On April 16, 2015, the Equal Employment Opportunity Commission (the EEOC) released its proposed rule (the Proposed Rule) that would amend the regulations implementing Title I of the Americans with Disabilities Act (the ADA) and provide guidance to employers seeking to implement employee wellness programs that comply with the ADA. The Proposed Rule comes nearly two years after the EEOC heard from representatives of business and advocacy groups about the need for guidance as to how employers can design and implement wellness programs that comply with federal nondiscrimination laws. While the EEOC’s guidance is limited in that it addresses compliance with the ADA only, the Proposed Rule is nonetheless significant in that it sets forth the EEOC’s interpretation of whether a wellness program is “voluntary” (and thus likely compliant with the ADA) that is mostly, but not entirely, consistent with guidance on nondiscriminatory wellness programs issued by other federal departments. This article provides historical background with respect to wellness programs, including previous regulatory guidance, analyzes the Proposed Rule, and addresses the open issues remaining in the wake of the EEOC’s most recent proposed regulatory guidance.
Employee wellness programs are popular with employers seeking to improve employee well- being and boost productivity, as well as stem rising healthcare costs. According to the Kaiser Family Foundation’s 2014 Annual Survey of Employer Health Benefits, 98 percent of employers with over 200 employees and 73 percent of smaller employers offer some sort of wellness program.
There are two types of wellness programs. Participatory programs are available to all employees and do not condition any reward on an individual satisfying a specific standard or benchmark related to a health factor. For example, reimbursing employees for the cost of membership in a fitness center is a participatory program. Health- contingent programs provide an award to employees why satisfy a health standard. For example, a program that provides for reduced health benefit premiums for employees who do not use tobacco products or participate in a smoking cessation program is a health-contingent program.
Participatory programs generally do not implicate anti-discrimination laws, so long as they are available to all similarly-situated employees, because such programs do not condition a reward on an individual satisfying a standard that is related to a health factor. See 29 C.F.R. § 2950.702(f)(3). Health-contingent programs, however, may give rise to discrimination claims to the extent the programs penalize employees based on a health factor. However, long-standing regulations implementing the Health Insurance Portability and Accountability Act of 1998 (the HIPPA) (the 2006 HIPPA Regulations) deemed health-contingent wellness programs permissible under HIPPA’s nondiscrimination provisions so long as they met certain criteria, including with respect to the value of the reward (not to exceed 20 percent of the cost of coverage), eligibility, and availability of reasonable alternatives.
The 2006 HIPPA Regulations were amended in June 2013 by the United States Departments of Labor, Health and Human Services, and Treasury (collectively, the Departments) to comply with the Affordable Care Act (the ACA). Pursuant to the amended regulations (the 2013 ACA Regulations), health-contingent wellness programs are classified as either “activity-only” or “outcome-based” programs. Activity-only wellness programs require employees to perform or complete activities related to a health factor to obtain a reward, but do not require that employees attain specific health outcomes. See 29 C.F.R. § 2950.702(f)(1)(iv). For example, a diet program that does not require that participating employees reach a certain BMI is an activity- only wellness program. Outcome-based wellness programs require that employees actually attain or maintain a specific health outcome to obtain a reward. See 29 C.F.R. § 2950.702(f)(1)(v). Thus, a diet program that requires participating employees reach specific BMI is an outcome-based wellness program.
Under the 2013 ACA Regulations, health-contingent wellness programs (both activity-only and outcome- based) do not violate the HIPPA’s nondiscrimination provisions where (i) employees are provided with the opportunity to qualify for the reward at least once per year; (ii) the program is reasonably designed to promote health or prevent disease; (iii) the reward does not exceed more than 30 percent of the cost of coverage for the employee and his or her dependents (or 50 percent if the program is a tobacco cessation program); (iv) the program permits individuals to achieve the reward through a reasonable alternative standard; and (v) the program provides notice of the availability of other reasonable alternatives for qualifying for the reward or of a waiver of that requirement in all plan materials describing the health-contingent wellness program. See 29 C.F.R. § 2950.702(f)(3).
With respect to reasonable alternatives, the employer’s obligation turns on whether the program is activity-only or outcome-based. For activity-only wellness programs, an employer must make available an alternative means for obtaining the reward to those individuals for whom it is either unreasonably difficult due to a medical condition to meet the applicable standard or would be medically inadvisable to attempt to satisfy the standard. See 29 C.F.R. § 2950.702(f) (3)(iv). For outcome-based wellness programs, an employer must offer each individual who does not meet the initial standard a reasonable alternative, regardless of whether the failure to meet the initial standard is attributable to a medical condition. See id.
