On May 16, 2016, the Equal Employment Opportunity Commission (EEOC) issued two sets of final regulations that impact employer-provided wellness programs. Final regulations under the Americans with Disabilities Act (ADA) apply to wellness programs that involve employee medical examinations and disability-related inquiries, and final regulations under the Genetic Information Nondiscrimination Act (GINA) apply to wellness programs under which employees receive incentives when spouses complete health risk assessments and/or biometric screenings (spousal HRAs).

This summary provides a practical resource for those involved with wellness programs by answering the following questions:

I provide a health risk assessment and/or biometric screening opportunity for my employees. How can I be sure my wellness program complies with the new regulations?

Employers that provide health risk assessments and/or biometric screenings (HRAs) should evaluate their program to confirm that the program complies with the requirements listed below.

Note: This summary focuses specifically on HRAs, but the requirements described below generally apply under the ADA regulations to any other type of wellness program that involves an employee medical examination or a disability-related inquiry. The rules relating to spousal HRAs apply only to spousal HRAs.

1. The wellness program must be reasonably designed to promote health or prevent disease.

In order for the wellness program to be reasonably designed to promote health or prevent disease, the wellness program must:

  • Have a reasonable chance of improving the health of or preventing disease in participating employees;
  • Not be overly burdensome;
  • Not be a subterfuge for violating the ADA or other laws prohibiting employment discrimination;
  • Not be highly suspect in the method chosen to promote health or prevent disease;
  • Not simply shift costs from the employer to employees based on their health; and
  • Not simply provide an employer with information to estimate future health care costs.

A wellness program involving an HRA is not reasonably designed to promote health or prevent disease unless:

  • It provides results, follow-up information or advice designed to improve the health of participating individuals; or
  • The collected information actually is used to design a program that addresses at least a subset of the health-related conditions identified.

Note: Whetherthe wellness program is reasonably designed to promote health or prevent disease will be determined based on the relevant facts and circumstances. However, the EEOC has indicated that this standard generally will be met if employees are asked to complete an HRA for the purpose of alerting them to health risks of which they may have been unaware or if the employer uses aggregate information to design and offer health programs aimed at specific conditions identified by the information collected.

Caution: The GINA regulations indicate that a program involving a spousal HRA is not reasonably designed to promote health or prevent disease if the incentive is conditioned upon the outcome of the spousal HRA (e.g., if the spouse’s blood pressure must be below a certain level in order to qualify for the incentive).

2. The wellness program must be voluntary.

In order for the wellness program to be voluntary, an employer must not:

  • Require employees to complete the HRA;
  • Deny health coverage to employees who fail to complete the HRA or to employees whose spouses fail to complete a spousal HRA;
  • Deny coverage under a particular plan option to employees who fail to complete the HRA or to employees whose spouses fail to complete a spousal HRA;
  • Limit the extent of health coverage for employees who fail to complete the HRA (except with respect to permissible incentives, such as a higher deductible for non-participants); or
  • Take adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who fail to complete the HRA or whose spouses fail to complete a spousal HRA.

Caution: HR staff should be trained on how to respond appropriately to employees who complain about HRAs. Otherwise, the HR staff’s response could be viewed by the employee (and the EEOC) as an adverse employment action or other impermissible response taken to retaliate against the complaining employee.

3. Information obtained through the wellness program must be kept confidential.

In order for the wellness program to be confidential:

  • Medical information obtained through the HRA can be shared with the employer only in aggregate form, except to the extent necessary to administer the health plan.
  • The employer cannot condition participation in the HRA (or earning the incentive for completing the HRA) on:
  • The individual’s agreement to the sale, exchange, sharing, transfer or other disclosure of medical or genetic information (except as necessary to carry out specific activities relating to the wellness program).
  • The individual’s waiver of any confidentiality protections under the ADA.

