Incentives for healthybehavior have become a critical tool for employers to addressrising health care costs. Accordingto a 2015 study from the National Business Group on Health andFidelity Benefits, jumbo employers spent an average of $878 peremployee on heath incentives, an increase from $717 per employee in2014.

The Patient Protection and Affordable Care Act provision thatincreased the amount of allowable incentives from 30 percent (andin the case of 50 percent in the case of smoking cessation) ofannual premium was welcomed by employers and opened the door togreater creativity in the use of incentives. The EqualOpportunity Employment Commission (EEOC) saw thingsdifferently.

The EEOC has a long-standing tradition of championing the rightsof employees and ensuring that employers don’t discriminate basedon race, color, religion, sex and other related standards. Theseefforts are an important part of the balance of theemployer-employee relationship for U.S. employers.

To this end, the EEOC has voiced its view that some of the basictenets of the reward and incentive programs used to drive healthybehaviors implemented by employers under the Health InsurancePortability and Accountability Act (HIPPA) and PPACA in factviolate the Americans with Disabilities Act and associatedregulations (ADA) and, in some cases, the Genetic InformationNon-Discrimination Act (GINA).

Despite the view of employers that compliance with HIPAA andPPACA should be sufficient to constitute a “legal” program, theproposed EEOC regulations, contend that many of the provisions thatwould be in compliance PPACA and HIPPA still violate the ADA andGINA. Protecting employees from inappropriate practices is animportant function of the EEOC. However, in this case, some of thepositions that the EEOC is taking in their proposed regulationswill actually end up hurting the very employees they are seeking toprotect:

1. If the EEOC makes it too risky or difficult to implementincentive and reward programs, employers are likely to simply dropthem. According to a 2015 study from the National Business Group onHealth and Fidelity Benefits, the average jumbo employer spent $878per employee on heath incentives. The proposed regulations woulddeprive them of the opportunity to earn these incentives. In fact,at its extreme, if employers feel that removing this valuable toolwill make it too difficult to drive down costs, some employers mayget out of the business of providing health care at all.

2. The EEOC has proposed that the 30 percent limit on the amountof incentives, which under PPACAapplies only to health-contingent or “outcomes” programs, wouldapply to all programs including participatory programs. If this wasthe case, it is likely that employers will shift their incentivedollars to outcomes programs and away from programs based on onlyparticipation.

This will make it harder for employees to earn incentives asthey will be required to achieve more outcomes and less will beavailable for basic participation.

3. The EEOC has proposed that the limit of 50 percent of premiumas provided under PPACA would only be available if smoking status is not verifiedby an actual test. This has the potential to deprive manynon-smokers of incentive dollars.

In fact, many companies have been using, and employees have beenparticipating in, biometric and other testing to verify smokingstatus for many years now. For those employees participating inthose tests, they would be deprived of incentives they are earningtoday.

4. The EEOC has proposed that the calculation of permittedincentive dollars be based on the premium of just the employee andnot of the employee and other family members as providedunder PPACA. This will likely cause employers to reduce oreliminate incentives for spouses and family members and thusdeprive the families of employees the opportunity to earnadditional dollars.

These amounts can be significant. According to a 2015 study fromthe National Business Group on Health and Fidelity Benefits, 54percent of employers indicated their program will include spousesand domestic partners in 2015 and the average incentive value perspouse/domestic partner has grown to $628 in 2015 from $530 in 2014(and from $420 in 2010) and to $894 in 2015 for jumbo (over 20,000employees) employers.

5. Finally, the EEOC has proposed counting non-cash incentivessuch as days off, prizes and other “in-kind” incentives in thecalculation of the allowable incentive amount. Today, employershave had these types of ancillary incentives in place in additionto the incentives available under HIPPA and PPACA. Employers viewthese types of incentives as valuable additions that can have ameaningful impact not only on participation rates but on theability to create a “wellness culture.”

In addition, these types of in-kind incentives are verydifficult to track and requiring employers to do so would place anadministrative burden on them. This would likely have theeffect of employers eliminating or reducing these valuableadditional incentive programs and techniques.

The EEOC is trying to strike a delicate balance betweenprotecting the rights of employees and affording employers theopportunity to take advantage of incentive programs. While thereare many PPACA provisions that employers were concerned about, theincrease in the use of incentives was one in which there waswidespread agreement. As a result, with the passage of PPACA,employers have been embarking on multi-year strategies to engageemployees, spouses, dependents and domestic partners withincentives. Not only will some of the EEOC’s proposed regulationshurt employers’ ability to rein in costs, but in fact the EEOC maybe hurting the very employees they are trying to protect.