Surprising Court decision may disallow most wellness incentives
Have you ever wondered how a wellness program can be defined as “voluntary” rather than mandatory if noncompliance penalties often reach into four figures, while the Affordable Care Act’s 2018 “mandate” carries a noncompliance penalty of only $695?
You aren’t alone. Late last month, a federal court ruled in AARP v. EEOC that the Equal Employment Opportunity Commission must rewrite its definition of “voluntary” to achieve consistency with the dictionary definition. Further, the EEOC must issue rules soon enough for employers to incorporate the new limits for incentives and penalties into their own wellness programs starting in January 2019. Yet as you’ll read below, there is a silver lining — and for some employers this could be the best thing ever to happen to their wellness program.
By way of background, a wellness program involving medical exams (screenings) or inquiries (many health risk assessments) must be voluntary in order to comply with the Americans with Disabilities Act and the Genetic Information Non-Discrimination Act. However, until this decision, “voluntary” was never defined. There had been almost no limitations, or even judicial or legislative guidance, on allowable penalties or incentives that can be tied to screenings or HRAs. The only bright line was the Affordable Care Act’s 30%-of-total-health-benefit-spending limitation (50% for smokers).
Even that limitation applied only to contingent (outcomes-based) wellness programs. Employers had far more discretion in participatory programs. For instance, a previous decision in favor of a company called Flambeau had held that employees could be required to complete a health risk assessment in order to obtain employer-sponsored health insurance.
Further, the 30% limitation was easily gamed by offering two different health plans whose monetary values could not be readily compared, and making the more attractive one available only to people who submitted to these programs.
What follows are the questions most often asked about AARP v. EEOC. Note that the decision was very recent. You are likely reading about this for the first time here, and probably 80% of your counterparts in other companies don’t even yet know that this has happened, or what its significance is. (As a result, I’ll also be offering a Jan. 18 webinar.)
Q: What is covered?
Anything involving a medical exam, like a screening, or medical inquiry. There is a fine line. An HRA with questions like “How much broccoli do you eat?” is OK. Asking “Are you depressed?” would be affected by this ruling. A screening where employees just check off that they got it is OK. A screening where numbers are sent or stored somewhere (the vast majority) is affected. Other examples:
· OK: Walk around the block every day or forfeit 30%.
· Not OK: Walk around the block every day and we’ll see how much weight you lose.
· OK for employee health literacy quizzes: “Do you want educational questions about diabetes?”
· Not OK: “Do you have diabetes? If yes, then here are some educational questions.”
Q: Does this apply just to penalties, or to incentives as well?
It applies to both. Both represent forfeitures for non-compliance or non-participation. It is the magnitude that is likely going to be capped.
Q: Is there a cutoff point for when a fine is considered voluntary vs. coercive?
Not yet. Generally, as in this case, courts don’t write the rules. They sent it back to EEOC to write the rules.
Q: When we will know?
Best guess is that you’ll have an excellent idea by July, but it won’t be etched in stone likely until fall.
Q: Is this is last word?
No. First, the final rules have yet to be written, as noted above. The rules then must be approved by the district court if AARP files a motion claiming they are not in compliance.
Along with that uncertainty are two others. The EEOC could appeal, since these days it advocates limits on employee rights, rather than expansions of them. However, the DC Appellate Circuit would likely not be favorably disposed towards defining “involuntary” and “voluntary” as synonyms. Further, the AARP has not yet argued the observation in the opening paragraph, which should be persuasive once they do argue it.
Alternatively, an Act of Congress could gut GINA. The American Benefits Council, the leading lobbying group in favor of expanding wellness programs and penalties, could try to convince their legislative allies, like Virginia Foxx (R-NC5), to push her Preserving Employee Wellness Programs Act, for example. However, this bill is very controversial and is opposed by her constituents in both parties, largely because it expands the reach of wellness programs to include genetic testing. Consequently, Rep. Foxx may get cold feet about persevering.
Q: How does the rules-writing process work?
The EEOC will draft proposed rules, and then seek public comments. Wellness vendors will no doubt flood the EEOC with comments. Flooded comments or not, the EEOC is constrained (as always) by statutes, specifically ADA and GINA, and also (in this case) by the court in how it redefines “voluntary.”
Q: There is a long lead time for employers to design programs. How can they design certainty into their programs despite this major unknown?
It is still OK to offer medical screenings and HRAs (collectively, “medical exams”) OR dangle incentives or fines (collectively “forfeitures”), just as it is today. The difference is that the programs involving required forfeitures can’t also require medical exams, which both the ADA and GINA say can only be “voluntary.”
You can still require employee forfeitures up to 30% (50% for smokers), and you can still offer medical exams or medically inclined HRAs. You just can’t combine the two requirements. That’s because ADA and GINA govern only programs with required medical exams/inquiries. So, for example, you can require employees to either do screening or do a wellness program that does not require medical exams or HRAs, such as employee health literacy education. That makes the apparent “requirement” of a medical exam optional because an employee can opt out of screenings into health literacy.
Q: So what should we plan to do?
There are two possibilities. First, you could plan to dramatically reduce your incentives. However, that will reduce participation, possibly substantially.
Second, you could add a non-medical exam alternative to the option of HRAs/screenings. That one-stop fix solves your legal issues. Whatever vendor you add as that alternative should be willing to indemnify you against all relevant employee lawsuits filed under EEOC, as Quizzify does.
Q: What other analyses of AARP v. EEOC should we be looking at?
Q: OK, what’s the silver lining teased above?
Many employers have finally realized that their very own vendors know wellness loses money. The wellness industry’s own trade association, the Health Enhancement Research Organization, admits wellness is a losing value proposition even before accounting for incentives (and administrative overhead and extra doctor visit expense).
And, employers have learned, incentives generally don’t change behavior because employees revert to their old behaviors once the incentive ends. Ironically, even Flambeau — willing to go to court to preserve its right to make employees take HRAs — determined soon after its case was heard that HRAs were insufficiently incentivizing change, and dropped the requirement on its own.
Notwithstanding the futility of incentives from the employer’s viewpoint, some employees expect to receive them annually, when they fill out HRAs or get screened. This rewrite of the “voluntary” rules, likely capping incentives in the low three figures, will allow employers to cut way back on incentives…while blaming the government.
In other words, if you want out, now is the time.