In December 2014, we highlighted the challenges that employers have been facing in ensuring that their wellness programs are not in violation of the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), Title VII, and other relevant federal, state, and local laws.1 While the Affordable Care Act (ACA) expanded on the provisions of HIPAA and carved out an exception for wellness programs from rules generally prohibiting discrimination in health benefits, the regulations associated with the ACA and HIPAA made clear that that compliance with these statutes would not constitute compliance with the ADA.
Thus, employers were left with lingering questions:
- Which wellness programs would be considered compliant with the ADA?
- Does compliance with the ADA mean compliance with other anti-discrimination laws?
Despite the absence of guidance, the EEOC began challenging employers’ wellness plans, asserting that they violated the ADA and other anti-discrimination laws.2 Under the ADA, disability-related questions and “medical examinations” (which include biometric screenings) can be asked of employees only when (1) their purpose is job-related and consistent with business necessity, see 42 U.S.C. § 12112(d)(4)(A), or (2) they are part of an employee health program that is “voluntary.” See 42 U.S.C. § 12112(d)(4)(B) (emphasis added). Employers and their advocates contended, among other theories, that penalties or rewards that were in line with the ACA’s “surcharge limits” and which kept health care costs within the realm of “affordable” under the ACA should be considered “voluntary” under the ADA. The EEOC disagreed, but offered no guidance as to which wellness programs would be considered “voluntary” under the ADA. Until now.
After much anticipation, the EEOC has issued proposed Amendments to Regulations under the ADA. The Notice of Proposed Rulemaking (NPRM) was informally issued on April 16, 2015, and was officially published in the Federal Register on April 20, 2015.
The EEOC Chairperson Jenny R. Yang explained, "The EEOC worked closely with the Departments of Labor, Health and Human Services, and Treasury in developing this NPRM to harmonize the ADA's requirement that medical inquiries and exams that are part of an employee health program must be voluntary, and HIPAA's goal of allowing incentives to encourage participation in wellness programs.” The NPRM indicates the EEOC views wellness programs as permissible under the ADA, and can include medical examinations or questions about employee health (i.e. disability-related inquiries), but the NPRM also provides a number of cautions:
- Wellness programs may not be used to discriminate based on disability;
- Employers may not subject employees to threats, intimidation, or coercion for refusing to participate in a wellness program or for failing to achieve certain health outcomes;
- Individuals with disabilities must be provided with reasonable accommodations (even for participatory only wellness programs) that allow them to participate in wellness programs and to earn whatever incentive an employer offers;
- Wellness programs must be reasonably designed to promote health or prevent disease; and
- As to wellness programs that are part of or provided by a group health plan and which include medical examinations or disability-related inquiries3, companies are limited to offering a specified amount of incentives in connection with their wellness programs and are required to comply with notice requirements when collecting medical information from their employees.
While some of these limits on employers’ use of wellness programs are more familiar to employers (for example, the prohibition on using wellness programs to discriminate based on disability), employers will likely be more interested in the NPRM insofar as it pertains to (1) the requirement that wellness programs be reasonably designed to promote health or prevent disease; (2) the use of incentives, and (3) new requirements pertaining to the collection of medical information from employees.
The NPRM proposes that an employee health program, including any disability-related inquiries or medical examinations that are part of such a program, must be reasonably designed to promote health or prevent disease. In order satisfy this standard, the wellness program must (1) have a reasonable chance of improving the health of, or preventing disease in, participating employees; (2) not be overly burdensome; (3) not be a subterfuge for violating the ADA or other anti-discrimination laws; and (4) not be highly suspect in the method chosen to promote health or prevent disease.
The EEOC provides examples of programs that would or would not meet this standard. For example, it explains that collecting medical information on a health questionnaire, but providing no follow-up information or advice to employees, would not be reasonably designed to promote health.
The NPRM provides that an employee health program that includes disability-related inquiries and/or medical examinations (including those that are part of a health risk assessment) will be considered “voluntary” under the ADA so long as the employer (1) does not require participation in the wellness program; (2) does not deny coverage under any of its group health plans or benefits packages within a group health plan for non-participation, or limit the extent of such coverage (except pursuant to the allowed incentives); (3) does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees; and (4) provides a requisite notice regarding collection of medical information, if the wellness program is part of a group health plan.
Use of Incentives
In previous guidance, the EEOC had stated that “A wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.” However, until now, neither statute, regulation, nor EEOC guidance addressed the extent to which incentives may affect the voluntary nature of a wellness program, making them non-compliant with the ADA.
The NPRM indicates the EEOC has determined that certain incentives are acceptable, but also has indicated a continued concern about economic coercion. The NPRM proposes that for wellness programs that are part of group health plans and include disability-related inquiries or medical examinations, companies may only offer incentives of up to 30% of the total cost of employee-only coverage in order to promote participation in a wellness program, as long as participation in the program is “voluntary”. The NPRM explains that “incentives” include both financial and in-kind incentives, and encompasses incentives framed as either rewards or penalties.
