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Informing Policy. Advancing Health.

New Rules for Employee Wellness Programs Spark Controversy

What comes to mind when you think of wellness? Yoga? Kale? Long walks in the park?

If you work for an employer offering a wellness program — and about half of U.S. employers now offer some sort of program to promote healthier lifestyles and control health care costs — your list probably includes cholesterol screenings and weight loss classes as well.

But as employer wellness programs pick up steam, some consumer and disability rights advocates worry that employees will feel pressured to participate. They’re also concerned that employers may gain medical and disability-related information about their workers.

The Equal Employment Opportunity Commission (EEOC) has just issued new rules regarding both the incentives and penalties that companies can use to encourage employees to participate in their voluntary wellness programs. (The rules apply only to employer wellness programs that require employees to provide medical information.)

Under the new rules, the incentives or penalties can be worth up to 30 percent of the cost of covering an employee under the company health insurance plan.

Incentives often take the form of cash, prizes, a reduction in health care premiums or lower cost sharing. Penalties, on the other hand, could include charging an employee who doesn’t participate in the wellness program more for health insurance than for those workers who opt in to the program.

Simply put, the EEOC considered the level at which a reward or penalty becomes such a strong inducement that the wellness program is no longer considered voluntary.

“To give meaning to the ADA’s (Americans with Disability Act) requirement that an employee's participation in a wellness program must be voluntary, the incentives for participation cannot be so substantial as to be coercive,” the agency said.

Even so, such groups as the National Partnership on Women and Families are raising concerns over the ruling. They argue that the 30 percent threshold can run into the thousands of dollars, an incentive so large that employees may decide to participate and to provide private medical information that they otherwise would have kept to themselves.

For example, the average cost of single coverage in Colorado is $5,860, according to the Colorado Division of Insurance (DOI), meaning that a 30 percent discount would be worth about $1,760.

The ruling is seen as a win for businesses, but employers didn’t get everything they wanted. Employers had hoped that the maximum incentive would be higher —30 percent of the cost of family health insurance. The average cost of family health insurance in Colorado is about $16,000, according to the DOI, so 30 percent would be $4,800.

The EEOC ruling also says that wellness programs must be “reasonably designed” to promote health and prevent disease, meaning they can’t be overly burdensome and must follow ADA requirements. For example, if a wellness program requires walking, an employer must provide an alternative for an employee who uses a wheelchair.

The rules also try to address privacy concerns by making sure that all the data collected are used appropriately. Participants must be told who will access the data, and the information can only be in aggregate form.

The final rules go into effect in 2017 and apply to all applicable workplace wellness programs.