The regulations are a win for employers, but there is still important work to be done during the comment period.
On April 17, the Equal Employment Opportunity Commission (EEOC) released proposed regulations under the Americans with Disabilities Act (ADA) that will provide long-awaited guidance concerning the extent to which employers may use incentives to encourage employees to participate in wellness programs. In many respects, the proposed regulations are a win for employers because the regulations are much more accepting of wellness programs than the EEOC’s position in its prior wellness program litigation against employers. However, the proposed regulations are more restrictive in a number of respects than the wellness regulations issued under the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA). Employers will likely request that the EEOC make changes to ensure that these proposed regulations are truly consistent with HIPAA and the ACA.
Self-insured employers and insurers are increasingly implementing wellness programs as part of their group health plans to promote a healthier workforce and to lower healthcare and insurance costs. These wellness programs often include incentives to encourage employee participation, and they also sometimes include incentives that encourage employees to achieve certain health outcomes. Such wellness programs are governed by federal employee benefits laws, including ERISA, HIPAA, and the ACA. In addition, wellness programs must comply with federal antidiscrimination laws, including the ADA.
Because wellness programs typically include a health questionnaire and/or biometric screening, the ADA’s limitations on employer health-related inquiries may be implicated. Under the ADA, employers are permitted to make health-related inquiries or to require employees to undergo medical examinations in certain limited situations.
The ADA contains an insurance safe-harbor provision that exempts bona fide employee benefit plans from the ADA’s limitations on health-related inquiries and medical examinations (See 42 U.S.C. § 12201(c)(2); Seff v. Broward Cnty., 691 F.3d 1221, 1223 (11th Cir. 2012)). In addition, even if a wellness program does not fall within this safe harbor, an employer is still permitted under the ADA to use health questionnaires and biometric screening as part of a wellness program so long as participation is “voluntary” (See 42 U.S.C. § 12112(d)(4)(B)). The proposed regulations address the incentives that employers can offer to satisfy the “voluntary” standard.
Prior to issuing these regulations, the EEOC had instituted litigation against multiple employers related to their wellness programs. The EEOC was criticized by both employer representatives and Republicans in Congress for doing so prior to issuing formal guidance on this topic.
The proposed regulations would apply to wellness programs that are part of an insured or self-insured group health plan. The proposed regulations contain the following key provisions, many of which will need to be further explored during the comment period:
- In its discussion of the proposed regulations, the EEOC has taken the position that wellness programs that are part of group health plans are not protected by the insurance safe-harbor provision. This interpretation conflicts with the plain language of the ADA and the Seff decision and should be explored during the comment period. The EEOC reasons that if the insurance safe harbor covered wellness programs, the ADA’s voluntariness provision would be rendered superfluous, but the EEOC entirely ignores the fact that the voluntariness provision would still apply to employer wellness programs that are not a part of insured or self-insured group health plans.
- The wellness program must be designed to promote health or prevent disease. For example, a program that gathers health-related information from employees through biometric screening but does not provide employees with the results or offer any programs to mitigate health-related conditions would not be a valid wellness program.
- An employer may not require participation in the program and it may not deny coverage under any of its group health plans or benefit packages within a group health plan, limit the extent of such coverage, or take any other adverse employment action against employees who choose not to participate in a wellness program or achieve certain health outcomes.
- An employer must provide employees with a written notice that clearly explains (1) what medical information will be obtained, (2) how the medical information will be used, (3) who will receive the medical information, (4) restrictions on the medical information’s disclosure, and (5) the methods used to prevent improper disclosure of the medical information. This new notice will add to the numerous required health and welfare notices already distributed by employers.
- An employer may offer incentives to encourage employees to participate in the wellness program of up to 30% of the cost of employee-only coverage. Prior to issuing these regulations, the EEOC had issued guidance stating that “[a] wellness program is ‘voluntary’ so long as an employer neither requires participation nor penalizes employees who do not participate.” In litigation, the EEOC had argued that any “penalty” is impermissible, no matter the amount. The proposed regulations would permit employers to offer incentives in the form of rewards or penalties so long as the amount of the incentive does not exceed 30% of the cost of employee-only coverage (including both the employee and the employer share of the cost of coverage). This is a significant departure from the past litigation position taken by the EEOC and a win for employers. However, applying the 30% limit to the cost of employee-only coverage will materially limit employers’ ability to offer wellness incentives for covered spouses and dependents. The HIPAA/ACA regulations allow the limit to be determined based on spouse or family coverage if spouses and dependents are included in the wellness program. This discrepancy is expected to be a significant issue raised in employer comments.
