On April 20, 2015, the Equal Employment Opportunity Commission (EEOC) published proposed regulations and interpretive guidance (collectively, “rules”) under Title I of the Americans with Disabilities Act (ADA) applicable to incentive-based wellness programs commonly offered in connection with group health plans. The new rules add to existing wellness regulations under HIPAA and the ACA, which are published and enforced by the Departments of Treasury, Labor, and Health and Human Services (the “Departments”).
The new guidance primarily impacts wellness programs that condition large financial incentives (or penalties) on employees undergoing biometric testing and/or completing health risk assessments (HRAs). However it has broader implications – and complications – for all wellness program designs. Below we explain why certain wellness program designs fall under the ADA, how the EEOC’s proposed rules, if finalized in their current form, would limit design options for these programs, and what employers might consider doing in the meantime.
Wellness Programs Subject to the ADA
As mentioned, the EEOC rules primarily impact wellness programs that provide a high financial reward for merely undergoing biometric testing and/or completing an HRA, or that impose a penalty on employees who choose not to participate in such testing.
This specific plan design is permitted under existing HIPAA/ACA wellness regulations, which aim to prevent discrimination on one or more “health factors,” including a disability, illness, claims experience or medical history. As we have discussed in an earlier post, those regulations permit employers to tie any size financial incentive or penalty to a wellness program that requires mere participation (“participation-only”), and restrict the incentive (and impose other design criteria) only when the incentive is conditioned on physical activity or attainment of a specific health outcome (“health-contingent”).
The Departments consistently have maintained, however, that satisfaction of HIPAA/ACA requirements does not equal satisfaction of other laws governing wellness programs, including the ADA. They most recently reiterated this position in ACA FAQ XXV, published on April 16, 2015. And the EEOC in past guidance has identified biometric testing as a workplace medical examination, and HRAs as containing “disability-related inquiries,” such that participation must be “voluntary” on the part of the employee. EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the ADA, Q&A 22. (July 27, 2000). That guidance clarified that a wellness program is “voluntary” as long as an employer neither requires participation nor penalizes employees who do not participate. Even since, the EEOC requirement of voluntary participation has been on a collision course with the unlimited financial incentives that HIPAA and the ACA permit under “participation-only” wellness plans.
What was not clear, until publication of the new rules, was the point at which a financial wellness incentive crossed the border from voluntary to coercive, in the eyes of the EEOC. Employer uncertainty on this point reached a crescendo in the latter part of 2014, when the EEOC brought three separate enforcement actions against employers whose “participation only” wellness programs included biometric testing and HRAs, but met applicable HIPAA/ACA design guidelines for same. In the third and most prominent action, against Honeywell, the wellness program imposed a potential annual surcharge of up to $4,000 on employees who refused, along with their spouse, to undergo biometric testing including a blood draw, performed by a third party vendor. The federal court rejected the EEOC’s attempt to stop Honeywell’s use of the program, but the case had a “chilling effect” on employers whose wellness programs followed similar designs.
Proposed Design Restrictions
Under the proposed EEOC rules, an incentive or reward under a wellness program that includes biometric testing and/or an HRA crosses the line from voluntary to coercive when it exceeds a dollar amount equal to 30% of the total cost of employee-only health coverage (employer and employee contributions, combined). An additional incentive or penalty of up to 20% may be imposed in exchange for the employee disclosing whether or not they use tobacco, but not in exchange for blood testing for nicotine or cotinine. Most significant, this cap on incentives applies to biometric testing and HRAs (or to other forms of medical examination or disability-related inquiries under a wellness program) even when the program is “participation-only” under HIPAA/ACA rules. Note that only employers with 15 or more employees are subject to Title I of the ADA; smaller employers are outside the EEOC’s jurisdiction.
By contrast, the HIPAA/ACA rules apply these limits only to health-contingent wellness programs, and also permit the maximum percentage limits to apply to the cost of dependent coverage when the wellness program allows participation by dependents. The EEOC rules do not address dependent participation, most probably because their jurisdiction is limited to the employer-employee relationship. Nor do they address whether participation by spouses in biometric testing/HRAs triggers concerns under the Genetic Information Nondisclosure Act, or “GINA.” The EEOC did take this position in the Honeywell case, however, and in the new guidance reserves the topic for future comment.
In addition to the cap on incentives, the EEOC rules would also impose other criteria for “voluntariness” on wellness programs that include biometric testing/HRAs, including that:
- the employer may not require participation in the wellness program;
- the employer may not deny access to health coverage (other than through imposition of the permitted reward/penalty percentage) to those who do not participate; and
- the employer may not take adverse employment action or otherwise retaliate against employees who do not participate, or who participate but do not attain a desired health outcome.
Additionally, for all wellness programs that are used in conjunction with a group health plan, whether or not they include biometric testing/HRAs, employers must provide a written notice explaining what medical information will be obtained under the wellness program, how it will be used, and the restrictions on disclosure that apply, including HIPAA privacy and security rules. Note that this is in addition to the notification of reasonable alternative methods of attaining a wellness reward that the HIPAA/ACA rules require be included in all health-contingent wellness program materials.
The EEOC rules also impose confidentiality requirements on all wellness programs, not just that include biometric testing/HRAs, and further require that wellness programs be “reasonably designed to promote health or prevent disease.” The EEOC confidentiality and reasonable design rules are quite similar to existing requirements under HIPAA/ACA regulations, with the following modifications:
- The EEOC confidentiality rules require that medical information be disclosed to employers only in aggregate form, except as is necessary to administer the health plan.
- The EEOC reasonable design rules would apply to participation-only wellness programs; under HIPAA/ACA regulations they only apply to health-contingent programs.
- The EEOC reasonable design rules would require that a wellness program that collects medical information (such as through biometric testing) provide follow-up information or advice with regard to health issues.
- The EEOC reasonable design rules would prohibit wellness programs that require an overly burdensome investment of time in order to attain an incentive, involve unreasonably intrusive procedures, or act primarily to shift health costs onto employees.
Finally, the EEOC rules require that all wellness programs satisfy reasonable accommodation requirements under the ADA. Under existing HIPAA/ACA regulations, accommodation (in the form of an offer of alternative ways to attain a reward) is only expressly required for health-contingent wellness programs. The example given is provision of a sign language interpreter to allow a hearing-impaired employee to attain a reward by taking part in nutrition classes.
What to Do Now
It is likely that the EEOC will receive a large number of public comments on the proposed regulations and guidance. They have asked for comments on a number of points in addition to the proposed guidance, including whether wellness incentive limits should link to the ACA concept of “affordable” coverage.
Public comments are due on June 19, 2015 and it may take some time for the EEOC to incorporate them into final regulations and guidance. Although compliance with the proposed rules is optional in the meantime, the standards they outline likely will function as a “safe harbor” from challenge on ADA grounds, such that risk-averse employers may want to take steps to comply with them proactively. In the interim, employers can also expect business lobbies to challenge the dual standard the EEOC rules would impose on several aspects of participation-only wellness programs. (A House bill that would insulate ACA/HIPAA compliant wellness incentives from attack under GINA or the ADA was proposed before the EEOC rules were published.) All employers maintaining wellness programs should consider distributing the notice re: wellness program data collection, use and privacy, and should work with their wellness vendors and benefit advisors to craft the appropriate language. Pending further guidance on whether participation by family members triggers GINA concerns, it seems premature to eliminate, or modify wellness incentives for participation by spouses and dependents.