On April 16, 2015, the Equal Employment Opportunity Commission (EEOC) issued long-awaited proposed regulations addressing what constitutes permissive employer wellness programs. While the EEOC recognizes that many employers that provide health insurance also offer workplace wellness programs intended to encourage healthier lifestyles or prevent disease, it had filed three lawsuits against employers concerning wellness program incentives. The EEOC argued in all three lawsuits that the incentives offered were so substantial that they made the wellness programs in effect involuntary wellness programs in violation of the American with Disabilities Act (ADA). 

The EEOC's Strategic Enforcement Plan calls for it to address emerging and developing issues in equal employment law, including issues involving the ADA, among other possible issues.  Wellness plans fall under such emerging issues.

The ADA prohibits employers from making disability-related inquiries to employees or requiring employees to undergo medical examinations. The EEOC's proposed rule confirms that wellness programs are permitted under the ADA, but that they may not be used to discriminate based on disability. In the three lawsuits, the EEOC argued that despite meeting requirements under the Affordable Care Act (ACA), the incentives offered by the plans constituted coercive penalties to those who chose not to participate, making the wellness programs involuntary.

The EEOC's proposed rules apply only to employee health programs that include disability-related inquiries or medical examinations; however, the EEOC has offered no further guidance on which wellness programs would not meet that requirement. The proposed rules focus on the "voluntariness" of wellness programs and maintaining the confidentiality of participating employees' medical information

30 Percent Cost of Reward Cap for Certain Participatory Programs              

The EEOC proposes to extend to participatory wellness programs the 30 percent cost of coverage limit, which was set under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the ACA to limit the size of incentives under health-contingent programs. This would mean that an employer may offer employees incentives up to a maximum of 30 percent of the total cost of employee-only coverage, whether a reward or penalty, to promote an employee's participation in a wellness program.

Definition of "Voluntary"

The guidance also clarifies that "voluntary" means that an ADA-covered entity: "(1) does not require employees to participate; (2) does not 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); and (3) does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of Section 503 of the ADA, at 42 U.S.C. 12203."

Privacy of Medical Information

Further, to ensure that participation in a wellness program that includes disability-related inquiries or medical examinations and is a part of a group health plan is actually voluntary, employers must give participants written notice that clearly explains:

  • what medical information will be obtained,
  • who will receive the medical information,
  • how the medical information will be used,
  • the restrictions on its disclosure, and
  • the methods the covered entity will employ to prevent improper disclosure of the medical information.

HIPAA's Privacy Rule already applies to information collected through a wellness program associated with a HIPAA covered entity. The EEOC proposes to add HIPAA's Privacy Rule safeguards to the ADA's confidentiality provisions. The new ADA provisions would require all medical information collected though a wellness program to be provided to the ADA covered entity only in aggregate form that does not disclose, or is not reasonably likely to disclose, the identity of specific individuals, except as needed to administer the health plan.

What does this mean for employers now?

These rules are merely proposed amendments to the ADA, and final rules will not be effective for several months. However, employers contemplating implementing wellness programs may have to comply with not only the ACA and HIPAA, but also the ADA. Employers may want to comply with the EEOC's proposed rules now to circumvent compliance issues in the future. But, members of the public have 60 days from the date of publication in the Federal Register (or until Friday, June 19) to submit comments, which could result in a change to the proposed rulemaking.