Employers that want to encourage their workforces to become and stay healthy have faced some uncertainty in recent years about what incentives are permissible. Financial incentives are known to boost participation in some well-being activities, in particular, completion of health assessments and biometric screenings. Until the EEOC finalized its 2016 wellness regulations, offering any financial incentive had some degree of compliance risk for an employer. Yet, many well-being initiatives did offer meaningful financial incentives. In 2017 and 2018, employers had a brief window of clarity around what was permissible for financial incentives. However, when the AARP prevailed in its lawsuit against the EEOC’s wellness regulations that had established incentive guardrails, the regulations were vacated and employers were again faced with uncertainty about what level of financial incentives were permissible and consistent with participation in wellness programs being voluntary.
To address this void in the wellness regulations, the EEOC recently released proposed revised regulations that aim to provide some clarity around permissible incentives for employer-sponsored well-being initiatives. It should be noted that the proposed amendments have not yet been published in the Federal Register, which would initiate a 60-day period for public review and comment. Thus, it is unclear if, or when, the proposed regulations will be finalized and become effective. Furthermore, it’s unclear if the Biden administration’s “Regulatory Freeze Pending Review” memo will require the proposed rules to be reviewed by the EEOC and could be rescinded and rewritten.
In their current form, the proposed regulations don’t necessarily line-up with well-being best practices, the current structure of many incentive programs, or where they can go in the future. For example, many well-being initiatives currently use health assessments and biometric screenings as tools to help individuals understand their current health status and what they can focus on to improve their health. The results of these assessments also allow each person to receive customized recommendations for appropriate programs and services designed to improve well-being – personalized vs. one-size-fits-all – a best practice. The blinded, combined results of these assessments may also be used to measure the progress of the entire well-being initiative and steer what future offerings and investments make the most sense. The proposed regulations would limit an employer to offering only de minimis incentives for a health assessment, biometric screening or other medical exam or health inquiry of an employee subject to the Americans with Disabilities Act. This would likely lead to large reductions in participation in these activities. Most people need a nudge to take action on their health, which incentives can provide.
The EEOC’s proposed regulations do allow for a safe harbor to offer more than de minimis financial incentives for health-contingent wellness programs (up to 30% of the cost of medical coverage; 50% if the wellness program is related to tobacco use cessation), but only for those enrolled in a group medical plan. This conflicts with the best practice of including the entire employee population which contributes to a culture of health and well-being. Offering incentives to all employees, regardless of medical plan enrollment, is consistent with the best practice of cultural and organizational support for health and well-being.
Another challenge with the proposed safe harbor is that it only applies if the incentive design is health-contingent, which means the program is based on the health activities or health outcomes of the participant and not based on participation alone. Mercer’s National Survey of Employer-sponsored Health Plans has reported that around 25% of employers offer outcomes-based well-being programs with financial incentives. This safe harbor requirement could potentially require the majority of employers that offer financial incentives for health inquiries to change their underlying approach from rewarding for participation to rewarding for results. While health-contingent programs can be appropriate in some situations, they are not an approach for every organization and may require a higher level of communication and trust to be successful. As well, at least one recent study concluded that outcomes-based incentives weren’t any more effective than participation-based incentives in achieving higher participation or improved health targets.
Additionally, one important question that remains to be answered is if the final regulations will support the positive trend of employee choice to engage in a variety of well-being activities. Many initiatives now embrace a broad definition of well-being, including physical, mental, emotional, social and financial wellness. It is not clear if an employer could still offer a greater than de minimis financial incentive for a health inquiry if that same incentive could be earned in another way. For example, could an employer offer a menu of four choices and completing any two of them would earn a $100 incentive? In this example, the menu might include health assessments and biometric screening, but also two other non-health inquiry options such as attending a health webinar or participating in a health improvement program (tobacco cessation, managing stress, managing weight, etc.). If this were possible, employers would have a viable option to continue to offer meaningful incentives to encourage participation in a variety of health-promoting activities, without having to eliminate health inquiries or change their incentive model to focus on health-contingent actions or outcomes.
To sum it up, having final wellness regulations that provide greater clarity for employer-sponsored well-being initiatives would be a good thing. With some refinements to what is currently proposed by the EEOC, the regulations could both maintain the voluntary nature of health inquiries for employees, and at the same time allow employers to continue to offer meaningful incentives to improve the health and well-being of their workforces.
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