Many employers have implemented wellness programs to encourage employees to adopt a healthy lifestyle and reduce medical claims. In recent years employers have revised wellness programs to comply with final regulations under the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA). Now employers must review their wellness programs for compliance with final regulations issued by the Equal Employment Opportunity Commission (EEOC) under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The final ADA regulations describe the extent to which employers may use employee incentives in wellness programs that include disability-related questions and/or medical examinations. Unfortunately, employers must navigate differences between the final ADA regulations and the HIPAA/ACA regulations.

The final GINA regulations confirm that employers may provide limited wellness incentives in exchange for an employee’s spouse providing health status information, but cannot provide incentives for children’s health status information.

The ADA’s notice and incentive provisions, and GINA’s incentive provisions, apply as of the first day of the first plan year beginning on or after January 1, 2017. Per the EEOC, all other provisions are clarifications of current requirements.

This advisory analyzes the final regulations, contrasts them with the final HIPAA/ACA regulations, and provides practical guidance for employers. For information on the background and a chart comparing the proposed ADA regulations (which were very similar to the final ADA regulations) to the HIPAA/ACA rules, refer to our previous advisory.

Employer to-do list

This is unlikely to be the final word on wellness from the regulators and the courts (litigation is pending). For now employers should:

  • Analyze how the various regulations apply to each wellness plan component
  • Check compliance with applicable incentive limits under the ADA and HIPAA/ACA
  • Review notices for compliance with ADA and HIPAA/ACA requirements

Four rules for ADA-compliant wellness programs

Under the final ADA regulations, wellness programs must:

  • Be reasonably designed to promote health or prevent disease.
  • Be voluntary (including provision of a notice), if they include disability-related questions or medical examinations.
  • Limit participation incentives to 30%, if they include disability-related questions or medical examinations.
  • Comply with confidentiality rules regarding medical information or history.

These requirements are described in more detail below, but it is important to understand that the ADA regulations are different in scope to the HIPAA/ACA regulations. The HIPAA/ACA rules prohibit group health plans from discriminating in premiums, benefits or eligibility based on a health factor, with limited exceptions for wellness programs, which are classified as participatory or health contingent. The ADA’s wellness rules, including limits on incentives and notices, apply to any wellness program requiring employees to answer disability-related questions or undergo medical examinations to earn a reward or avoid a penalty, regardless of whether the program is participatory or health contingent under the HIPAA/ACA regulations, or whether it is part of a group health plan. Wellness programs that do not include disability-related inquiries or medical examinations are not subject to the ADA’s limits on incentives and notice requirements, but must be available to all employees and are subject to the ADA’s reasonable accommodation rules.

In other words, the ADA’s incentive and notice rules do not apply to programs providing general health and educational information, or merely requiring employees to engage in certain activities, but those progams must provide reasonable accommodation for employees with disabilities. The reasonable accommodation requirement might equate to HIPAA/ACA’s “reasonable alternative standard”, but the HIPAA/ACA rules do not require a reasonable alternative standard for participatory-only programs, only for health contingent programs. Let’s take some examples where the ADA’s incentive limits do not apply:

  • Employer X offers financial incentives to attend a nutrition class. Under the ADA regulations, the employer must provide a sign language interpreter for a deaf employee, or materials in braille for a blind employee, unless that would cause undue hardship to the employer. Under the HIPAA/ACA regulations, this type of program would be participatory-only, and the only requirement would be to offer it to all similarly-situated individuals.
  • Employer Y offers financial incentives to complete a walking program. Under the ADA regulations, the employer must provide an alternative for a wheelchair user to participate. Under the HIPAA/ACA regulations, this program is classified as health contingent, activity-only, and is subject to HIPAA/ACA’s incentive limits and reasonable alternative standards.

Program must be “reasonably designed to promote health or prevent disease”

The program must have a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease. This requirement is similar to that in the HIPAA/ACA regulations.

Programs designed to alert employees to health risks (e.g. high cholesterol or elevated blood pressure), or programs aimed at specific conditions prevalent in the workplace (e.g. diabetes or hypertension) are acceptable.

However, the following are unacceptable:

  • Imposing undue time burdens or costs on employees.
  • Requiring unreasonably intrusive procedures.
  • Collecting medical information without providing employees with follow-up information or advice (e.g. feedback about risk factors, or using aggregate information to design programs or treat specific conditions).
  • Shifting costs to employees based on their health.
  • Using the wellness program only to predict the employer’s future health care costs.