Notably, while incentives under HIPAA and the ACA are discussed in terms of the amount of the family premium if the family participates in the wellness program (or, most typically, the employee plus spouse premium if the spouse participates), the proposed guidance explains the incentives only as a percentage of the “total cost of employee-only coverage,” without reference to whether this is different if the family or spouse participates in the wellness program.
The 30% threshold is generally the maximum allowed incentive available under HIPAA and the ACA for health-contingent wellness programs (with the exception of smoking cessation incentives). Thus, the EEOC’s proposal would extend the 30% limit to include participatory wellness programs that ask an employee to respond to a disability-related inquiry or undergo a medical examination.
Because not all wellness programs require disability-related inquiries or medical examinations, not all wellness programs will be limited to incentives at the 30% level under the ADA. However, if such programs (including attending nutrition, weight loss, and smoking cessation classes) are considered health-contingent under the ACA, then they may be subject to HIPAA incentive limits.
This distinction is significant when it comes to smoking cessation programs. Under HIPAA and the ACA, employers may offer incentives as high as 50% for any tobacco-related wellness programs, including smoking cessation programs. The EEOC’s proposed guidance confirms that smoking cessation program that does not include disability-related inquiries or medical examinations (for example, one that requires attendance at a class or one that merely asks whether the employee uses tobacco), would not be limited to the 30% incentive amount, and thus could offer an incentive of up to 50% of the cost of employee coverage for the program. However, if the smoking cessation program did involve disability-related inquiries or medical examinations (such as a test for nicotine or tobacco), the proposed guidance indicates that the program would implicate the proposed rules under the ADA, and the incentive would need to be limited to 30%.
The EEOC’s concerns regarding economic coercion are seen in its request for comments. The EEOC specifically asks for comments on:
- Whether the amount of the amount of the incentive should be limited so that the cost of health insurance would not be rendered unaffordable based on the affordability standard under the ACA. This could cap incentives at approximately 9.5% of an employee’s compensation.
- What are the best practices to ensure that wellness programs are designed to promote health and do not operate to shift costs to employees with health impairments or stigmatized conditions.
- Whether employers are likely to offer wellness programs outside of group health plans and the extent to which incentives for such programs should be limited.
As these requests indicate, it is not clear that the final regulations will adopt a 30% limit on incentives.Collection of Medical Information
If a wellness program includes disability-related inquiries and/or medical examinations, and is part of a group health plan, then in order to be considered “voluntary”, it would also need to comply with specific requirements outlined in the NPRM regarding collection of medical information. Although medical information may be collected as part of a wellness program, employers must satisfy a number of requirements with regard to collection:
- In order to collect medical information as part of such a wellness program, the employer must provide a notice to employees describing what medical information will be collected, with whom it will be shared, how it will be used, and how it will be kept confidential.
- Additionally, when collecting medical information as part of such a wellness program, the information collected can only be disclosed to employers in aggregate form, in a manner that does not reveal the employee's identity, except as needed to administer the health plan, and must be kept confidential in accordance with ADA requirements.
The EEOC’s interpretative guidance explains that both employers and administrators of wellness programs acting as agents of employers have obligations to ensure compliance with these disclosure requirements.
Other Anti-Discrimination Laws: No Guidance
Notably, the proposed Amendments are expressly limited to the intersection between wellness programs and the ADA. The EEOC explicitly stated that the proposed rule concerns only the ADA, and compliance with this proposed rule would not necessarily result in compliance with other non-discrimination laws, including Title VII, GINA, or the ADEA. Further, it stated that compliance with the ADA regulations would not necessarily equate to compliance under HIPAA, as amended by the ACA.
The EEOC is seeking comments on the NPRM that will shape the final regulations. Members of the public will have until Friday, June 19, 2015, to submit comments. Employers with wellness programs should consider submitting comments to prevent further limits on incentives or other requirements.
It is worth noting that the EEOC proposed regulations may also be seen as a response to Congressional activity. After the EEOC brought actions against the wellness programs of three employers last year, the “Preserving Employee Wellness Programs Act” was introduced in Congress. Depending on the level of concern about the EEOC’s approach, it is possible that Congress could move forward with the bill.
The proposed regulations and the EEOC actions highlight the complexity of wellness programs. Please feel free to contact us with any questions you may have regarding your wellness program.
2 See, e.g., EEOC v. Honeywell International, Inc., 2014 WL 5795481 (D. Minn. November 6, 2014).
3 Notably, the NPRM applies to all wellness programs, whether offered as part of a group health plan or not, with the exception of references to the use of incentives and providing a notice regarding medical information collection. These particular provisions only apply to those wellness programs that are offered as part of or provided by a group health plan or group health insurance coverage.