EEOC Issues Rules for Employee Wellness Program Incentives

By | April 16, 2015

U.S. employers can reward workers with as much 30 percent of the cost of their health insurance benefits in return for participation in programs to monitor weight, cholesterol and other “wellness” measures, the Obama administration said Thursday.

Honeywell International Inc., for example, has given employees incentives worth as much as $3,500 to track health measures like body mass index and heart health.

Many other employers have similar programs, though there has been debate over how far they can go. While the Patient Protection and Affordable Care Act allowed employers to increase financial incentives for employee participation, the Equal Employment Opportunity Commission under President Barack Obama has sued companies, including Honeywell, arguing that they violated the Americans with Disabilities Act.

The proposed regulations issued today by the EEOC are intended to reconcile the two laws. The rule “makes clear that wellness programs are permitted under the ADA, but that they may not be used to discriminate based on disability,” the EEOC said in a statement.

Employers have struggled to make sense of a divide between federal agencies over the issue and were pleased with the announcement.

“The EEOC has removed the cloud of uncertainty,” said Steve Wojcik, vice president of public policy at the Washington- based National Business Group on Health. The group represents large employers.

Widespread Wellness

While almost unheard of five years ago, more than a third of U.S. employers now charge their workers a penalty that averages about $50 a month if they don’t participate in wellness programs, according to benefits firm Towers Watson & Co. Some companies charge as much as $1,600 a year to employees who refuse.

Those penalties typically come in the form of higher health insurance costs. The average premium for a single worker at a U.S. employer was $6,025 in 2014, according to the Kaiser Family Foundation, a Menlo Park, California, nonprofit that researches health issues.

In Honeywell’s program, workers and their spouses have been asked to undergo screening that includes drawing blood to test cholesterol levels and a determination of body mass index by measurement of height, weight and circumference.

Holdouts were assessed a $500 surcharge on their 2015 health insurance plans, and could lose as much as $1,500 in company contributions to health savings accounts and be docked as much as $2,000 more in tobacco-related surcharges, according to the EEOC’s complaint.

Lawsuits

A judge ruled Nov. 3 in Honeywell’s favor, denying the agency’s request to block the company from assessing penalties on workers who refused to participate.

“We have no plans to drop our pending lawsuits” against two other companies, Orion Energy Systems Inc., a lighting company, and Flambeau Inc., a plastics manufacturer, said Christine Nazer, a spokeswoman for the EEOC, in an e-mail.

Robert Ferris, a Honeywell spokesman, said the company was glad to see the rules. “The proposed regulations recognize that Congress views wellness programs as having an important role to play in the health care marketplace, both in terms of promoting employee health and helping to control health care costs,” Ferris said.

Incentives

Under Thursday’s proposed rules, employers would not be allowed to threaten or otherwise coerce workers to participate, other than by using financial rewards and penalties. Companies couldn’t punish workers with disciplinary measures such as suspension or firing if they opt out.

Financial incentives typically aren’t as effective as employers expect at luring workers into wellness programs, said Soeren Mattke, a health researcher at the non-profit RAND Corporation.

One company that levied a $600 penalty on smokers who refused to participate in a cessation program found that more than 70 percent of the workers chose to pay the penalty, Mattke said.

While the proposed rules take a step toward a unified policy with other agencies that have issued their own regulations, there are still differences. The Treasury Department, Health and Human Services Department, and Labor Department have put out their own guidelines, with differing rules to the EEOC’s proposal on how large the incentives can be and how to deal with tobacco cessation programs.

Under the EEOC proposal, employers wouldn’t have access to medical information about individual workers, only aggregated data about their entire workforce. Workers would have to be provided notices describing what information is collected in the wellness program, how it’s used and who sees it.

The agency said it will take public comments on its proposal until June 19, before issuing final regulations.

–With assistance from Zachary Tracer and Shannon Pettypiece in New York.

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