To avoid potentially costly andtime-consuming issues, it is imperative for employers to carefullyconsider compliance, document the reasonableness of incentivechoices and lean on trusted counsel. (Photo: Shutterstock)

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Defining “wellness” for any one person is no simple task, andneither is deciphering a given wellness program's compliance under the law.

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In 2016, when the Equal Employment Opportunity Commission (EEOC)released its final regulations defining a “voluntary”program under the Americans with Disabilities Act (ADA), the entirelandscape — at least what can be seen on a hazy day — appeareddefined. But thanks to AARP's successful challenge to these regulations andthe EEOC's recent acknowledgement of the demise of its incentivelimitations, employers find themselves back in the “Wild West” ofsorts for wellness compliance.

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Related: 4 wellness priorities for employers in2019

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That being said, the uncertainty is not new for employers withwellness programs, and there is now more guidance than before, solet's take a moment to take in the current view.

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The current guidance under the Health Insurance Portability& Accountability Act (HIPAA) remains unchanged, so any wellnessprogram integrated with a health plan or otherwise constituting ahealth plan itself, employers need to assess whether the plan is“purely participatory” or “health contingent.” Thehealth-contingent plans (which condition the award of incentives onaccomplishing a health goal) will require additional complianceconsiderations, including—but not limited to—incentive limitations,reasonable alternative standards (RAS), and noticerequirements.

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The RAS should be of particular importance because they can bemissed most out of the compliance parameters. Often there is an“accidental” program such as a tobacco surcharge, and the employerdoes not even realize the wellness rules are implicated, or theemployer's RAS is another health-contingent parameter that actuallynecessitates another RAS.

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The Department of Labor is actively enforcing compliance in thisarea, so employers will want to take care.

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Additionally, the EEOC's ADA (and Genetic InformationNondiscrimination Act) regulations are still largely in force. Thisseems to be a common misconception—ranging from a celebration of norules to a lament for the end of incentivized wellness programsthat include disability-related questionnaires (like an averagehealth risk assessment) or medical examinations (includingbiometric screenings).

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The truth is somewhere in the middle.

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The ADA's own RAS and notice concepts still apply, along withconfidentiality requirements. All that has changed is that the EEOChas declined (again) to tell us at what point an incentive turns aprogram compulsory. So employers sponsoring wellness programssubject to the ADA have three choices, based on risk tolerance(In truth, there are four options,but charging above the ADA's previous incentive limitations wouldbe excessively risky):

  • Run incentives for ADA plans up to the 30 percent capthat existed before. This is the riskiest approach. Totake this route, an employer must rely upon HIPAA's similar (thoughnot exactly the same) incentive limitations as indicative ofnon-compulsory levels. The fact that Judge Bates did not acceptthis argument in the AARP case advises against this approach, butthis case does not have global application. If this path is chosen,it will be imperative to document analysis as to why this incentivepreserves voluntariness for your participants.
  • Keep the incentives below the previous 30 percent capbut incentivize the program. This approach does have riskbecause no one knows at what point an incentive takes choice awayfrom participants. However, the incentive is a useful tool tomotivate and reward health-conscientious behavior. The wellnessincentive limitations stood at 20 percent under the HIPAAregulations for quite some time without much concern, so this couldbe a relatively safe target. But the most important thing is tocarefully assess the overall structure of the program(s) offered,consider the culture and demographics of the employees who mayparticipate, and balance the desire to motivate against theparticular tensions of the program to decide on a reasonableincentive. Make sure to document this analysis and reconsider itevery time a program changes.
  • Not incentivize the program at all. This isthe most conservative approach from a compliance perspective butultimately not required. Before the EEOC's 2016 regulations,employers were incentivizing programs subject to the ADA, andnothing about the AARP case or the EEOC's response to it prohibitsincentives.

There's no doubt the wellness compliance landscape has changed alittle over this last year, but this is also just the tip of theiceberg. With enforcement heating up, it is imperative foremployers to carefully consider compliance, document thereasonableness of incentive choices and lean on trusted counselwhen necessary to avoid potentially costly and time-consumingissues.


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Brenna Davenport is a partner at Poyner SpruillLLP in the firm's Charlotte office. She assists closely heldand nonprofit entities in a broad spectrum of corporatetransactions and health law or health and welfare benefitcompliance matters.

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