EEOC Issues Proposed Wellness Program Regulations
Employee Benefits Update
Date: April 22, 2015
On April 20, 2015, proposed regulations and interpretive guidance from the Equal Employment Opportunity Commission (EEOC) were published in the Federal Register. The proposed regulations would amend regulations issued under the Americans with Disabilities Act (ADA) and provide guidance on how employers may provide wellness programs involving disability-related inquires and/or medical examinations without violating the ADA.
The ADA generally restricts employers from obtaining medical information from employees. However, it allows medical examinations of employees and inquiries about their health as part of a “voluntary” employee health program. Prior to issuing the proposed regulations, the EEOC had not provided official guidance to help employers understand the circumstances under which a wellness program would be considered voluntary. Instead, it initiated charges and brought lawsuits against employers who maintained programs that its national or local offices found to be “involuntary.”
In contrast, final wellness program regulations issued under the Health Insurance Portability and Accountability Act (HIPAA) provide specific requirements that wellness programs must satisfy to avoid penalties for discrimination against an employee based on a health factor in violation of HIPAA.
The Patient Protection and Affordable Care Act appears to encourage the use of wellness programs by modifying the HIPAA requirements to increase the amount of an incentive an employer can provide to an employee who completes a wellness program.
Each of the agencies has been clear to state that their rules apply only to the laws they are required to enforce. As a result, compliance with one of the laws does not guarantee compliance with the other.
In response to sharp criticism of the EEOC’s method of rulemaking in the courts, the proposed regulations provide that a wellness program that includes a disability-related inquiry or medical examination will not be found discriminatory under the ADA if the wellness program is reasonably designed to promote health or prevent disease, voluntary and confidential. Additionally, wellness programs offered as part of a group health program must limit the incentive offered and satisfy certain notice requirements.
Reasonably Designed to Promote Health or Prevent Disease
A wellness program satisfies the reasonable design requirement if it has a reasonable chance of improving the health of, or preventing disease in, participating employees, and is not 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. The interpretive guidance provides the following examples of reasonable and unreasonable design.
Examples of reasonable design:
- A wellness program that collects information on a health risk assessment to provide feedback to employees about their health risks.
- A wellness program that uses aggregate information from health risk assessments to design programs aimed at particular medical conditions.
Examples of unreasonable design:
- A wellness program that collects information without providing feedback to employees or using the information to design specific health programs.
- A wellness program that requires an overly burdensome amount of time to participate, requires unreasonably intrusive procedures or places significant costs on employees.
The HIPAA wellness program regulations also require that health-contingent wellness programs be reasonably designed to promote health or prevent disease. A health-contingent wellness program satisfies this requirement if it has a reasonable chance of improving the health of, or preventing disease in, participating employees, and is not overly burdensome, a subterfuge for discrimination based on a health factor, or highly suspect in the method chosen to promote health or prevent disease. In addition, an outcome-based health-contingent wellness program must provide all individuals who do not meet the initial standard related to a health factor with a reasonable alternative standard to qualify for the reward.
Simultaneously with the release of the proposed regulations, the Departments of Labor, Health and Human Services, and Treasury issued FAQs to further explain how wellness programs may satisfy the reasonable design requirement. The FAQs indicate that the following programs are not reasonably designed:
- Wellness programs designed to dissuade or discourage enrollment by employees who are sick or potentially have high claims experience.
- Wellness programs that collect a substantial amount of sensitive personal health information without assisting individuals to make behavioral changes such as stopping smoking, managing diabetes or losing weight.
- Wellness programs that require unreasonable time commitments or travel.
Note that the HIPAA requirement applies only to health-contingent wellness programs, whereas the proposed regulations apply to all wellness programs.
A wellness program is voluntary if:
- Employees are not required to participate.
- An employee who does not participate is not denied coverage under any group health plan or benefits package under a group health plan.
- No adverse employment action is taken against an employee who does not participate.
Except as is necessary to administer the employee health program, employee information obtained by a wellness program may be provided to the employer only in aggregate terms that do not disclose, and are not reasonably likely to disclose, the employee’s identity.
The preamble to the proposed regulations and the interpretive guidance indicate that a group health plan sponsor generally may comply with this requirement by adhering to the HIPAA privacy rules and making the certification required under the final HIPAA privacy regulations.
Simultaneously with the release of the proposed regulations, the Department of Health and Human Services released a Q&A to confirm how the HIPAA privacy rules apply to wellness programs.
The interpretive guidance indicates that “as a best practice, individuals who handle medical information that is part of an employee health program should not be responsible for making decisions related to employment, such as hiring, termination or discipline.” However, the guidance recognizes that some employers (such as small employers that administer their own health plans) may have employees who handle medical information and act as employment decision-makers.
Limitation on Incentives
The use of incentives in a wellness program that is part of a group health plan will not cause the wellness program to violate the ADA if the maximum aggregate incentive provided under all of the employer’s wellness programs does not exceed 30 percent of the total cost of employee-only coverage. The proposed regulations indicate that a permissible incentive may take the form of a reward or a penalty.
The EEOC did not simply approve the use of wellness program incentives that satisfy the requirements of the HIPAA wellness program regulations. The proposed regulations differ from the HIPAA wellness program regulations in the following ways:
Application to participatory programs. Unlike the HIPAA regulations, the incentive limit applies even to participatory wellness programs that include disability-related inquiries or medical examinations.
