The Equal Employment Opportunity Commission (EEOC) has released long-awaited proposed guidance (the proposed rule) relating to employer wellness programs. The proposed rule amends regulations implementing Title I of the Americans with Disabilities Act (ADA) to provide guidance regarding the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations.
There are four federal agencies charged with the regulation of employer wellness program compliance. They are the Internal Revenue Service (IRS), the U.S. Department of Labor (DOL), the U.S. Department of Health and Human Services (HHS), and the EEOC. The IRS, DOL and HHS are the regulatory agencies jointly responsible for the Health Insurance Portability and Accountability Act’s nondiscrimination rules (HIPAA), as amended by the Affordable Care Act (ACA). In June 2013, these regulatory agencies issued final regulations under the ACA which updated earlier regulations implementing the HIPAA nondiscrimination wellness regulations. These regulations, in part, set the maximum permissible reward offered in connection with a health-contingent wellness program that is part of a group health plan at 30 percent of the cost of coverage (or 50 percent for wellness programs designed to prevent or reduce tobacco use). The 2013 regulations specifically stated that compliance with HIPAA’s nondiscrimination requirements is not determinative of compliance with other federal laws, such as the ADA, the Genetic Information Nondiscrimination Act (GINA) or other legal requirements that apply to employer wellness programs.
The EEOC is the regulatory agency responsible for enforcement of the ADA and certain requirements of GINA. The ADA restricts the types of medical information employers may obtain from job applicants and employees, makes it illegal for an employer to discriminate against individuals based on a disability, and generally prohibits employers from obtaining medical information from employees through disability-related inquiries or medical examinations. However, the ADA includes a limited exception that permits employers to “conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site.” Employer-sponsored wellness programs are considered employee health programs under this rule.
Until now, the EEOC has provided little guidance with respect to wellness plan compliance under the ADA. Previous EEOC guidance stated that a wellness program is “voluntary” as long as an employer neither requires participation nor penalizes employees who do not participate. However, the EEOC has never established guidelines for when a penalty or an incentive would render the program involuntary. Despite this lack of guidance, the EEOC has recently filed several lawsuits alleging that employer wellness programs violated the “voluntary” requirement under the ADA.
The Proposed Rule
The proposed rule applies only to employer wellness programs that include disability-related inquiries or medical examinations. Other types of wellness programs, such as education programs and programs that provide employees with general health information, are not subject to the proposed rule. However, HIPAA nondiscrimination requirements (for example, the requirement to provide a reasonable alternative standard for an activity-only wellness program) may apply to these other types of programs.
The proposed rule limits the incentives employers may offer as part of a voluntary wellness program, creates notice requirements and addresses confidentiality of health information obtained as part of a wellness program. Certain parts of the proposed rule apply only to wellness programs provided by an employer in connection with a group health plan (whether insured or self-insured), whereas other parts of the proposed rule apply to all health programs. In the proposed rule, the EEOC acknowledged that the interpretation of the term “voluntary” with respect to wellness programs is central to the interaction between the ADA and HIPAA’s nondiscrimination rules: “[T]he Commission believes that it has a responsibility to interpret the ADA in a manner that reflects both the ADA’s goal of limiting employer access to medical information and HIPAA’s and the Affordable Care Act’s provisions promoting wellness programs.”
A wellness program is considered “voluntary” only if an employer (1) does not require employees to participate; (2) does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation, or limit the extent of such coverage (except pursuant to allowed incentives, described below); and (3) does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate or threaten employees who do not participate or who fail to achieve certain health outcomes. If this definition remains in the final rule, employers that restrict or modify access to certain medical benefit plan offerings—for example, an employer that offers both a traditional PPO and a high deductible health plan option but only makes the traditional PPO available to employees who complete a health risk assessment—will need to eliminate that practice. Employers will still be permitted to charge participants different premiums or contributions for different benefit options, as long as the wellness program is otherwise operated in compliance with these rules.
The proposed rule provides, as part of the voluntary requirement, that if an employer’s wellness program is part of, or offered in connection with, a group health plan, the employer must provide a notice that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on disclosure of the medical information, and the methods that will be used to prevent improper disclosure of the medical information. Medical information obtained by wellness programs may be disclosed to employers only in aggregate form, except as needed to administer the health plan. This requirement is similar to those under the HIPAA privacy rules.
An employer offing a wellness program as part of or in connection with a group health plan may use incentives, whether in the form of a reward or penalty, to encourage participation in the wellness program. The proposed rule clarifies that, for the wellness program to be considered voluntary, an employer may offer incentives up to a maximum of 30 percent of the total cost of employee-only coverage under the group health plan. Incentives may include health plan premium discounts or rebates and modifications to health plan cost sharing requirements, such as copayments, deductibles or coinsurance. This is welcome guidance since the EEOC’s proposed rule is generally consistent with the incentives permitted under the HIPAA nondiscrimination rules, as codified in the ACA and its implementing regulations. One noted difference is that the final HIPAA nondiscrimination regulations issued under the ACA provide that if in addition to employees, any class of dependents (such as spouses, or spouses and dependent children) may participate in the wellness program, the 30 percent reward threshold must not exceed the applicable percentage of the total cost of the coverage in which an employee and any dependents are enrolled, whereas the proposed EEOC rule appears to be limited to 30 percent of the total cost of employee-only coverage. Hopefully, this discrepancy between the EEOC proposed rule and the HIPAA final rule will be eliminated when the EEOC rules are finalized after a period of notice and comment. In addition, ACA rules permitting incentives as high as 50 percent of the total cost of employee coverage for smoking cessation and other tobacco-related wellness programs would not be permitted under the proposed rule if the wellness program asks employees to respond to disability-related inquiries and/or undergo medical examinations.
Promotion of Health or Prevention of Disease
Also similar to the HIPAA health-contingent wellness program rules, disability-related inquiries and medical examinations that are part of a wellness program must be reasonably designed to promote health or prevent disease. In order to meet this standard, the wellness program must have a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease. Interpretive guidance issued by the EEOC in conjunction with the proposed rule offers examples of programs that would and would not meet this standard.
Compliance with the proposed rule does not relieve an employer from its obligation to comply with all other nondiscrimination requirements. For example, wellness programs must not discriminate against employees with disabilities or on the basis of race, color, sex, national origin, religion, compensation, age, pregnancy, genetic information or any other grounds prohibited by law. An employer must provide reasonable accommodations that enable employees with disabilities to fully participate in wellness programs and earn any reward or avoid any penalty offered as part of those programs.
Many employers offer wellness programs outside of and separate from their group health plan that offer incentives, such as prizes, time-off awards and other items of value, based on participation in the wellness program. The proposed rule’s guidance relating to the value of permitted incentives and related notice requirements would not apply to such programs. The EEOC has invited comments about whether ADA regulations should limit incentives provided as part of programs outside of a group health plan.
The proposed rule also does not address whether and the extent to which GINA affects an employer’s ability to condition incentives on a family member’s participation in a wellness program. GINA prohibits a wellness program from offering an inducement for individuals to provide genetic information, including family medical history. The EEOC indicated that this issue will be addressed in future guidance.
Employers should review their wellness programs for consistency with the proposed rule. Although still in proposed form, the proposed rule provides insight into the EEOC’s approach to regulating employer wellness programs.
The proposed regulations were published on April 20, 2015. Comments may be submitted on or before June 19, 2015 (60 days from publication).
The McDermott Difference
If you would like to submit comments, joint comments with other employers or comments on an anonymous basis, or have questions regarding the design and implementation of your wellness program, McDermott would be happy to assist you. Please contact your regular McDermott lawyer or one of the authors for more information.