Proposed Wellness Program Rules Leave Questions Unanswered

A proposal from the EEOC did not address all the issues between employer wellness programs and the Americans with Disabilities Act (ADA).

“The idea [behind issuing proposed rules for employer wellness programs] was to provide clarity and consistency, and while the EEOC was conceptually in the neighborhood, it provided a little more clarity, but a lot more inconsistency,” says Michael Dermer, chief incentive officer at Welltok, a Denver-based company that created the CaféWell Health Optimization Platform.

Dermer, based in New York City, notes that the proposed rules recently issued by the Equal Employment Opportunity Commission (EEOC) did not address issues with the Genetic Information Nondiscrimination Act (GINA)—tying incentives to family history information—and that was the basis for one of its claims in a lawsuit against Honeywell International. He also tells PLANSPONSOR that if the proposal is passed in its current form, it will establish two sets of rules, one for outcomes-based incentives and one for participation-based incentives, particularly when it comes to smoking cessation.

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For background, Ryan Gorman, an associate in the Employee Benefits and Executive Compensation practice of King & Spalding LLP, in Atlanta, Georgia, explains that in 2013, the Internal Revenue Service (IRS) and the Departments of Labor (DOL) and Health and Human Services (HHS) issued final regulations based on changes made by the Patient Protection and Affordable Care Act (ACA) to set up an affirmative defense for employers that wellness incentives complied with Health Insurance Portability and Accountability Act (HIPAA). However, the EEOC said wellness programs could satisfy HIPPA under those regulations, but may not be in compliance with Americans with Disabilities Act (ADA).

Following the filing of several lawsuits by the EEOC challenging employers’ wellness program practices, many called for the EEOC to issue rules for wellness programs. The EEOC had previously said employers cannot make disability-related inquiries, and medical examinations are restricted to only those that are part of a voluntary program. Employers wanted clarification of what qualified as voluntary, Gorman notes.

He says the proposed rules define what requirements must be met if you make a disability-related inquiry or medical testing in order for it to be voluntary—employers cannot mandate all employees participate, cannot deny access to health coverage or limit coverage if someone chooses not to participate, cannot take any adverse action towards an employee such as threatening to discipline the employee if he or she doesn’t participate or achieve certain outcomes. But, Gorman notes there are still questions about the underlying principle of incentives not discriminating, especially if the incentive is tied to health insurance premiums. 

For example, some employers tie smoking to premium rates, adding a surcharge to the rates paid by smokers. “It is difficult to reconcile whether a reduced rate is an incentive to participate in smoking cessation programs or a penalty for not participating,” Gorman notes. “It gets murky as to whether the program is really voluntary and whether it’s nondiscriminatory.” He says he is seeing a trend of employers not tying incentives to premiums because of this fine line. The proposed rules ask for comments about what the requirements should be for a program to be considered voluntary.

Smoking cessation is one of the areas in which the proposed rules create inconsistency, says Dermer. Prior rules allowed for an incentive of up to 50% of the cost of employee-only coverage for employees that successfully complete smoking cessation programs, but the proposed rules only allow for an incentive up to that amount if the employer simply asks the employee if he stops smoking, not if a blood test for nicotine is required, he explains. Dermer adds that there is a trend of employers using testing as opposed to someone just checking a box to self-report they are not smoking.

In general, the proposed rules say that employers are allowed to offer both financial and in-kind incentives in the form of a reward or penalty totaling no more than 30% of the cost of employee-only coverage. Dermer notes that this is a reduction in the incentive amount allowed by current rules, which calculate the incentive based on total cost of family coverage.

As for wellness program design, the proposed rules say gathering information to alert employees of health risks is appropriate, but gathering information without providing feedback or using the information to design programs is not appropriate, Gorman says. The proposal also requires more disclosure to participants. If the wellness program is part of a group health plan, employers have to provide participants with written notice that explains what medical information will be obtained, how it will be used, who will receive it, privacy rules and procedures the employer will use to make sure the information is not improperly disclosed or to handle breaches.

Neither Dermer nor Gorman have a clear opinion about how the proposed rule would affect current EEOC lawsuits, but Gorman says his colleagues do not think the EEOC will pull back on future enforcement activities concerning wellness programs given its commitment to pursue enforcement of discrimination laws. 

Financial Education Over Time Improves Savings Behaviors

An analysis finds repeated use of financial wellness resources improves retirement savings behaviors.

Financial wellness education is becoming popular at many workplaces.

Financial Finesse says employers offering an online financial learning platform since 2010—when the firm’s tool was originally launched—have seen registrations grow 59% annually, and overall usage grow 69% annually since then.

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“We see hopeful signs that employees are becoming more proactive, especially those who are making regular use of the financial wellness program offered by their employer,” Cynthia Meyer, resident financial planner for Financial Finesse, based in Gladstone, Connecticut, tells PLANSPONSOR.

According to Financial Finesse’s 2014 Year in Review, repeat users made up 15% of all users in 2014, up from 6% of all users in 2013. These employees show improvement in key areas of financial wellness that is far above the improvement seen in the general population.

Forty-six percent of repeat users indicated in their last assessment that they feel confident their investments are allocated appropriately, compared to 31% in their first assessment. Nearly one-third said they know they are on target to replace at least 80% of their income in retirement, compared with 17% who said so in their first assessment. Forty-seven percent reported that they regularly rebalance their investment accounts to keep their asset allocations on track, versus 35% who said the same in their first assessment.

Repeat users are also seeing significant progress in handling bills and paying down debt, Meyer says. “Multiple touches build a pattern of success over time.” She explains that as employees get more financially self-reliant and get control of their monthly cash flow, they increase saving for retirement.

The Year in Review report shows three-quarters of questions received by Financial Finesse’s team of Certified Financial Planner professionals were proactive in nature, seeking guidance about long-term financial planning issues such as saving for college and retirement, rather than dealing with short-term issues like losing a job or facing foreclosure.  Retirement planning continues to be the main focus, accounting for 35% of all questions received in 2014, and up four percentage points since last year.

COMING UP: How report findings can inform targeted education.

Another finding of the review that Financial Finesse finds encouraging, according to Meyer, is that the program seems to be reaching the demographic that is most vulnerable to financial issues. Employees with household incomes below $35,000 saw improvements in cash management, which has led to improvements in debt management, fewer 401(k) loans and hardship distributions (23% in 2014 vs. 29% in 2013), reduced stress, and a greater feeling of control over their financial situation. “This is the first time we’ve seen good movement in those numbers,” Meyer says.

She notes that some of the review findings reveal an opportunity for employers to tailor certain financial wellness messages to address challenges of different employee demographic groups. For example, 70% of African Americans and 62% of Hispanics identified managing cash flow as a top concern, and both of those demographics reported that getting out of debt is a top concern. Retirement plan participation is also lower for those demographic than for Asian America or Caucasian employees.

Women were less likely than men to say they have a handle on their monthly cash flow (66% vs. 80%); they know they are on target to replace at least 80% of income in retirement (17% vs. 24%); they have a general knowledge of stocks, bonds and mutual funds (67% vs. 84%) or they feel confident their investments are allocated properly (34% vs. 48%).

In addition, employees younger than age 30 listed cash flow and debt management as top financial priorities. For employees ages 30 to 44, the top two priorities are retirement planning and cash flow; for employees ages 45 to 54 , they are retirement planning and debt management; and for employees ages 55 and older, they are retirement planning and investing.

The full Year in Review report is available here.

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