Employers seeking to get workers to join wellness programs and provide medical information can set financial rewards or penalties of up to 30 percent of the cost for an individual in the company's health insurance plan, according to controversial rules finalized by the Equal Employment Opportunity Commission in May.

Although such penalties or incentives could run into the hundreds or even thousands of dollars, the programs are considered voluntary, and therefore legal, the commission said.

According to the EEOC, "The rules seek to ensure that wellness programs actually promote good health and are not just used to collect or sell sensitive medical information about employees and family members or to impermissibly shift health insurance costs to them."

The highly anticipated rules from the Equal Employment Opportunity Commission will go into effect next January and will help define how these rapidly expanding wellness programs are run. They are also an effort to coordinate consumer provisions in several competing federal laws, including the Americans With Disabilities Act, the Affordable Care Act and Genetic Information Nondiscrimination Act of 2008.

Generally, employers reacted cautiously to the new rules. Many groups had advocated for stricter provisions and even higher penalties or incentives.

The $6 billion a year workplace wellness industry is booming as employers aim to reduce the high costs of health care by promoting prevention. Typically, employers contract with a firm to gather employee information and provide wellness services.

Most employers have some type of program, but there is little evidence that these efforts save money or improve health.

What's In the Final Rules?

The final rules cover a wide variety of issues, from the financial incentives to how the medical information gathered must be protected.

One rule clarifies what wellness programs must do to comply with the requirements of the Americans with Disabilities Act (ADA), a law aimed at preventing discrimination. The ADA generally prohibits employers from asking questions related to health or disability, except in limited circumstances, such as through voluntary workplace wellness programs.

Another rule extends the ability of employers to seek health information from workers' spouses. This can include asking spouses to fill out health risk questionnaires or have medical exams, so long as the programs are considered voluntary.

To further clarify what's voluntary, the EEOC rules, in effect, say that employers cannot charge workers the full cost of their health insurance if they choose not to participate in wellness programs, saying "safe harbor" provisions in the ADA do not apply to wellness programs. Last December, the EEOC lost a federal court case, EEOC v. Flambeau, when an employer used the ADA's "safe harbor" clause to argue that it could charge a nonparticipating worker full costs for health care.

The new rules apply to wellness programs offered as part of an employer's health insurance package of benefits and to those that are separate from the health plan.

Some wellness programs are simple: They offer discounts to gyms or access to weight loss programs. Increasingly, however, programs ask workers to fill out some kind of health risk assessment questionnaire. And an increasing percentage also want employees to take medical tests, such as those for high cholesterol, blood pressure, weight or diabetes.

Workers' advocates had sought a provision in the final rule to give employees an exemption to filling out the risk assessment or having a medical exam if they instead provided doctors' certifications that they were under medical care. The final rule did not add that exemption.

The rules also kept the limits on financial incentives that was in the draft regulation largely intact. Slightly more than half of workplace wellness program use financial rewards or penalties to encourage workers to participate. Those incentives range from small-dollar gift cards to discounts for the health plan premium or annual deductible. Employees who don't participate don't get the discounts, which some advocates say is a penalty.

The rules say the total dollar amount of the incentive or penalty can't exceed 30 percent of single-only coverage offered by the employer. At an average cost of roughly $6,000 a year, that could be about $1,800. That amount could be doubled if the employee has a spouse on the plan, according to the rule.

Smokers, however, may see higher costs if they choose not to participate. Those who acknowledge their smoking can face financial incentives - or penalties - of up to half the cost of single-only coverage. But, if an employer requires medical testing to determine if employees smoke, the limit drops back to 30 percent under the rules.

Privacy and Emplyee Personal Data

As the programs start asking about ever more sensitive areas like genetics, mental health issues, finances, sleep habits and overall well-being, there's growing concern about whether existing privacy and anti-discrimination regulations are adequate.

The new rules aim to address those concerns by requiring employers to tell workers which entities, such as the third-party administrators that typically run wellness programs for employers, can access their personal medical data.

Additionally, any data gathered by the wellness company and then shared with employers must generally be in an aggregate form that isn't likely to disclose the identity of individual employees.

Still, advocates say, the regulations have a loophole that does allow employers to see individual data provided to the wellness programs if needed to administer their health plans. That is designed to avoid delays in patients getting treatment and making sure bills are paid on time. But consumer advocates raise concerns that such rules open a loophole for too much information sharing with health plan sponsors, which can include self-insured employers.

In a section added since the draft proposal was released, the rules also require that wellness programs may not require employees "to agree to the sale, exchange, sharing, transfer or other disclosure of medical information...as a condition of participating."

Wellness programs also can't collect the medical information simply to have it. Instead, it must be used to advise a worker how to improve health or to design a wellness program.

Such programs must be "reasonably designed" to improve health and not a "subterfuge for violating...laws prohibiting employment discrimination."

The new rules go into effect January 1, 2017.

If you have questions or concerns about how these new workplace wellness rules affect you, please contact us.

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