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EEOC Proposes Rule Allowing Financial Incentives for Wellness Programs

May 29, 2015

On April 20, 2015, the Equal Employment Opportunity Commission (EEOC) issued a notice of proposed rulemaking that would allow employers to use significant financial incentives to encourage worker participation in employer-sponsored workplace wellness programs. These programs, which have become increasingly popular, aim to increase worker productivity by promoting healthier lifestyles. However, many of these programs require participants to complete a health risk questionnaire that may result in disclosure of disability. As a result, the Americans with Disabilities Act (ADA) requires that such programs be “voluntary.” At issue in the proposed rules is the extent to which an employer can impose financial incentives or penalties to encourage participation, while preserving the “voluntary” nature of the program.

The proposed rule would allow employers to impose a financial incentive of up to 30 percent of the total cost of employee-only coverage – including not only the amount that the employee pays but also the portion covered by the employer. For example, if an employer contributes $3,000 per year in premiums for an employee health plan and the employee contributes $2,000, the employer would be permitted to offer up to $1,500 (30 percent of $5,000) in incentives or penalties to participate in a wellness program that includes disability-related questions and/ or medical examinations. In addition, employers are prohibited from firing any employees who choose not to participate or excluding those workers from coverage under the company’s health insurance plan.

The regulations will be open for comment until June 19, 2015. For more information, visit the EEOC website.