Steve Carroll March 3, 2021 13 min read

Wellness Programs Are Essential to Designing Comprehensive Benefits Strategies … and the Rules Are Massively Confusing

Learn the voluntary wellness program rules

Our teams have been very busy since last summer, responding to employers’ changing needs as they have adjusted to help employees cope with the changes wrought by the COVID-19 pandemic.

One common trend we noticed was the uptick in suspension of wellness programs that required in-person visits to medical providers for initial screening and tracking progress against a program’s goals.

While we expect those programs to come back as the pandemic recedes and more employees are vaccinated, those changes significantly impacted plan design and benefits administration during 2021 OE, especially with regard to insurance premium credits and other incentives that impact employee participation and return on employers’ wellness investments.

Adding to the pressure on benefits teams, as surveys have made clear, employees and their families are very interested in restarting physical wellness efforts, as the dangers of COVID-19 (hopefully) diminish and gyms and exercise studios fully reopen across the country.

And incentives can be critical to the success of these wellness programs.

The nonprofit Health Enhancement Research Organization summarizes its findings on how incentives affect participation in well-being programs and health outcomes in this infographic:

A Voluntary Wellness Program is Essential to Benefits Strategies


Unfortunately, despite the clear relationship between incentives and outcomes, regulatory considerations will continue shaping wellness program design even as we return to something resembling “normal.”

So, what does that mean for employers?

It means more confusion about what incentives they can offer to encourage employees to participate, what sorts of screening and outcome tracking they can include when designing programs, and exactly when they will be able to roll out programs that comply with the rules.

Here’s some insight and advice from our team of experts that will help employers navigate these complicated but critical changes.

Background: law and politics

Voluntary wellness programs rules have been in limbo for the last four years.

The U.S. Equal Employment Opportunity Commission in 2016 proposed a new set of rules to meet a court’s mandate by limiting the value of any incentive employers offer to employees to encourage them to participate in wellness programs like smoking cessation, weight loss and exercise programs that track employees' health data.

The EEOC relied on the rules in HIPAA, as amended by the Affordable Care Act, which allow incentives valued at up to 30 percent of an employee’s total health insurance cost to encourage participation in specific types of wellness programs.

Employers’ benefits teams were hopeful that the new rules would both address any legal issues and be clear enough to guide the design of new and revamped wellness programs, allowing employers to roll out those programs quickly as part of their COVID-19 response.

What’s the holdup?

Despite the tie to HIPAA regulations, the EEOC’s proposed wellness program rules ran into the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

Both the ADA and GINA generally prohibit employers from collecting employee health and genetic information except for closely prescribed purposes. Both laws include exceptions that permit collecting such information as part of employer wellness plans, as long as an employee provides such information "voluntarily.”

Wellness programs that don’t ask employees to share information about disabilities nor require medical exams or biometric screenings are not subject to limits on incentives and programs offered under group health plans and remain insulated by an existing safe-harbor exception.

The AARP and others sued the commission, arguing the proposed 30% limit would result in a financial incentive valuable enough that it would coerce employees to disclose personal health information out of fear they would lose out if they did not participate in a program. The incentives, the plaintiffs argued, would make participating in those wellness programs, in effect, involuntary.

And, they said, while HIPAA rules are OK with compensating employees who share health and genetic information, that information is strongly protected under the ADA and GINA.

In December 2017, the district court for Washington, D.C., agreed with the plaintiffs and vacated the EEOC wellness program regulations, effective Jan. 1, 2019.

The court ordered the commission to revise its rules to include privacy protections that met ADA and GINA standards. And, the court ordered, any financial or other incentives included in wellness programs had to be small enough that they would not coerce employees to participate in programs that required them to share protected information.

The EEOC finally released its proposed changes in early January 2021, after the election but before the new administration took office.

Then, before the new rules could be published in the Federal Register and opened for a 60-day public review and comment period (a requirement for any proposed new or revised regulation), the Biden administration on January 20 froze all pending regulation, including the new EEOC wellness program rules, and ordered agencies to review any rules that have not yet been enacted.

And remember that the questions around compliance and when employers can introduce or restart wellness and other voluntary benefit programs overlap with the larger benefits puzzle in myriad ways.

Employers are desperate for guidance

It is imperative that employers’ benefits teams get trusted advice on how these programs interact with the data employers collect and analyze on benefits engagement and usage, employee benefits communications, and all other aspects of benefits administration.

Here are some of the things you’ll need to consider as you assess the risk created by regulatory uncertainty surrounding wellness program design.

Highest Risk: If you’ve already put a 30% incentive and/or a penalty in place in your wellness program, you need to recognize that the new rules are almost certain to define your program as involuntary and in violation of the ADA’s and GINA’s guidelines.

Moderate Risk: You can act now to significantly reduce the incentive/penalty to an amount that, hopefully, will be small enough to increase the chances that employees’ participation will be considered voluntary. The EEOC’s guidance provides that an incentive/penalty is generally permissible under the ADA and GINA. This strategy may decrease the risk of challenge by the EEOC. The big question remains the allowable amount.

But keep in mind that, even if the EEOC doesn’t challenge your program, employees or outside organizations could still claim in court that your program violates federal law. We think the risk is not overly great if you have scaled back aggressive incentives or penalties (such as preventing an employee from enrolling in your program until health information is provided).

Lowest Risk: Put any existing wellness programs on hold and wait for the EEOC to review the latest proposed rules. Because the commission still comprises a Republican majority until 2022, the Biden administration may choose to wait until the commission shifts to majority-Democratic before reviewing and publishing the rules for comment, to ensure the rules align with Democratic priorities.

Meanwhile, if you have checked with expert counsel and are comfortable that specific programs are not subject to ADA or GINA rules, you are free to provide incentives/penalties for other programs that promote healthier habits and awareness.

Selecting the right benefits administration partner is critical

Even if employers are sure they’re in compliance with the applicable laws, wellness programs need to be seamlessly integrated into a comprehensive solution that is customized to individual employers’ benefits strategy and their existing infrastructure, allowing employers to roll out new or revised programs quickly once the regulations are clear.

That requires dedicated teams working closely with their clients’ plan sponsors from the very beginning of an engagement, teams that bring deep industry expertise and a long-term commitment to exceptional customer service.

By anticipating changes — like those affecting current rules around wellness programs and how they interact with group health insurance plans, payroll, HIPAA, ADA, GINA, COBRA, and other critical compliance responsibilities — an effective benefits administration partner will reduce business risks and eliminate expensive and disruptive surprises.

We’d love to show you what a true benefits administration partner can offer

We’re here when you need help implementing a world-class comprehensive voluntary wellness program. And we’ll make sure it integrates smoothly and seamlessly into your strategic benefits framework, whatever your organization’s size and complexity. Schedule a call to learn more.