EEOC Publishes Final Rules for Wellness Programs
Last week, the Equal Employment Opportunity Commission (EEOC) released its final rules regarding workplace wellness programs. Two sets of final rules were issued, both providing guidance to employers about workplace wellness programs and the EEOC's perspective on how they can comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), respectively, when offering incentives for participation in such programs. Wellness programs will continue to be subject to the Health Insurance Portability and Accountability Act (HIPAA) nondiscrimination rules and the Affordable Care Act (ACA) rules in addition to the EEOC rules. The EEOC and HIPAA rules continue to differ, so employers will need to be very careful to understand where the rules differ and how to structure their wellness programs to meet compliance requirements.
What is a Wellness Program?
Many employers offer wellness programs that are intended to encourage healthier lifestyles among their employees. Basic wellness programs typically use medical questionnaires, health risk assessments, or biometric screenings to determine an employee’s health risk factors, and employees are informed of those risk factors and provided with resources to help employees adopt heathier behaviors. Some employers offer financial and other incentives for employees to participate and some even require participation in a wellness program in order for employees to be eligible for group health coverage (this is now prohibited under the EEOC rules as explained below.)
ADA and GINA in General
The ADA prohibits employment discrimination based on health status and generally forbids employers from inquiring about workers' health status. The ADA makes an exception for medical inquiries that are conducted as part of a voluntary wellness program.
GINA prohibits employment discrimination based on genetic information and forbids employers from asking about individuals' genetic information, including information about family members' health status or family history. GINA also provides for an exception for inquiries through voluntary wellness programs.
The EEOC, which enforces both the ADA and GINA, issued the final regulations on wellness programs "to reflect both the ADA's goal of limiting employer access to medical information…and the ACA's provisions promoting wellness programs," with similar changes under GINA.
Final Rule Under the ADA
Plan Must Be Voluntary
Wellness programs under the ADA must be voluntary. This means that the program cannot require employee participation, deny or limit coverage or particular benefits for non-participation, or take any adverse action against employees for non-participation or failure to achieve certain health outcomes.
Because of this voluntary requirement, a fairly common employer practice is now prohibited. Some employers require employees to complete a health risk assessment or a biometric screening as a condition of being eligible for a major medical health benefit option. The final rule specifies that employers who continue this practice will be discriminating against employees by requiring them to answer questions or undergo examinations that are not job-related and therefore the program is not considered voluntary.
Confidentiality and Notice
Unfortunately, the final rules also retained the additional notice requirement that we first saw when the proposed rules were released, and this notice differs from the notice requirements provided by the HIPAA rules. The ADA rule requires employers to give participating employees a notice that (i) tells them what information will be collected as part of the wellness program, (ii) with whom it will be shared and for what purpose, (iii) the limits on disclosure, and (iv) the way information will be kept confidential. This notice requirement is somewhat different from the wellness program notice requirement provided for in the HIPAA rules in that it requires additional information and must be provided for all types of wellness programs (and not just health contingent programs).
Limits on Incentives – Non-Tobacco Related
The EEOC rules set limits on the extent to which employers may use incentives to encourage employees to participate in certain wellness programs. The EEOC rule provides that wellness programs that ask questions about employees’ health, or include medical examinations, may offer incentives of up to 30% of the total cost of self-only coverage, whether the incentive is a reward or a penalty. The rule’s provisions apply to all employee health programs that ask employees to respond to disability-related inquiries or undergo medical examinations – whether the programs are offered only to employees enrolled in an employer-sponsored group health plan or to all employees as a benefit of employment. However, almost all wellness programs provide some type of medical care and will be considered a group health plan requiring the program to be offered to only those employees who participate in the employer's major medical, to avoid huge daily penalties under the ACA. Under the final rule, offering limited incentives, either financial or in-kind, will not render the program involuntary. The final rule gives employers the flexibility to determine the value of in-kind incentives as long as the method is reasonable.