Program must be “voluntary”

A wellness program including disability-related questions or medical examinations is voluntary if the employer:

  • Does not require employees to participate.
  • Does not deny health coverage or limit the choice of plan or benefits.
  • Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate or threaten employees choosing not to participate, or who do not meet certain health outcomes.
  • Provides an understandable notice explaining what medical information will be obtained, how it will be used, who will receive it, restrictions on disclosure of the employee’s medical information, the employer representatives or other parties with whom the information will be shared, and how the employer will ensure medical information is not improperly disclosed (including whether it complies with HIPAA). Employers may need to revise current notices to comply (see our previous advisory for content information). The EEOC will issue a sample notice.

Program must limit participation incentives to 30%

General Rules

The total allowable incentive under programs with disability-related questions or medical examinations, whether classified as participatory or health-contingent under HIPAA/ACA regulations, and whether or not part of a group health plan, cannot exceed a 30% limit, calculated as follows:

Medical Coverage Options

Maximum Incentive

Employer offers only one medical plan

30% of total cost for self-only coverage

Employer offers multiple medical plans

30% of total cost for lowest cost self-only coverage

Employer does not offer any medical plan*

* Beware the ACA’s employer mandate!

30% of the cost for a 40 year old non-smoker’s self-only coverage under the second lowest cost Exchange Silver Plan for the employer’s principal place of business

Similar to HIPAA and the ACA, incentives include financial and in-kind incentives (e.g. reduced premiums, cash, time-off, prizes and other items of value). There is no de minimis exclusion.

Testing for nicotine use

If employees are tested for nicotine use, the EEOC treats this as a medical exam, so the incentive must be limited to 30%, even though the HIPAA/ACA regulations permit 50%.

If employees are merely asked about smoking habits, the ADA’s incentive limits do not apply, so employers may use the 50% limit in the HIPAA/ACA regulations. However, the ADA’s other rules, e.g. reasonable accommodation, would apply.

Program must comply with confidentiality rules

In addition to general confidentiality provisions under the ADA:

  • Employers and plan administrators must ensure that medical information or history obtained under a wellness program regarding any individual is provided to the employer only in aggregate terms not disclosing, or reasonably likely to disclose, the identity of any employee. Generally, wellness programs can meet this rule by complying with HIPAA Privacy Rule requirements.
  • Employers may not require an employee to either agree to the sale, exchange, sharing, transfer, or other disclosure of medical information, or waive confidentiality protections available under the ADA, as a condition for participating in a wellness program or receiving an incentive (unless permitted to carry out specific activities related to the wellness program).

See our previous advisory for practical guidance from the EEOC on complying with the confidentiality provisions.

There is no such thing as a bona fide benefit plan safe harbor

The ADA has taken a firm position that the ADA safe harbor (allowing employers to use information about risks posed by health conditions to make decisions regarding the cost of coverage) does not apply to wellness programs, which must comply with the “voluntary” standard. This is contrary to case-law in the EEOC v. Flambeau, Inc. and Seff v. Broward County decisions, which the EEOC believes were wrongly decided. The EEOC has appealed Flambeau, and we await the Seventh Circuit decision.

GINA’s rules regarding incentives for spouses or children

Under Title II of GINA, employers may not use genetic information in making employment decisions. However, there is an exception for genetic information gathered under voluntary wellness programs. Genetic information includes information regarding the manifestation of a disease or disorder in family members of an individual, such as a spouse. Under the EEOC’s final GINA regulations, employers:

  • May offer incentives to an employee for completion of health risk assessments that include questions regarding family medical history or other genetic information, but must clearly explain that the incentive will be available regardless of whether the genetic information questions are answered.
  • May offer incentives to an employee whose spouse provides information regarding the manifestation of a disease or disorder as part of an HRA, regardless of whether the wellness program is offered through a group health plan. The incentive cannot exceed 30% of the cost of self-only coverage, calculated using the same rules as the ADA. Spouses must provide prior, knowing written and voluntary authorization to complete the HRA. Note, GINA would not apply to inducements for spouses who participate in activities not disclosing information about current or past health status, such as attendance at a weight loss or nutrition program, or exercising.
  • May allow children to participate in wellness programs, but cannot offer incentives to children (adult, minor or adopted) for their health information.
  • Cannot deny benefits to, or retaliate against, any employee whose spouse refuses to provide information about current or past health status.
  • Must design their programs to promote health or prevent disease. The requirements are the same as under the ADA regulations. Note that a program cannot penalize an employee because a spouse’s manifestation of disease or disorder prevents or inhibits the spouse from participating or from achieving a certain health outcome. For example, an employer cannot deny an employee an incentive because the spouse has a biometric result that the employer considers too high. Perhaps a properly designed “reasonable alternative standard” under the HIPAA/ACA regulations would be sufficient to avoid this result.
  • Must comply with confidentiality rules.