Thus, it is clear that health-contingent wellness programs can be compliant with the HIPPA, as amended by the ACA. However, other federals laws, including the ADA, the Genetic Information Non-Discrimination Act of 2008 (GINA), Title VII of the Civil Rights Act of 1964 (Title VII), and the Age Discrimination in Employment Act (ADEA) may limit the ability of employers to offers such programs in a nondiscriminatory fashion. Indeed, the Departments recognized in the 2013 ACA Regulations that compliance with said regulations is not determinative of whether health-contingent wellness programs may be in violation of other state or federal nondiscrimination laws. See 78 FR at 33168.
EEOC Guidance Under the ADA
The Proposed Rule applies to wellness programs that are (1) part of a group health plan and (2) may implicate the ADA because they include disability- related inquiries or require medical examinations. Generally, the ADA prohibits all such inquiries and examinations prior to an offer of employment and, after a conditional offer is made, allows such inquiries and examinations only if they are job-related and consistent with business necessity. See 42 U.S.C. § 12112(d). However, a limited exception allows for “[a] covered entity [to] conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site” so long as the information is kept confidential and not used for discriminatory purposes. See 42 U.S.C. § 12112(d) (4)(B). While the EEOC previously recognized that disability-related inquiries and medical examinations are permissible as part of a “voluntary” wellness program (see The EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the ADA, available at http://www. eeoc.gov/policy/docs/guidance-inquiries.html), only in the Proposed Rule has the agency set forth how it determines whether a program is “voluntary.”
Specifically, under the Proposed Rule, a wellness program is “voluntary” if the employer does not (1) require employees to participate; (2) deny coverage under any of its group health plans or limit the extent of such coverage to employees who refuse to participate in wellness programs; or (3) take adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who do not participate. Thus, should the Proposed Rule be finalized, employers would be prohibited from offering certain lower-deductible or otherwise preferable plans only to those employees who, for example, complete a health risk assessment or undergo a biometric screen.
Further, to be “voluntary,” any disability-related inquiries and medical examinations required under the wellness program must be reasonably designed to promote health or prevent disease, and must not be overly burdensome. Additionally, the Proposed Rule clarifies that an employer may offer financial incentives to employees and still be “voluntary” so long as the reward does not exceed 30 percent of the cost of coverage for the employee. However, unlike the 2013 ACA Regulations, the Proposed Rule does not allow an increase to 50 percent for tobacco cessation programs. Moreover, the EEOC’s position is that the percentage must be based on the cost of coverage for the employee only, while the 2013 ACA Regulations consider the full cost of the coverage for the employee and his or her dependents.
Notably, the Proposed Rule notes that compliance with the rule will not relieve an employer from its obligation to comply with other state and federal nondiscrimination laws, and that wellness programs might comply with the ADA but nonetheless be in violation of Title VII, the ADEA, or GINA. Thus, employers should be mindful of their obligations under those laws, irrespective of the EEOC’s guidance with respect to the ADA.
For example, GINA prohibits discrimination on the basis of genetic information with respect to health insurance and employment. See 42 U.S.C. § 2000ff- 1. In 2010, the EEOC set forth regulations stating that, to comply with GINA, a wellness program may not condition receipt of an incentive on an employee providing genetic information. See 29 C.F.R. § 1635.8(b)(2). For example, the regulations provide that if an employer offers a $150 incentive for employees who complete a health risk assessment that asks about the employee’s family medical history, the health risk assessment must state that any incentive will be given for completing the assessment regardless of whether the employee answers the questions seeking genetic information. See 29 C.F.R. § 1635.8(b)(2)(ii). Therefore, the discrimination provisions of GINA may limit the ability of employers to implement wellness programs that require employees to provide information related to family medical history, even if such inquiry would otherwise be permissible under the Proposed Rule. Importantly, the EEOC did indicate in the Proposed Rule that additional guidance with respect to GINA would be forthcoming.
Similarly, employers should be mindful that health- contingent wellness programs that reward employees who meet certain benchmarks may also violate Title VII and the ADEA if the programs target health or risk factors that occur disproportionately among certain protected groups, such as women, minorities, or older workers. Employers should examine their health- contingent wellness programs carefully to assess potential exposure, and continue to monitor closely any guidance under Title VII or the ADEA.
The Proposed Rule is helpful in offering some clarity to employers seeking to implement health-contingent wellness programs that comply with the ADA, and employers should be mindful of the final rule once implemented. Moreover, as additional guidance may be forthcoming with respect to designing and implementing wellness programs to ensure compliance with federal nondiscrimination laws, including GINA, employers should continue to monitor their programs to take into account any available guidance.