Note: For wellness programs that are part of group health plans, the EEOC has indicated that the group health plan sponsor generally can comply with this confidentiality requirement by complying with the HIPAA privacy rules and by making the plan sponsor certification required under those rules. If an employer does not have a HIPAA privacy certification on file, the employer should consider documenting the plan sponsor certification as soon as possible.

Caution: The EEOC has indicated that 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. If it is not possible for an employer to divide these responsibilities among different people, the employer should consider how best to protect the information from being used to discriminate on the basis of disability in violation of the ADA.

4. Beginning in 2017, the employer cannot provide an incentive that exceeds 30 percent of the cost of health coverage.

The regulations prohibit wellness programs from providing incentives that exceed 30 percent of the total cost (i.e., employee and employer cost) of employee-only coverage. This 30 percent limitation is calculated as follows:

  • For wellness programs offered by employers who also provide a group health plan, the maximum incentive is 30 percent of the total cost of self-only coverage under the lowest-cost health plan option.
  • If the employer requires that an employee be enrolled in a particular plan option in order to participate in the wellness program, the maximum incentive is 30 percent of the total cost of self-only coverage under the required health plan option.
  • For wellness programs offered by employers who do not provide a group health plan, the maximum incentive is 30 percent of the cost of coverage under the second-lowest-cost Silver Plan (for a 40-year-old non-smoker) that is available through the Marketplace in the state that the employer identifies as its principal place of business.

This limitation applies both to financial and in-kind incentives, whether characterized as rewards or penalties, that are available under all of the employer’s wellness programs that involve medical examinations or disability-related inquiries. A separate limit equal to 30 percent of the cost of employee-only coverage applies to incentives provided in exchange for completion of a spousal HRA.

Caution: If an incentive is provided simply for completing the HRA, an employer does not need to consider the incentive limitations under the HIPAA wellness program rules. However, if the incentive is conditioned upon certain results (e.g., blood pressure at or below a certain level), the incentive must also satisfy HIPAA’s 30 percent rules, which are slightly different from the EEOC rules (see below).

Example: An employer offers one group health plan option that costs $500 per month. The employer also offers a $100/month premium discount for employees who complete an HRA and a $75/month premium discount for employees whose spouses complete a spousal HRA.

The $100 employee incentive does not exceed 30 percent of the total monthly cost of employee-only coverage under the employer’s health care plan (30 percent of $500 = $150), and the $75 spousal incentive separately does not exceed 30 percent of the total monthly cost of employee-only coverage under the employer’s health care plan. Therefore, even though the total incentive is more than 30 percent of the cost of coverage, these incentives satisfy the incentive provisions of the final regulations.

5. Beginning in 2017, the employee must receive a notice about the wellness program.

To comply with the ADA wellness program rules, an employer that provides an HRA must provide employees with a clear and understandable notice that describes:

  • The type of medical information that will be obtained;
  • The purpose for which medical information will be used;
  • The restrictions on disclosure of the employee’s medical information;
  • The employees or other parties with whom the information will be shared; and
  • The methods the employer will use to ensure that the medical information is not inappropriately disclosed (including whether it complies with HIPAA’s privacy and security rules).

The EEOC intends to publish a model notice on its website.

Note: These elements may already be described in communications that describe the wellness program. If so, no separate notice is necessary.

6. The person completing the HRA must provide prior, knowing and voluntary written authorization.

The authorization form must:

  • Be written in a manner likely to be understood by the individual.
  • Describe the types of genetic information that will be obtained and the purpose for which it will be used.
  • Describe the restrictions on disclosure of the information.

Caution: Although this authorization requirement was highlighted in the GINA regulations on spousal HRAs, the EEOC’s GINA regulations also apply this requirement to an employee’s completion of an HRA. Therefore, employers who offer HRAs – even where no incentive is provided – should obtain authorizations before the HRA is completed.

