On April 20, 2015, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations addressing how the Americans with Disabilities Act (ADA) applies to employer-sponsored wellness plans. The primary focus of the EEOC's proposed regulations is on what it means for a wellness program to be "voluntary." These proposed regulations generally track existing statutory and regulatory guidance under the Health Insurance Portability and Accessibility Act of 1996 (HIPAA) and the Affordable Care Act (ACA) regarding the operation of wellness plans, but they include certain potential important differences from the existing guidance. Because these regulations are proposed, they do not require immediate action1, but they provide an indication of how the intersection of the ADA, HIPAA and the ACA may be interpreted in the future.
The ADA permits employers to conduct medical inquiries and examinations of employees if the inquiry or examination is (a) "job-related and consistent with business necessity" or (b) “voluntary” as part of an employee health program. 42 U.S.C. § 12112(d). The EEOC, in enforcement guidance issued to investigators in 2000, stated: "A wellness program is 'voluntary' as long as an employer neither requires participation nor penalizes employees who do not participate." EEOC Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act, Q&A-22 (2000). This called into question the ability of employers to condition wellness program financial incentives or penalties on an employee's completion of a health risk assessment (HRA) or biometric screening. EEOC officials remarked that modest rewards (e.g., T-shirts and water bottles) for participating in a wellness program involving HRAs or biometric screening were permissible, but declined to take a formal position on what level of financial inducement was permitted under a "voluntary" program.
The next major development in the substantive regulation of employer-sponsored wellness programs arose under the health status nondiscrimination rules that were part of HIPAA. In 2006, the U.S. Departments of Labor, Treasury and Health and Human Services issued final regulations governing the operation of wellness plans under HIPAA (the HIPAA Regulations). The HIPAA Regulations essentially divided wellness programs into two categories: (1) "participatory" wellness programs (e.g., completing an HRA) and (2) "health-contingent" wellness programs (e.g., walking programs, lowering cholesterol). The primary difference between these two types of programs is that participatory wellness programs do not require an individual to satisfy any goal relating to a health factor. For example, simply completing an HRA or attending a smoking cessation class is enough to receive the incentive under a participatory wellness program. By contrast, a health-contingent wellness program focuses on activities (walking) or the achievement of certain outcomes (lowering cholesterol)2, or at least attempting to do so. The HIPAA Regulations did not limit incentives under participatory wellness programs, but they limited incentives under health-contingent wellness programs to 20 percent of the cost of employee-only coverage (generally described as 20 percent of the individual COBRA rate).
Three years later, in March 2009, the EEOC's Office of General Counsel issued an opinion letter approving, as consistent with the ADA, wellness program premium discounts within the 20 percent HIPAA-approved corridor. However, that letter was withdrawn two months later, and no subsequent guidance was issued.
When the ACA was enacted in 2010, it essentially incorporated the existing HIPAA Regulations into its statutory language, with the primary change being to increase the potential 20 percent incentive to a 30 percent incentive, and to provide that the incentive for smoking cessation could be as high as 50 percent of the cost of employee-only coverage. In 2013, final regulations were issued expanding on the ACA's statutory provisions. Those regulations basically retained the permitted framework outlined in the HIPAA Regulations (the "HIPAA/ACA Regulations")3. Thus, participatory wellness programs continued to be subject to minimal formal regulation, with the focus remaining on health-contingent wellness programs.
However, the EEOC remained skeptical about whether wellness programs involving HRAs or biometric screening tied to financial rewards or penalties were permitted under the ADA. In late 2014, the EEOC’s Chicago regional office commenced widely publicized litigation against Honeywell relating to the operation of its wellness plan. EEOC v. Honeywell, No. 0:14-04517 (D. Minn. 2014). Based on the pleadings in the Honeywell case, Honeywell's wellness program appeared to have been designed to comply with existing HIPAA/ACA Regulations. Yet the EEOC asserted that it nevertheless violated the ADA because it was not a "voluntary" wellness program.
EEOC's Proposed Regulations
1. Definition of "Voluntary"
As noted above, the EEOC's proposed regulations focus on what it means for a wellness program to be "voluntary." The proposed regulations articulate the following factors necessary to demonstrate that the wellness program involving the use of HRAs or biometric screening is voluntary:
- The employer cannot require employees to participate.
- The employer cannot deny coverage under any of its group health plans (or particular benefit packages within those plans) or limit the extent of coverage (except for permitted incentives) to employees who do not participate.
- The employer cannot take any adverse employment action against an employee who does not participate.
- The employer must provide a notice to employees clearly explaining (i) what medical information will be obtained, (ii) who will receive the medical information, (iii) how the medical information will be used, (iv) the restrictions on the disclosure of the medical information and (v) the methods that will be applied to prevent improper disclosure of the medical information.
Under the proposed regulations, an employee is not "required to participate" in a wellness program if the total incentive available under all wellness programs (both participatory programs and health-contingent programs) does not exceed 30 percent of the cost of employee-only coverage (i.e., 30 percent of the individual COBRA rate). The key difference between the EEOC's proposed regulations and the existing HIPAA/ACA Regulations is the concept of aggregation. Thus, according to the proposed EEOC regulations, if the annual cost of individual coverage is $5,000, and employees receive a $500 premium reduction for completing an HRA (a participatory wellness program), employees may only receive an additional $1,000 premium reduction for participating in a cholesterol-lowering program (a health-contingent wellness program).
It should be noted that under the proposed regulations certain types of wellness programs are outside of the EEOC's 30 percent aggregate incentive limitation. For example, employers can provide incentives to employees for attending such programs as nutrition, weight loss or smoking cessation classes (without any additional requirements) and not aggregate those incentives with other incentives applicable to other participatory and health-contingent wellness programs. In addition, the EEOC's restrictions on incentives generally appear limited to those that are tied to disability-related inquiries as part of an HRA or biometric screening (which the EEOC regards as a "medical examination" for ADA purposes).
2. Fifty Percent Incentive for Smoking Cessation
As noted above, the HIPAA/ACA Regulations provide that a wellness program can offer an incentive of up to 50 percent of the cost of employee-only coverage (i.e., 50 percent of the individual COBRA rate) for participating in a tobacco-related wellness program. The EEOC's proposed regulations provide that a participatory wellness program that merely asks employees whether or not they use tobacco (or whether or not they ceased using tobacco upon completion of a smoking cessation program) can offer an incentive of up to 50 percent under the HIPAA/ACA Regulations. However, if tobacco-related incentives are tied to the results of a biometric screening or other medical examination that tests for the presence of nicotine or tobacco, that wellness program is subject to the EEOC's 30 percent aggregate incentive limitation discussed above.
3. Health Risk Assessments and GINA
One of the issues being litigated by the EEOC in the Honeywell litigation discussed above is the ability of an employer to condition incentives for a family member under a health plan on that family member's participation in a wellness program. In the Honeywell litigation, the EEOC has challenged Honeywell's requirement that spouses certify that they are tobacco free to avoid a tobacco surcharge as violating requirements under the Genetic Information Nondiscrimination Act (GINA) relating to the disclosure of family medical history. The EEOC's proposed regulations do not address this issue and specifically note that the EEOC will issue further regulatory guidance under GINA on this issue.
Overall, the EEOC's proposed wellness regulations are generally consistent with the existing HIPAA/ACA Regulations, with the primary differences relating to (1) the aggregation of incentives for participatory and health-contingent wellness plans and (2) the restrictions of use of the 50 percent tobacco-related incentives. The comment period regarding these proposed regulations runs until June 19, 2015. We will update our guidance whenever the EEOC issues its final regulations on this topic.