Determination of cost of coverage. The HIPAA regulations allow employers to measure incentives against the cost of the level of coverage in which an employee is enrolled (e.g., family coverage) if any class of dependents may also participate in the wellness program. The proposed regulations do not take this approach and instead measure incentives against only the cost of employee-only coverage.
Application to tobacco-related programs. Unlike the HIPAA regulations, the proposed regulations do not apply a 50 percent incentive limitation to tobacco-related wellness programs. Under the proposed regulations, if a tobacco-related program involves a medical examination (such as a blood draw) to confirm the non-use of tobacco, the 30 percent incentive limitation applies. However, the interpretive guidance indicates that a tobacco-related incentive is not subject to the 30 percent incentive limitation where an employee is simply asked whether he or she uses tobacco. In that case, the wellness program does not involve a medical examination or a disability-related inquiry.
The preamble to the proposed regulations indicates that wellness programs that do not include disability-related inquiries or medical examinations, such as those that provide employees with general health information and education programs, are not subject to the incentive requirements.
A wellness program that is part of a group health plan is voluntary if employees are provided a notice that:
- Is written in a manner an employee is reasonably likely to understand.
- Describes the type of medical information that will be obtained and the specific purposes for which the medical information will be used.
- Describes the restrictions on the disclosure of the employee’s medical information, the individuals with whom the information will be shared and the methods taken to ensure that medical information is not improperly disclosed.
The HIPAA wellness program regulations require certain notices for health-contingent wellness programs. However, the proposed regulations impose different notice requirements and apply the requirements to all wellness programs that are part of a group health plan.
Impact on Other Requirements
The preamble to the proposed regulations and the interpretive guidance indicate that wellness programs that satisfy the rules described above still must comply with other legal requirements, including the ADA’s reasonable accommodation rules, the nondiscrimination requirements of the Civil Rights Act, the Equal Pay Act, the Age Discrimination in Employment Act and the Genetic Information Nondiscrimination Act (GINA).
Whereas the HIPAA wellness program regulations require reasonable alternatives only for health-contingent wellness programs and only in certain cases, the proposed regulations require an employer to make a reasonable accommodation (absent undue hardship) to enable employees with disabilities to fully participate in a wellness program and earn incentives. For example, an employer who offers an incentive for attending a nutrition class is required (absent undue hardship) to provide a sign language interpreter for a deaf person who needs one.
The proposed regulations specifically do not address the extent to which GINA affects an employer’s ability to condition incentives on a family member’s participation in a wellness program. This issue will be addressed in future EEOC rulemaking.
The FAQs issued by the Departments of Labor, Health and Human Services, and Treasury also confirm that compliance with the HIPAA wellness program regulations is not determinative of whether a wellness program complies with other applicable requirements, including those under COBRA, ERISA, the ADA, and HIPAA’s privacy and security provisions. Additionally, compliance with the HIPAA wellness program regulations does not determine the tax treatment of wellness program incentives. Finally, compliance with the HIPAA wellness program regulations is not determinative of compliance with any disclosure laws, including those that require accurate disclosures and prohibit intentional misrepresentation.
Request for Comments
The EEOC has specifically requested comments on the following issues:
- Whether the EEOC’s coordination with the HIPAA wellness program regulations is appropriate.
- Whether employers should be required to provide wellness program incentives to employees who fail to participate and instead provide a doctor’s note.
- Whether wellness programs should be in violation of the ADA if the incentives cause the health coverage to be unaffordable as determined under the Patient Protection and Affordable Care Act.
- Whether the notice requirements should include prior, written and knowing confirmation that participation in a wellness program is voluntary.
- Whether the notice requirements should be limited to wellness programs that offer more than a de minimis reward or penalty.
- Which best practices 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 offer wellness programs outside of group health plans and, if so, whether the final regulations should limit incentives provided as part of such programs.
- The practical effect of the proposed regulations’ 30 percent limit on incentives offered with respect to wellness programs intended to prevent or reduce tobacco use where such programs ask employees to respond to disability-related inquiries and/or undergo medical examinations.
Individuals who wish to provide comments on the proposed regulations must do so by June 19, 2015.
Meanwhile, on Capitol Hill…
In response to public outcry over the EEOC’s litigation activities, identical bills were introduced in the Senate and House of Representatives on March 2, 2015. Known as the Preserving Employee Wellness Programs Act, H.R. Bill 1189 and Senate Bill 620 provide as follows:
- Wellness programs will not violate the ADA or GINA solely because they provide incentives that comply with the limitations imposed under the HIPAA wellness program regulations.
- Wellness programs will not violate GINA solely because they ask about family members’ manifested medical conditions. This provision would confirm that employers may provide incentives for spouses to complete health risk assessments and biometric screenings.
- The Preserving Employee Wellness Programs Act will not affect application of the underwriting safe harbor under the ADA, which was relied upon in the Supreme Court’s decision in Seff v. Broward County when finding that an employer may impose financial penalties on employees who fail to complete a wellness program. In the preamble to the proposed regulations, the EEOC specifically states that the underwriting safe harbor should not be used to validate a wellness program under the ADA.
- Employers may establish reasonable deadlines within which employees must request and complete a reasonable alternative that certain health-contingent wellness programs must offer under the HIPAA wellness program regulations.
Now that the EEOC has issued proposed regulations that permit the use of certain financial incentives, it is unclear whether the Preserving Employee Wellness Programs Act will move forward.
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