives put too much pressure on low-wage workers to take part and could work against older workers.

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"AARP firmly believes the new EEOC rules violate the plain language of the civil rights laws and their requirement that submitting to wellness questionnaires and exams must be voluntary," said David Certner, legislative policy director of AARP government affairs. "AARP is reviewing the details of the rules and weighing possible regulatory fixes. These rules are ripe for a legal challenge by workers who are facing coercive penalties."

In 2014, it was the EEOC that went to court, arguing that wellness screenings at Flambeau, a plastics manufacturer in Wisconsin, violated the ADA because they were mandatory. A federal district judge disagreed and ruled in favor of the company. The EEOC appealed that ruling, and the case remains active.

Flambeau's attorney, John Gardner, said a judge might also take issue with the EEOC's requirement that screening be completely voluntary.

"I think there is an open question as to whether or not courts are going to agree with the EEOC," said Gardner, "and ... the voluntary requirement that's referred to here."

American Benefits Council's Wilber said most employers understand that workers worry about privacy and how their health data will be used, and want to use wellness plans as carrot rather than a stick.

"We realize that if someone is feeling uncomfortable and information is shared, they're not going to be willing to share it," she said. "It's important to make sure those protections are there. Employers are definitely supportive of that."

The new EEOC wellness plan rules take effect on Jan. 1.