NOTE: The opinions in this article are the author’s and do not necessarily represent the views of Shortlister
Recently Shortlister published an interpretation of the AARP vs EEOC (Equal Employment Opportunity Commission) decision, by Barbara Zabawa. We won’t recap the decision here. You can simply refer to her article for a refresher. This article instead proposes a largely different interpretation.
By way of background, I consider Attorney Zabawa to be the leading authority on wellness law. In addition to having very favorably reviewed her book on wellness law myself, my company obtained a validation from Attorney Zabawa to support our claim that our health risk assessment (HRA) satisfied the requirements of an HRA without the need for collecting personal health information.
Because of my great respect for her expertise, I read her article closely, looking for support for the counter-intuitive headline, “Wellness Incentives Are Not Dead Yet.” Here’s what I found:
1. Regarding outcomes-based programs, we appear to be in agreement – almost time to panic;
2. Regarding participation-based programs, we reach opposite conclusions – I conclude it’s almost time to panic, while she believes employers will have more leeway in setting incentives and penalties;
3. Regarding what happens to employers if the EEOC’s rules are not in place by January, her level of concern is far lower than mine;
Additionally, a new development– a motion filed by EEOC unopposed by AARP, plus the judge’s ruling on it – appears to further tilt the scales away from employer coercion towards employee rights. This is covered in an update at the end of this article.
On the subject of outcomes-based programs, it appears we are in agreement. While not addressed specifically in her article, my assumption is that Barbara’s view would be the same as the consensus: that while still allowable, outcomes-based programs are, for all practical purposes, dead as of January.
The reason for that? Outcomes-based programs generally need four-figure incentives or penalties to drive participation from employees not eager to tie their premiums to personal medical information. We don’t know where incentives will be capped under the forthcoming rules, but a dictionary definition of “voluntary” would suggest perhaps that a (taxable!) $100 or $200 gift card would be the maximum. (A totally subjective opinion here, but gift cards sound much more like a token of appreciation for a voluntary job well done than a cash payment does.)
Gift card or not, at that level, it is unlikely that many employees would submit to these unpopular programs if noncompliance carried only a trivial incentive or penalty.
Why would the “voluntary” limit be set this much lower than the current rules allow?
Along with the dictionary definition of “voluntary” is an implied statutory definition. Consider that while the word “voluntary” itself has yet to be given a monetary cap by the EEOC, the word “mandatory” has already been monetarily defined in the Affordable Care Act (ACA): the mandatory provision for buying health insurance carries a $695 noncompliance penalty. How can a penalty for noncompliance with a voluntary program exceed the penalty for a mandatory program, under the same general law? This argument can be extended further:
- Congress has repealed the mandate, implying that a $695 penalty for noncompliance is too high even for a mandatory requirement;
- The EEOC has repeatedly used the word “harmonize” when describing how incentive language in the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA) need to mesh with ACA. Surely, harmonization of voluntary and mandatory noncompliance penalties requires that the former be quite a bit lower than the latter.
Zabawa would say that the arguments above apply only to outcomes-based programs, not participatory programs. She argues that the latter could survive -- and even carry 100% penalties for non-compliance, as in the Flambeau case:
What these commentators [specifically, myself and The Incidental Economist] may fail to realize, however, is that what might happen next is a scrapping of the entire wellness incentive rule under the ADA and GINA. The EEOC may decide that it can’t pick an incentive limit number that all employees would consider “voluntary” when being asked to divulge their personal health information…
…One real possibility is that without the ADA incentive limit rules, employers may feel free to raise participatory program incentives to 100% of the employee’s premium cost, as was the case in the EEOC v. Flambeau and EEOC v. Orion Energy cases. In particular, the court in the Flambeau case adopted the reasoning in Seff v. Broward County that the ADA safe harbor applied to the employer’s wellness program, effectively insulating the program from the ADA’s voluntary requirement.
I believe the gist of her conclusion – that if the EEOC “can’t pick an incentive limit number,” employers “may feel free to raise participatory program incentives to 100%” -- is incorrect. Judge Bates’ opinion does not distinguish the two types of programs, and very specifically indicates that EEOC is likely to conclude that a 30% premium is not “sufficiently voluntary.” So, it is hard to imagine the Court taking kindly to a 100% penalty/incentive for a voluntary program.
Therefore, if you currently have a participation-based program with a large incentive or penalty, or which is a requirement of qualifying for the more attractive coverage option, it may be time to review your incentive design.
What if the new rules are not in place by January?
We differ here too, in large degree. The old rules would be “vacated,” meaning they no longer apply as of 1/19. At that point, governing statutory law would be the ADA and GINA statutes by themselves, with no definition of “voluntary.” Under that circumstance, a wellness program manager trying to select an incentive level that balances liability risk with attractiveness to employees would be flying blind. She writes: “Employers may believe that the uncertain legal landscape of incentives is [sic] not worth the headache.”
I would add several exclamation points to that sentence. She may be underestimating the strong distaste for these programs among many employees. Simple behavioral economics supports this viewpoint: if employees won’t do something unless you fine or bribe them, that’s because they don’t want to do it.
Uniquely, the Net Promoter Score for the workplace wellness industry is minus-52, which I didn’t even think was possible. (Source: WillisTowersWatson.) No other industry is below zero.
Further, you can assume that attorneys sense an opportunity here too and may actively seek aggrieved parties.
Therefore, I would urge anyone who wants to keep their job in wellness (or as corporate counsel) to reduce incentives to the low three figures and expect much less participation. Or, continue the program exactly as is in 2019, but implement…
…A Magic Bullet
There is a way to finesse this entire problem: offer a non-clinical alternative to screenings/HRAs. If employees can choose an option free of “medical exams or inquiries,” the clinical option by definition becomes truly voluntary. ADA and GINA apply only to clinical options. Take away the clinical option, and you take away the governing statutes.
Many vendors offer programs free of medical exams or inquiries, as this example (Disclosure: from my own company) shows:
While Barbara concludes “I think it is premature to declare that workplace wellness incentives are dead.” I don’t. Clearly, large workplace incentives and especially penalties are indeed dead, absent the magic bullet above.
As for small incentives, it is not premature to start thinking about which company’s gift cards you’d like to distribute.
Update: New EEOC Motion and Ruling on Motion
On January 15th , the Justice Department on behalf of EEOC filed a motion – unopposed by AARP (which already has what it wants)– making three key points:
1. EEOC is under no obligation to make rules by January
2. EEOC is under no obligation to make rules at all
3. Wellness involving medical exams or inquiries must indeed be voluntary (see Footnote 4)
As described in the legal trade press:
These would not appear to be arguments made by an agency that intends to make rules, by January, maximizing substantial incentives or penalties. On January 19th, the judge allowed the motion. More importantly, the court intends to maintain jurisdiction over this case until January 1st, which makes an appeal much more difficult. (Having admitted that these exams need to be voluntary would seem to complicate an appeal still further.)
Therefore, the initial conclusion looks more compelling than ever: time to select your favorite low-denomination gift cards.
Article by Al Lewis JD
Al Lewis JD is a Harvard-trained attorney who has written extensively on AARP vs EEOC. He is CEO of Quizzify, which offers both employee health literacy quizzes and onsite health literacy trivia contests. His books, Why Nobody Believes the Numbers and Cracking Health Costs, have both been trade bestsellers.