At the end of 2017, wellness program incentives stepped back into the spotlight when a U.S. District Court overturned certain Equal Employment Opportunity Commission (EEOC) wellness program regulations. Our team is closely monitoring this to see how it impacts our customers and our programs.
Ultimately, we believe the court’s actions are a strike against coercive wellness programs that focus on narrow health outcomes. And we applaud that.
At Limeade, we look beyond just health and focus on whole-person well-being, which includes physical, emotional, work and financial well-being. We also believe in authentically supporting employees to improve their overall well-being and engagement.
But first, a quick refresher on the issue.
The EEOC enforces two main laws that impact well-being programs:
- The Americans with Disabilities Act (ADA)
- The Genetic Information Nondiscrimination Act (GINA)
These regulations prohibit employers from requiring medical examinations, making disability-related inquiries, or requiring disclosure of genetic information unless it is voluntary and part of an employee health program.
But what is considered “voluntary”?
In 2016, the EEOC attempted to define “voluntary” this way: if employers do not provide program incentives that exceed 30 percent of the total cost of health care coverage (among other requirements), the program is considered voluntary. This 30 percent limit was the EEOC’s way of allowing employers to use incentives to encourage employees to participate in the program. The industry designed programs and incentives relying on this guidance to ensure their program would be considered “voluntary.”
In December 2017, the U.S. District Court in the case of AARP vs. EEOC decided that the EEOC’s interpretation of “voluntary” was arbitrary and capricious. Citing that the EEOC lacked data to support the idea that this 30 percent incentive limit constituted “voluntary,” the court voided the limit. But, the court did not provide guidance on what incentive amount is valid and still considered “voluntary.” This leaves everyone in the industry with uncertainty as to how to design a program that complies with these laws.
The good news
The good news is that this ruling doesn’t impact our 2018 programs. There’s no need to scramble now since this new ruling doesn’t go into effect until Jan. 1, 2019. But it seems unlikely that the EEOC will provide new guidance in 2018 since they previously stated they were unable to propose new regulations until Aug. 2018, which wouldn’t be finalized before Oct. 2019 or effective before 2021.
Without court guidance or new rules from the EEOC, there’s no certainty that any incentive can be provided for programs that ask employees to undergo medical examinations, answer disability-related inquiries or provide genetic information.
While we recommend all customers discuss the EEOC regulations with their own legal teams to determine the level of risk you’re willing to take on, here’s what our team is thinking:
- We envision a future where activities are so personalized, users are so well connected socially and the personal benefits to these programs are so obvious that intrinsic reward is enough. In fact, many of our customers have gotten closer to this idea and have successfully stepped down their incentives.
- Consider designing a program that does not tie financial incentives to biometric screenings, Well-Being Assessments and other medical examinations. This is a conservative approach that will likely comply with the “voluntary” requirement under the ADA and GINA.
- When the court voided these rules, they essentially just put us back in time before the 2016 EEOC rules were in place. During this period, employers were providing incentives based on their own risk tolerance. We think modest incentives (e.g., 10 percent of the total cost of health plan coverage for an employee) pose relatively low risks until the EEOC provides additional guidance.
- We recommend moving away from programs that focus on a health outcome and instead look more holistically at whole-person well-being and engagement.
- We do not recommend providing incentives at or near the full 30 percent incentive level when tied to medical examinations, disability-related inquiries or genetic information.
THE Limeade Solution – Beyond Physical Well-Being
It’s clear punitive programs that use economically coercive incentives to narrowly focus on specific health outcomes create trouble under the law. If you punish people for non-compliance or force people to comply, morale suffers, people don’t improve, trust erodes and people won’t be motivated. It’s also unlikely that you’ll achieve any of your program or business goals.
That’s why Limeade is all about designing positive programs focused on whole-person well-being to motivate and engage people. We pull together well-being, engagement and social recognition software into one seamless experience — one that brings workplace culture to life and helps employees and companies feel more connected.
Our research shows incentives can be helpful to get people interested in the program — but are limited when it comes to motivating people. Most incentives don’t work in achieving the main goal — creating a motivated workforce that is healthy and engaged. That’s why we believe employers need to move away from extrinsic rewards and use more thoughtful and creative approaches to encourage improvement. Shifting away from extrinsic rewards also means rewards budgets can be reallocated and reinvested into tools, programs and resources that authentically support the employee to improve well-being and increase engagement.
After all, isn’t that what we should really focus on?
Speaking of intrinsic motivation — check out our webinar on the power of intrinsic motivation for employee engagement.