7. Incentives may not be conditioned upon the provision of family medical history.

If an HRA or spousal HRA includes family medical history questions, the HRA must clearly state that the questions are voluntary and that the incentive can be earned even if the family medical history questions are not completed.

8. The employer generally must provide a reasonable accommodation if an employee’s disability makes it difficult for the employee to complete the HRA.

The ADA requires employers to provide reasonable accommodations that would allow employees with disabilities to enjoy equal benefits and privileges of employment unless doing so would create an undue hardship for the employer. For example, if an employee has a disability that makes drawing blood dangerous, an employer that offers an incentive for undergoing a blood draw as part of a biometric screening would have to provide an alternative test (or certification requirement) so that the employee can earn the incentive.

Note: This obligation exists under the ADA even though the HIPAA wellness program regulations do not require the employer to offer a reasonable alternative for a participatory program.

How do the final EEOC regulations differ from the proposed regulations?

The final regulations retain the general concepts described in the proposed regulations, but contain some important differences.

ADA Regulations

Extension of Rules to Non-Group Health Plans. The proposed regulations applied two requirements only to wellness programs that are either offered by or are a part of a group health plan: (i) a limitation on the incentives that may be offered in connection with the wellness program and (ii) a requirement to provide employees with a notice about the wellness program. Unlike the proposed regulations, the final regulations apply these requirements to all wellness programs that ask an employee to respond to a disability-related inquiry or to submit to a medical examination (regardless of whether they are offered by or are part of a group health plan).

Additional Guidance on “Reasonably Designed” Requirement. The proposed and final regulations both require wellness programs to be reasonably designed to promote health or prevent disease. The final regulations clarify that:

  • A program involving a measurement, test, screening or collection of health-related information is not reasonably designed to promote health or prevent disease unless:
  • It provides results, follow-up information or advice designed to improve the health of participating employees; or
  • The collected health-related information actually is used to design a program that addresses at least a subset of the health conditions identified.
  • A wellness program is not reasonably designed to promote health or prevent disease if:
  • The program simply shifts costs from the employer to employees based on their health; or
  • The program simply provides an employer information to estimate future health care costs.
  • Whether a wellness program is reasonably designed to promote health or prevent disease will otherwise be determined based on the relevant facts and circumstances.

Additional Guidance on Calculating the 30 Percent Incentive Limit. The proposed and final regulations both prohibit wellness programs from providing incentives that exceed 30 percent of the total cost (i.e., employee and employer cost) of employee-only coverage. The final regulations provide additional detail on how to calculate this maximum permissible incentive.

  • For wellness programs offered by employers who also provide a group health plan, the maximum incentive is 30 percent of the total cost of self-only coverage under the lowest-cost health plan option.
  • If the employer requires that an employee be enrolled in a particular plan option in order to participate in the wellness program, the maximum incentive is 30 percent of the total cost of self-only coverage under the required health plan option.
  • For wellness programs offered by employers who do not provide a group health plan, the maximum incentive is 30 percent of the cost of coverage under the second-lowest-cost Silver Plan (for a 40-year-old non-smoker) that is available through the Marketplace in the state that the employer identifies as its principal place of business.

Additional Guidance on Confidentiality. The final regulations clarify that an employer cannot condition participation in a wellness program (or earning the incentive provided under that program) on:

  • An employee’s agreement to the sale, exchange, sharing, transfer or other disclosure of medical information (except as necessary to carry out specific activities relating to the wellness program); or
  • An employee’s waiver of any confidentiality protections under the ADA.

GINA Regulations

Extension to Non-Health Plan Participants. The proposed regulations permitted incentives for spousal HRAs only when the spouse was actually enrolled as the employee’s dependent under the employer’s health plan. The final regulations do not contain this limitation.

Different Method of Calculating Incentive Limitation. The proposed regulations prohibited incentives that, when added together with any permitted rewards for the employee’s completion of a wellness program involving medical examinations or disability-related inquiries, exceed 30 percent of the cost of the coverage in which the employee and spouse are enrolled. By contrast, the final regulations provide that the incentive for completion of a spousal HRA may not exceed 30 percent of the cost of employee-only coverage. This calculation is the same one applied under the final ADA regulations described above.

