EEOC Proposed Rules Provide Long-Awaited Guidance for Wellness Programs
For the past few years, the Equal Employment Opportunity Commission (EEOC) has flexed its muscle by bringing legal actions to enforce the Americans with Disabilities Act (ADA) against employers who sponsor certain types of wellness programs for their employees. These actions have ranged from:
- Suing an employer for requiring an employee to pay all insurance premiums and subsequently firing the employee for not participating in a health-risk assessment (HRA) in connection with a wellness program;
- Filing a temporary restraining order against an employer on the eve of open enrollment for implementing a wellness program designed to comply with the nondiscrimination requirements under the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA).
EEOC was roundly criticized and taken to task by employers, the Obama administration and legislators alike for failing to issue regulatory guidance regarding the permissible design and administration of wellness programs before resorting to filing lawsuits against employers. In response to this criticism and upon urging of federal legislators and the Obama administration, EEOC issued long-awaited proposed guidance relating to employer wellness programs.
The proposed rule amends regulations implementing Title I of the ADA and provides 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. The proposed rule was published in the federal register April 20, 2015. Comments could have been submitted on or before 60 days from publication (June 19, 2015).
EEOC is the regulatory agency responsible for enforcement of the ADA and certain requirements of the Genetic Information Nondiscrimination Act (GINA). 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;
- Generally prohibits employers from obtaining medical information from employees through disability-related inquiries or medical examinations.
However, ADA includes a limited exception that permits employers to conduct voluntary medical examinations which are part of an employee worksite health program. Employer-sponsored wellness programs are considered employee health programs under this rule; however, EEOC had not previously established guidelines as to when an incentive or penalty under a wellness program would render the program involuntary.
The proposed rule applies only to employer wellness programs that include disability-related inquiries or medical examinations. Other types of wellness programs, such as educational and those that provide employees with general health information, are not subject to the proposed rule.
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 of the proposed rules 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.
PROGRAM MUST BE VOLUNTARY
Under the proposed rule, a wellness program must be reasonably designed to promote health or prevent disease and cannot be overly burdensome or a subterfuge for violating employment discrimination laws. Further, a wellness program is considered "voluntary" only if an employer does not:
- Require employees to participate;
- 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);
- 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, so long as the wellness program is otherwise operated in compliance with these rules.
LEVEL OF INCENTIVE/DISINCENTIVE
An employer offering 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 - this cap applies to all wellness programs including participatory and health-contingent.
Incentives may include health plan premium discounts or rebates and modifications to health plan cost sharing requirements, such as copayments, deductibles, or coinsurance. The proposed rule is generally consistent with incentives permitted under HIPAA and ACA. One important difference is that the final HIPAA nondiscrimination regulations issued under the ACA provide that if any class of dependents -- spouses, dependent children -- participate in the wellness program, the 30 percent limit can be applied to the total cost of the coverage in which the employee and any dependents are enrolled.
This proposed rule appears to be limited to 30 percent of the total cost of employee-only coverage. In addition, ACA rules which permit incentives as high as 50 percent of the total cost of coverage for smoking cessation and other tobacco-related wellness programs would not be permitted under the proposed rule if the wellness program targets tobacco use by asking employees to respond to disability-related inquiries and/or undergo medical examinations.
Mere inquiries about tobacco use would not be subject to this limit. Hopefully, these discrepancies between EEOC proposed rule and HIPAA final rule will be eliminated when EEOC rules are finalized.
The proposed rule provides that if the 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;
- Restrictions on disclosure of the medical information;
- 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, but may require a separate notice.
PROMOTION OF HEALTH OR PREVENTION
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 non-discrimination 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 rules guidance relating to the value of permitted incentives and related notice requirements would not apply to such programs. 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 members participation in a wellness program. GINA prohibits a wellness program from offering an inducement for individuals to provide genetic information including family medical history. EEOC indicated that this issue will be addressed in future guidance.
Employers should review their wellness programs for consistency with the proposed rule and other applicable federal laws. Wellness programs are subject to myriad state and federal laws and regulations, depending on the type of program, the rewards offered, the persons providing the wellness services and the information collected about participants. A wellness program is potentially subject to:
- HIPAA Nondiscrimination Rules;
- GINA restrictions on the collection and use of genetic information and family medical history;
- Americans with Disabilities Act including reasonable accommodations to enable disabled employees to participate;
- Employee Retirement Income Security Act ("ERISA") requirements applicable to group health plans, if the wellness program provides robust services that extend beyond first aid or the treatment of minor injuries or illness;
- Tax code rules regarding taxation of wellness rewards and benefits;
- HIPAA privacy and security requirements;
- Title VII Nondiscrimination Rules
Compliance with the HIPAA and ACA requirements does not ensure compliance with the ADA and GINA requirements. Although still in proposed form, the proposed rule provides insight into EEOC' s approach toward regulating employer wellness programs. Employers should take a holistic approach to the design and administration of their wellness program with an eye toward compliance with all of the legal rules that apply.
About the Author
Susan M. Nash is a partner in the law firm of McDermott Will & Emery LLP and is based in the firm's Chicago office. Susan is chair of the firm's Health and Welfare Plan Affinity Group. She focuses her practice primarily in the areas of healthcare reform and health and welfare benefit plans including compliance with the Affordable Care Act, HIPAA, ERISA, COBRA, the Internal Revenue Code and other federal laws affecting group health plans.