Washington is on its way to clearing the path for employers to reduce health care costs by incentivizing healthy behaviors in employees. The Affordable Care Act (ACA), which was signed into law in 2010, allowed these incentive programs, but the Equal Employment Opportunity Commission (EEOC) raised questions about their legal implementation. After years of litigation, the EEOC on April 16, 2015 proposed a rule clarifying how companies can take advantage of the Affordable Care Act’s provisions.
Employers have more options than ever before to cultivate healthier employees and cut costs. Now, the challenge is designing benefits programs that comply with the rules and are not burdensome to manage.
What kind of programs does the proposed rule apply to?
The Affordable Care Act (ACA) allows employers to offer employees incentives to improve their health. Some of these programs ask employees to engage in healthy behavior – like becoming more active, not smoking, or eating better. Some ask employees to complete health risk assessments or screenings for risk factors – like high blood pressure or high cholesterol. Under the ACA, there are two types of these programs:
Participatory: These are programs that don’t require an individual to satisfy a health standard to get the incentive. For example, a program that reimburses employees for a gym membership.
Health-Contingent: These programs require an individual to reach a health goal to get the incentive. There are two types:
- Activity-only: Employees are required to engage in an activity, like a diet or exercise program, to get the incentive.
- Outcome-based: Employees have to meet a health standard or follow a program towards meeting that standard to get the incentive. For example, an employer screens for high blood pressure and offers a reward to employees with healthy blood pressure or employees who take steps to lower their blood pressure.
What are the rules for designing these programs?
1) Programs must be voluntary. Under the EEOC’s proposed rule, both participatory and health-contingent programs must be voluntary. This means that employers:
- May not require employees to participate.
- May not deny access to health coverage or limit coverage for non-participation.
- May not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees.
2) Programs must be “reasonably designed” to promote health or prevent disease. Both participatory and health-contingent programs must have a reasonable chance of improving the health or preventing disease in participating employees, must not be overly burdensome, and must not violate the Americans with Disabilities Act (ADA). For example, a program that collects medical information from employees, but does not use it to design programs that would improve employee health is not reasonably designed.
3) Employers must provide notice of how medical information is collected and shared. Employees must receive a notice that describes what medical information will be collected, who it will be shared with, how it will be used, and its confidentiality.
4) Employers must give employees the opportunity to qualify for an incentives program at least once a year. Employers can let their employees join the program more than once per year, if desired.
5) Incentives must be limited to 30 percent of the cost of the employee’s health coverage. According to the final ACA rule, health-contingent programs must not exceed 30 percent of the total cost of the individual employee’s health plan (50 percent for tobacco cessation programs). For example, if the total cost for Jane’s health care plan is $5,000 – Jane paying $1,000 and her employer paying $4,000 – the maximum incentive for Jane is $1,500, or 30 percent of $5,000.
The EEOC’s proposed rule adopts this limit, but it makes two changes. First, it extends the limit to include participatory programs when they require employees to answer disability-related inquires or take medical examinations. Second, it says that some tobacco cessation programs – those that subject employees to a medical screening – are also subject to the 30 percent limit.
6) Employers must provide reasonable accommodations or alternatives that enable employees unable to participate to earn the incentive. While in the ACA rule, this guideline applied to health-contingent programs, the EEOC’s proposed rule extends it to participatory programs.
- Example of an accommodation: If an employer offers an incentive for employees to attend a nutrition class, a sign language interpreter must be provided for a deaf employee who needs one to participate in the class.
- Example of an alternative: An incentives program requires a health screening that includes drawing blood. If an employee’s disability would make that test dangerous, an employer would need to provide a different kind of health screening.
- An employer also should provide information about the program in alternative formats for employees with disabilities—for example, a Braille version of the materials for a visually impaired employee.
7) Employers must disclose the availability of the reasonable alternative. Employers must describe the alternative or waiver of requirements in all materials describing the terms of a program. For outcome based-wellness programs, this notice must also be included in any disclosure that an individual did not satisfy an initial outcome-based standard.
When do the EEOC’s rule changes go into effect?
The EEOC proposed rule is not final. It is open for public comment until June 19, 2015. As the new rules develop, Jiff is staying on top of changes to help you optimize your incentives programs.