Elimination of the Allocation Requirement. The proposed regulations required that the portion of a wellness program incentive attributable to completion of a spousal HRA could not exceed the difference between (i) 30 percent of the cost of the coverage in which the employee and spouse are enrolled and (ii) 30 percent of the cost of employee-only coverage. The final regulations do not include this allocation requirement, so employers may provide an incentive of up to 30 percent of the cost of employee-only coverage for the employee’s completion of a health risk assessment and/or biometric screening and an additional 30 percent of the cost of employee-only coverage for the completion of a spousal HRA.

Enhancement of Confidentiality Provisions. The proposed regulations prohibited the incentive from being conditioned upon the employee’s or spouse’s agreement to sell genetic information or waive GINA’s confidentiality provisions. The final regulations expand this requirement to prohibit the exchange, sharing, transfer or other disclosure of genetic information except to the extent necessary to administer the wellness program.

How do the incentive rules described in the final EEOC regulations compare to the incentive rules applicable under the HIPAA regulations?

The following chart summarizes the differences between the incentive limitations described under the final EEOC regulations and the incentive limitations described under the regulations applicable to wellness programs under HIPAA.

ADA

GINA

HIPAA

Applicable to incentives provided in exchange for:

Medical examinations or disability-related inquiries of employees

Health risk assessments provided by spouses of employees

Completion of health-contingent wellness programs that are part of a group health plan

Maximum incentive percentage:

30%

30%

50% for tobacco-related programs; 30% for all other programs

Incentive limit calculated using the total (employee and employer) cost of:

If the employer requires enrollment in a particular health plan option: self-only coverage under that health plan option

If the employer offers a group health plan and does not require enrollment in a particular health plan option: self-only coverage under the lowest-cost health plan option

If the employer does not offer a group health plan: self-only coverage under the second-lowest-cost Silver Plan (for a 40-year-old non-smoker) that is available through the Marketplace in the state that the employer identifies as its principal place of business

If the employer requires enrollment in a particular health plan option: self-only coverage under that health plan option

If the employer offers a group health plan and does not require enrollment in a particular health plan option: self-only coverage under the lowest-cost health plan option

If the employer does not offer a group health plan: self-only coverage under the second-lowest-cost Silver Plan (for a 40-year-old non-smoker) that is available through the Marketplace in the state that the employer identifies as its principal place of business

If the wellness program is available to dependents: the health plan coverage in which the employee is enrolled

If the wellness program is available only to employees: self-only coverage

Example 1: An employer offers one group health plan option and offers a $75/month premium discount for employees who complete an HRA and a $50/month premium discount for employees whose spouses complete a spousal HRA. The $75 and $50 HRA incentives do not need to comply with the HIPAA rules because the HRA program is participatory (instead of health-contingent). However, the $75 HRA incentive must comply with the ADA rules because it involves disability-related inquiries of the employee, and the $50 HRA incentive must comply with the GINA rules because it involves a spousal HRA.

Example 2: An employer offers a $100/month premium discount for employees who certify that they and their family members do not use tobacco. The tobacco incentive does not need to comply with the ADA rules because it does not involve a medical examination or disability-related inquiry (see below). However, the tobacco incentive is a health-contingent wellness program and therefore must comply with the HIPAA rules.

Example 3: An employer offers (i) one group health plan option, (ii) a $75/month premium discount for employees who complete a biometric screening, and (iii) a $100/month premium discount for employees whose biometric screening confirms that the employee does not use tobacco. The $75 and $100 incentives together must satisfy the ADA rules because they both involve medical examinations (see below). The $100 incentive must separately satisfy the HIPAA rules because it involves a health-contingent wellness program. The $75 incentive does not need to satisfy the HIPAA rules because it relates to a participatory wellness program.

