The Equal Employment Opportunity Commission (EEOC) made headlines during the second half of 2014 by attacking employers' wellness programs that require employees to undergo certain medical testing or be penalized. In three separate lawsuits filed in August and October 2014 against Orion Energy SystemsFlambeau, and Honeywell, the EEOC argued that their wellness programs are involuntary and violate the Americans with Disabilities Act by requiring that employees submit to medical examinations and inquiries that were not job related.

The ADA limits circumstances under which an employer may require physical examinations or answers to medical inquiries. The agency recognized that voluntary wellness programs are a positive development, but said in a statement: "[They] have to be actually voluntary. They can't compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate." 

In a flurry of recent activity following those lawsuits, the EEOC, Centers for Medicare and Medicaid Services (CMS), and the U.S. Departments of Health and Human Services, Labor and the Treasury all issued guidance on wellness programs in April 2015. The focus of this alert is on the EEOC Guidance but please note the other guidance mentioned below. 

EEOC Guidance 

The EEOC issued proposed regulations, a questions and answers document, and a fact sheet for small businesses regarding wellness programs and compliance with the Americans with Disabilities Act (ADA). An overview of the guidance is provided below:

  • The Wellness Program Must Be Voluntary – For wellness programs that include disability-related inquiries or medical examinations, "voluntary" means that: (1) employees are not required to participate; (2) employees are not denied coverage for failure to participate; and (3) employees are not subjected to any adverse employment action, retaliation, intimidation, or coercion for failure to participate.
  • Design – The wellness program must be reasonably designed to promote health or prevent disease. This is discussed in more detail in the tri-agency guidance discussed below.
  • Notice – For a wellness program that includes disability-related inquiries or medical examinations, and is part of a group health plan, the employer must provide a notice that clearly explains: (1) what medical information will be obtained, (2) who will receive the medical information, (3) how the medical information will be used, (4) the restrictions on its disclosure, and (5) the methods that will be used to prevent improper disclosure of the medical information.
  • Reasonable Alternatives – Reasonable accommodations must be provided (absent undue hardship) for all wellness programs. This requirement is broader than the HIPAA and Affordable Care Act requirement to provide a reasonable alternative for only health-contingent wellness programs.
  • Limitation on Incentives – The maximum allowable incentive for participation in a wellness program or for achieving certain health outcomes is 30% of the total cost of employee-only coverage. This limitation only applies to wellness programs that require disability-related inquiries or medical examinations in order to earn an incentive.
    •  Discrepancy – The EEOC Question and Answer document states that the 30% incentive limit is the same as the limit under HIPAA and was used to provide consistency between the ADA and HIPAA. However, the 30% incentive limit under HIPAA is based on the total cost of coverage for the benefit package under which the employee is receiving coverage. If an employee and dependents may participate in the wellness program then, under HIPAA, the incentive cannot exceed 30% of the cost of the family coverage. This will be a provision to watch for potential changes in the final rule.
    •  Smoking Cessation – HIPAA permits a 50% incentive limit for wellness programs that prevent or reduce tobacco use. The EEOC proposed rule states that if disability-related inquiries or medical examinations are used for the wellness program (such as a biometric screening that tests for the presence of nicotine or tobacco) then the 30% limitation applies. However, if a smoking cessation program "merely asks employees whether or not they use tobacco" it is not a wellness program subject to the 30% limitation and the 50% limitation under HIPAA would apply.
  • Privacy – Employers may only receive medical information obtained by wellness programs in aggregate form except as needed to administer the health plan. Group health plans subject to HIPAA will satisfy this obligation as long as it complies with HIPAA.
  • Compliance – Compliance with the proposed rules does not guarantee compliance with other laws.  Genetic Information Nondiscrimination Act – The proposed rule does not address the ability to require an employee's family member to participate in the wellness program. The proposed rule states that this issue will be addressed in future rulemaking.
  • Safe Harbor – Compliance with the proposed rule is not required but the EEOC suggests that compliance with the proposed rule is unlikely to result in a court or the EEOC finding that an employer violated the ADA.

Comment Period – Comments are due by June 19, 2015. 

Other Guidance 

CMS Guidance – CMS issued three FAQs addressing how the market reform rules apply to wellness programs.

Tri-Agency Guidance – The Departments of Health and Human Services, Labor, and Treasury issued FAQs regarding health-contingent wellness programs for group health plans. The FAQ states that a "health-contingent wellness program must be reasonably designed to promote health or prevent disease." It further clarifies that "a program complies with this requirement if it (1) has a reasonable chance of improving the health of, or preventing disease in, participating individuals; (2) is not overly burdensome; (3) is not a subterfuge for discrimination based on a health factor; and (4) is not highly suspect in the method chosen to prevent health or prevent disease." The guidance provides examples of wellness programs that will not be considered "reasonably designed": "programs designed to dissuade or discourage enrollment", "a program that collects a substantial level of sensitive personal health information without assisting individuals to make behavioral changes", and "programs that require unreasonable time commitments or travel". 

DOL Report – The Department of Labor also released a report titled "Workplace Wellness Programs: Services Offered, Participation, and Incentives."