- The 30% limitation is consistent with the HIPAA/ACA regulations that concern health-contingent wellness programs that are not tobacco related, but it is not consistent with the HIPAA/ACA regulations that concern participatory wellness programs and health-contingent wellness programs with tobacco prevention or reduction initiatives. The EEOC essentially has taken a “pick and choose” approach in adopting certain parts of the HIPAA/ACA regulations and rejecting others. These discrepancies include the following, which will be an important area for employer comments:
- The HIPAA/ACA regulations do not limit the incentive amounts for participatory wellness programs, while the EEOC’s 30% limitation applies to such programs.
- The HIPAA/ACA regulations permit incentives of up to 50% of the cost of coverage for health-contingent wellness programs that contain tobacco prevention or reduction initiatives. For example, the HIPAA/ACA regulations would permit incentives of up to 50% of the cost of coverage for wellness programs that include a nicotine-testing component. The EEOC regulations would not.
- The EEOC’s interpretive guidance states that incentives that encourage employees to participate in a smoking cessation program are not covered by the 30% ADA limitation so long as the program merely asks the employees to disclose smoking status, rather than requiring a test for nicotine or tobacco.
The EEOC has specifically requested employer comment on several important issues, including the following:
- Whether employers should be required to offer the incentive to an employee who refuses to disclose medical information and offer a certification from a medical professional stating that the employee is under the care of a physician and any medical risks identified by the physician are under active treatment.
- Whether the “voluntary” standard also should contain a requirement that any incentives offered by an employer must not cause the cost of employee-only coverage to exceed 9.5% of the employee’s household income, consistent with the ACA.
- Whether and in what circumstances employers should be required to issue prior written notice that participation in the wellness program is voluntary.
- Whether employers offer or may in the future offer wellness programs with incentives outside of group health plans and the extent to which incentives should be permitted for such programs.
- The practical impact of the 30% incentive limitation on programs with a tobacco component.
The breadth of the topics upon which the EEOC seeks input underscores the importance of employer feedback in this notice process.
Employers may recall that prior guidance concerning family medical history in Health Risk Assessments caused a late-year scramble to ensure plan design compliance. Employers should be cognizant that they unfortunately may face a similar situation concerning these proposed regulations. Decisions concerning plan design for 2016 typically will be made in mid-2015, without the benefit of final regulations. The EEOC has stated that compliance with the proposed regulations will be treated by the EEOC as compliance with the ADA, pending the issuance of final regulations. However, if the EEOC issues its final regulations in late 2015 with a January 1, 2016 effective date, employers may again find themselves rushing to make last-minute changes to plan design to conform to any additional flexibility permitted under the final regulations.
Comments on the proposed regulations must be submitted on or before June 19, 2015.
Additional Wellness Guidance
On the same day that the EEOC issued its proposed regulations, the three agencies (Tri-Agencies) responsible for ACA guidance—the Department of Labor, the Department of Health and Human Services (HHS), and the Internal Revenue Service—issued two additional FAQs under the ACA regarding wellness programs. The FAQs provide that a wellness program that complies with the ACA must be “reasonably designed,” which means that it (1) must have 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 promote health or prevent disease. Like the EEOC, the Tri-Agencies affirmed that a wellness screening program that does not provide data to employees or offer them programs intended to manage health-risk factors is not “reasonably designed.” The FAQs also reinforce the view that compliance with HIPAA/ACA wellness rules does not necessarily constitute compliance with other federal laws, including the ADA.
The HHS Office of Civil Rights also issued on the same date guidance affirming that information gathered through a biometric screening or a health-risk assessment under a wellness program that is part of an employer group health plan is “protected health information” subject to HIPAA’s privacy and security rules.
Finally, the Centers for Medicare and Medicaid Services issued FAQs effective January 1, 2016 regarding wellness programs applicable to health insurers subject to the single risk-pool requirements for rates. Among other things, those FAQs prohibit insurers from choosing only certain employer groups for the offering of wellness incentives (e.g., office workers but not employees who perform physical labor).
The proposed ADA wellness regulations—which represent a radical departure from the EEOC’s position in litigation last year—combined with the simultaneous issuance of the additional guidance by the four other federal agencies responsible for regulating wellness programs, make clear that the Obama administration wants to signal strong support for employer and insurer wellness initiatives. Although all this guidance represents a welcome step in the right direction, the EEOC’s proposed ADA regulations are still more restrictive than the HIPAA/ACA regulations and are applicable to one of the fundamental building blocks of any wellness program—screenings designed to identify health risks that can be managed under the program. We hope that the EEOC will respond positively to expected comments requesting that its final regulations move further in the direction of harmonizing all of the agency guidance regarding wellness programs.