My health plan charges higher premiums for employees who use tobacco. Do the final rules impact that practice?

The EEOC’s regulations apply only to wellness programs that involve a medical examination or disability-related inquiry. Tobacco use is not currently recognized as a disability, so a tobacco surcharge would be subject to these rules only if an employer requires employees to undergo a medical examination to verify their tobacco use.

Example 1: An employer offers a $100/month premium discount for employees who certify that they and their family members do not use tobacco. The tobacco surcharge would not be subject to the final EEOC regulations because no medical examination is involved.

Example 2: An employer offers a $100/month premium discount for employees who certify that they do not use tobacco and whose blood test results confirm their certification. The tobacco surcharge would be subject to the final EEOC regulations because a medical examination is involved.

Note: A tobacco surcharge/discount is an outcome-based health-contingent wellness program under the HIPAA wellness program regulations. Therefore, even if no medical examination is involved and the EEOC rules do not apply, a tobacco surcharge/discount cannot exceed 50 percent of the cost of coverage as determined under the HIPAA regulations (see above). In addition, a reasonable alternative must be offered to employees who choose not to quit using tobacco and certain disclosures must be made in the communications that describe the tobacco surcharge/discount.

I have a wellness program that doesn’t involve a medical examination or disability-related inquiry. What do these new regulations mean for me?

If a wellness program does not involve a medical examination or a disability-related inquiry, it is not subject to these final regulations. For example, wellness programs that involve only nutrition classes, weight loss programs, smoking cessation programs, onsite exercise facilities, or health coaching are not subject to these rules. However, such programs must comply with other aspects of the ADA and other applicable laws. For example, the ADA requires the wellness program to be made available to all employees and to provide reasonable accommodations to employees with disabilities. If a program provides a financial incentive for employees to attend a nutrition class, the employer may need to provide a sign-language interpreter for a person with a hearing disability.

When are the final regulations effective?

The portions of the final EEOC rules applicable to notices and incentives are effective as of the first day of the first plan year that begins on or after January 1, 2017 for the health plan that is used to measure the level of permitted incentive. For employers that do not offer a health plan, those rules are effective January 1, 2017.

The remaining portions of the final EEOC rules are considered to be clarifications of existing obligations and are effective both before and after January 1, 2017.

Caution: Because the EEOC has taken this position regarding “clarifications,” employers who required completion of an HRA as a condition of eligibility for a health plan or for a particular plan option could be at risk – even if they no longer apply that condition.

Will these regulations override wellness program court decisions like Seff v. Broward County and EEOC v. Flambeau?

The courts will have to answer that question.

In Seff v. Broward County and EEOC v. Flambeau, each court addressed a “safe harbor” provision of the ADA that permits an employer to require medical examinations or make disability-related inquiries when “establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks or administering such risks that are based on or are not inconsistent with state law.” Each court found that the wellness program at issue satisfied this safe harbor and therefore did not violate the ADA.

The EEOC’s final regulations very clearly express the EEOC’s interpretation that the ADA’s safe harbor provision does not apply to wellness programs. Courts are required to give deference to an agency’s interpretation of an ambiguous provision of a statute as long as it reasonable. Therefore, a court that is faced with this issue in the future will need to determine whether the ADA’s provisions are ambiguous and, if so, whether the EEOC’s interpretation is reasonable.

What are some red flags to consider?

If your wellness program includes any of the following designs, you should pay close attention to the final regulations to determine whether and to what extent changes should be made:

  • An employee is not eligible for the group health plan unless the employee completes a health risk assessment and/or biometric screening.
  • An employee is not eligible for a particular health plan option unless the employee completes a health risk assessment and/or biometric screening.
  • Employees are not provided with the results of their health risk assessments and/or biometric screenings.
  • Employees are not required to provide authorizations before completing an HRA and/or biometric screening.