EEOC Decides “Voluntary” Wellness Programs Can Include Financial Incentives and Penalties

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Wellness programs sponsored by employers are supposed to encourage workers to lose weight, quit smoking, and become more active to be more “well” and healthy to reduce health-care costs and lost days from work. Until April, the Equal Employment Opportunity Commission (EEOC) warned employers that plans involving financial incentives wouldn’t be “voluntary” or comply with the Americans with Disabilities Act (ADA). Now, the EEOC has reversed course, stating limited incentives (and disincentives for not being “well” or participating in the plans) would be permissible, according to the Associated Press (AP).

This represents a major victory for employers who have long lobbied for such incentives, which are part of the federal Affordable Care Act (or ACA, popularly known as Obamacare), which the EEOC is trying to balance with the ADA.

The Monetary Incentives Behind Wellness Plans

Employers are seeking ways to lower costs associated with chronic illnesses, which can be affected by lifestyle choices in addition to medical causes. To get more employees involved, many plans include financial incentives for participation and reaching health goals as well as penalties for not participating.

The EEOC has proposed a rule that financial incentives can be as high as 30% of the cost of premiums for employee-only coverage (if the total premium paid by both the employer and employee for coverage is $5,000, rewards or penalties can’t exceed $1,500). Currently, an estimated 40 percent of wellness programs use financial incentives, and in most cases, the existing penalties or rewards are less than the EEOC’s proposed limit. Now that these programs have the EEOC’s apparent approval, programs using financial incentives, and their size, could increase.

What Is the Impact of Wellness Programs?

Wellness programs have become a $6 billion industry, with an estimated 85% of employers with more than 1,000 employees having some kind of wellness program, according to a study by the Rand Corporation, as reported by Fast Company. However, there is little concrete evidence these programs actually save employers money in decreased health-care costs or lower absenteeism:

  • Only 24 percent of workers at companies with wellness programs participate, mostly because they don’t know about them, according to a Gallup study.
  • The Rand study looked at 600 businesses with at least 500 employees each. The study found modest reductions in health-care costs, but they were not “statistically significant” and could not be linked to the wellness programs.
  • A 2013 study of a St. Louis area hospital system found its wellness program resulted in a sharp drop in hospitalizations, but increased outpatient costs negated those savings, according to the Associated Press.

Other Concerns About Employer Wellness Programs

Beyond the financial incentive issue, the EEOC is proposing mandatory confidentiality of employee medical information and preventing employers from firing workers who decide not to participate or denying them access to the company health plan.

Confidentiality is an issue because wellness programs often seek very personal, private information from employees (Do you ever drink and drive? Are you sexually active? What diseases have you been diagnosed with? Are you experiencing stress at home?) that could be embarrassing or harmful if released to management, co-workers, or the outside world.

Though companies managing these programs insist that information will be kept private, medical information is increasingly attractive to computer hackers. There have been 1,187 incidents where health information covered by the federal Health Insurance Portability and Accountability Act (HIPAA) was hacked, improperly disclosed, lost, or stolen, involving more than 41 million individuals since 2009, according to reports provided to the U.S. Department of Health and Human Services, reports Bloomberg News Service. This includes only instances where more than 500 records were lost because the loss of fewer records doesn’t need to be reported under HIPAA.

Summing It Up

Wellness programs are relatively new, and the EEOC’s regulation at this point hasn’t been finalized. A “wellness program” just used as an excuse to shift more health-care costs onto disabled employees (especially those who can’t meet health goals because of their disability or side effects of treatment) may be subject to future legal action.

It’s ironic that many companies have spent billions of dollars and are trumpeting the virtues of wellness programs while stressing out their workforce by making sure employees are constantly connected to work, providing vacation time on paper but making it practically impossible for all of it to be used, and stressing that the worldwide hypercompetitive marketplace demands more and more time and effort from employees (while wages remain stagnant). If the goal of employers truly were wellness, there are many other actions they could take, and there would be no need for wellness programs.

If wellness isn’t the goal of wellness programs, what is? Whatever wellness ride American employees will be on in the future, the EEOC has given its stamp of approval.