Incentives for healthy behavior havebecome a critical tool for employers to addressrising health care costs. According to a 2015 studyfrom the National Business Group on Health and Fidelity Benefits,jumbo employers spent an average of $878 per employee on heathincentives, an increase from $717 per employee in 2014.

The Patient Protection and Affordable Care Act provision thatincreased the amount of allowable incentives from 30% (and 50% inthe case of smoking cessation) of annual premium was welcomed byemployers and opened the door to greater creativity in the use ofincentives. The Equal Opportunity Employment Commission sawthings differently.

The EEOC has a long-standing tradition of championing the rightsof employees and ensuring that employers don’t discriminate basedon race, color, religion, sex and other related standards. Theseefforts are an important part of the balance of theemployer-employee relationship for U.S. employers.

To this end, the EEOC has voiced its view that some of the basictenets of the reward and incentive programs used to drive healthybehaviors implemented by employers under the Health InsurancePortability and Accountability Act and PPACA in fact violate theAmericans with Disabilities Act and associated regulations and, insome cases, the Genetic Information Non-Discrimination Act.

Despite the view of employers that compliance with HIPAA andPPACA should be sufficient to constitute a “legal” program, theproposed EEOC regulations, contend that many of the provisions thatwould be in compliance PPACA and HIPPA still violate the ADA andGINA. Protecting employees from inappropriate practices is animportant function of the EEOC. However, in this case, some of thepositions that the EEOC is taking in their proposed regulationswill actually end up hurting the very employees they are seeking toprotect:

1. If the EEOC makes it too risky or difficult toimplement incentive and reward programs, employers are likely tosimply drop them. According to a 2015 study from the NationalBusiness Group on Health and Fidelity Benefits, the average jumboemployer spent $878 per employee on heath incentives. The proposedregulations would deprive them of the opportunity to earn theseincentives. In fact, at its extreme, if employers feel thatremoving this valuable tool will make it too difficult to drivedown costs, some employers may get out of the business of providinghealth care at all.

2. The EEOC has proposed that the 30% limit on the amountof incentives, which under PPACA applies only tohealth-contingent or “outcomes” programs, would apply to allprograms including participatory programs. If this was the case, itis likely that employers will shift their incentive dollars tooutcomes programs and away from programs based on onlyparticipation.

This will make it harder for employees to earn incentives asthey will be required to achieve more outcomes and less will beavailable for basic participation.

3. The EEOC has proposed that the limit of 50% of premiumas provided under PPACA would only be availableif smoking status is not verified by anactual test. This has the potential to deprive many non-smokers ofincentive dollars.

In fact, many companies have been using, and employees have beenparticipating in, biometric and other testing to verify smokingstatus for many years now. For those employees participating inthose tests, they would be deprived of incentives they are earningtoday.

4. The EEOC has proposed that the calculation of permittedincentive dollars be based on the premium of just the employee andnot of the employee and other family members asprovided under PPACA. This will likely cause employers to reduce oreliminate incentives for spouses and family members and thusdeprive the families of employees the opportunity to earnadditional dollars.

These amounts can be significant. According to a 2015 study fromthe National Business Group on Health and Fidelity Benefits, 54% ofemployers indicated their program will include spouses and domesticpartners in 2015 and the average incentive value perspouse/domestic partner has grown to $628 in 2015 from $530 in 2014(and from $420 in 2010) and to $894 in 2015 for jumbo (over 20,000employees) employers.

5. Finally, the EEOC has proposed counting non-cashincentives such as days off, prizes and other “in-kind” incentivesin the calculation of the allowable incentive amount. Today,employers have had these types of ancillary incentives in place inaddition to the incentives available under HIPPA and PPACA.Employers view these types of incentives as valuable additions thatcan have a meaningful impact not only on participation rates but onthe ability to create a “wellness culture.”

In addition, these types of in-kind incentives are verydifficult to track and requiring employers to do so would place anadministrative burden on them. This would likely have the effect ofemployers eliminating or reducing these valuable additionalincentive programs and techniques.

The EEOC is trying to strike a delicate balance betweenprotecting the rights of employees and affording employers theopportunity to take advantage of incentive programs. While thereare many PPACA provisions that employers were concerned about, theincrease in the use of incentives was one in which there waswidespread agreement. As a result, with the passage of PPACA,employers have been embarking on multi-year strategies to engageemployees, spouses, dependents and domestic partners withincentives. Not only will some of the EEOC’s proposed regulationshurt employers’ ability to rein in costs, but in fact the EEOC maybe hurting the very employees they are trying to protect.