Note: the wellness program rules under HIPAA apply the 30% limit to the total cost of coverage in which the employee and any dependents are enrolled, if the wellness program is available to both the employee and dependents – i.e., the 30% incentive can be calculated on coverage that includes dependents and is not limited to 30% of the cost of self-only coverage. Further, the HIPAA rules limiting incentives to 30% apply only to health contingent wellness programs (wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward), not participatory wellness programs, whereas the new rules from the EEOC apply to both types of programs.
Limits on Incentives – Tobacco Related
Both the HIPAA and the EEOC final rules also create regulations for smoking cessation programs. The EEOC final rule distinguishes between smoking cessation programs that require employees to be tested for nicotine use and those that merely ask employees whether they smoke. A smoking cessation program that merely asks employees whether or not they use tobacco is not subject to the EEOC's incentive rules because it does not include disability-related inquiries or medical examinations; therefore, the incentive will be limited to 50% under the HIPAA rules. However, any program that uses a biometric screening or other medical procedure that tests for the presence of nicotine or tobacco is a medical examination under the ADA, so the 30% incentive cap would apply to those screenings.
Final Rule Under GINA
The other final rule issued under GINA applies to wellness programs that offer incentives to employees based on the employee's spouse providing genetic information as part of a health risk assessment. GINA applies to spouses because it defines genetic information as including information about the "manifestation of a disease or disorder in family members of an individual" and includes spouses in the definition of family members. Therefore, asking the spouse of an employee, through a health risk assessment, about their health history gives rise to the disclosure of genetic information, thus implicating GINA.
The final GINA rule largely tracks the ADA rule, requiring programs to be voluntary, confidential, and limiting incentives to 30%. The final GINA rule allows an incentive of 30% of the cost of self-only coverage when the spouse of an employee is allowed to participate in a wellness program. For example, if an employee and spouse are allowed to participate in an employer's wellness program, the employee may earn an incentive of up to 30% of the cost of self-only coverage and the spouse may earn an incentive of up to 30% of the cost of self-only coverage (the combined total incentive for both employee and spouse can be no more than twice the cost of 30% of self-only coverage). No incentives can be based on the provision of genetic information of an employee's child. The final rule under GINA also specifies that an employer cannot deny access to health insurance (or a specific benefit package) based on a spouse's refusal to provide information on the manifestation of a disease or disorder to a wellness program.
If you're not yet confused, a recent case from the Seventh Circuit (EEOC vs Flambeau) has found that the ADA's "safe harbor" applies, already putting the EEOC’s ADA final rule in question. The ADA safe harbor states that the ADA "shall not be construed to prohibit or restrict" an employer from establishing or administering "the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks." The preamble to the EEOC’s final ADA rule specifically states that the safe harbor does not apply to wellness programs. The Flambeau case, in finding that the ADA safe harbor applies to wellness programs, basically holds that the ADA has no impact on wellness programs established by employers in the Seventh Circuit. The court held that the employer could require a health risk assessment as a condition for participation in the health plan.
Employers action items include:
- Review wellness program notices to be sure they meet the additional requirements provided for by the final rules (an example notice will be posted on the EEOC's website by June 16, 2016).
- Redesign any "gateway plans" that require completion of a health risk assessment or biometric screening to be eligible to participate in a group health plan.
- Redesign any incentives that do not meet the 30% limit, including tobacco cessation incentives that test for the presence of nicotine.
- If in the Seventh Circuit, consider whether the Flambeau case allows you to disregard the ADA rules; at the very least, track the progression of the litigation.
The final EEOC rules are effective as of the first day of the first plan year beginning on or after January 1, 2017. In addition to the rules themselves, the EEOC also published question and answer documents on both rules. You can find those documents here (ADA) and here (GINA). If you have any questions about wellness plans, please contact Alison M. Stemler or Carl C. Lammers in Frost Brown Todd’s Employee Benefits Law group.