Wellness programs are becoming more popular among employers as a way to promote healthy lifestyles for their employees. Most employers are aware that their wellness programs must comply with the nondiscrimination rules under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), under which a wellness program is prohibited from discriminating on the basis of a health factor. However, last year the Equal Employment Opportunity Commission (“EEOC”) brought several claims against employers on the basis that the employer’s wellness program was not “voluntary” under the Americans with Disabilities Act of 1990 (“ADA”). As a result of these claims, an employer may be faced with a new dilemma even if its wellness program is able to pass muster under the HIPAA nondiscrimination rules, does it fail the ADA “voluntary” requirement?

Recently, the EEOC issued proposed rules that would amend the regulations and interpretive guidance implementing Title I of the ADA as such rules apply to employer wellness programs that are part of group health plans. The proposed rules address certain of the concerns raised by the EEOC in the recent claims brought against employers. Specifically, the proposed rules provide for the following:

  • a definition of an employee health program;
  • the criteria for determining whether a program is “voluntary;”
  • notice requirements to be fulfilled by employers in connection with voluntary employee health programs;
  • the incentives an employer is permitted to offer under a voluntary employee health program; and
  • confidentiality requirements with respect to medical information that is obtained through a voluntary employee health program.  

Employee Health Programs

The ADA requires that employee health programs (including wellness programs) that include disability-related inquiries or medical examinations must be voluntary and must have a reasonable chance of improving the health of, or preventing disease in, participating employees. For example, conducting a health risk assessment or biometric screening of employees for the purpose of alerting them to health risks of which they may have been unaware would meet the above standard, as does aggregating information from employee health risk assessments in order to design and offer health programs aimed at specific conditions that may be prevalent in the workplace (e.g., diabetes and high blood pressure).

“Voluntary” Participation

The proposed rule provides that, in order for a program to be “voluntary,” the employer may not require an employee to participate in the program and may not deny coverage under any of its group health plans or benefit packages as a result of non-participation. In addition, an employer may not take any other adverse action against employees who refuse to answer disability-related inquiries or submit to medical examinations.

Notice Requirement

In order for a program to be considered voluntary, the employer must provide a notice that clearly explains the information that will be obtained, how such information will be used, who will receive the medical information, the restrictions on its disclosure and the methods the employer uses to prevent improper disclosure of medical information. The EEOC has not yet published a model notice. One open question is whether the EEOC will permit employers that sponsor group health plans to satisfy the preceding notice requirements by including the required disclosure into the group health plan’s Notice of Privacy Practices, which is required to be distributed to plan participants under HIPAA.

Employer-Provided Incentives

The proposed rule places limitations on the incentives that employers may provide to employees to encourage participation in employee health programs. A wellness program that is part of a group health plan or health insurance coverage will not be rendered involuntary under the ADA for using limited incentives, including both financial and in-kind incentives (e.g., time-off awards, prizes or other items of value). However, the maximum incentive for either a participatory program that involves disability-related questions or medical examination, or for a health-contingent program that requires a participant to satisfy a standard related to a health factor, may not exceed 30% of the total cost of employee-only coverage. For example, if the premium for employee-only coverage is $5,000 and the plan provides $250 for completing a health risk assessment, the reward would not exceed the 30% maximum. However, if the plan also offers a $1,500 reward toward participating in a health-contingent program to promote cardiovascular health, then together the total reward of $1,750 would exceed the 30% maximum and would not comply with the ADA.

The HIPAA nondiscrimination rules permit employers to offer an incentive as high as 50% of the total cost of employee coverage for tobacco-related wellness programs, such as smoking cessation programs. However, the ADA rules only apply to health programs that include disability-related inquiries or medical examinations. Therefore, a smoking cessation program that merely asks whether employees use tobacco or whether they ceased smoking upon the completion of the program, are not programs that are covered under the ADA incentive rules. Accordingly, an employer may offer incentives as high as 50% of the cost of employee coverage pursuant to the HIPAA incentive rules without running afoul of the ADA rules with respect to such wellness plans. However, if the wellness program relating to tobacco involves a biometric screening or medical examination that tests for the presence of nicotine or tobacco, then the ADA financial incentive rules would apply as a result of such screenings or examinations and the maximum 30% incentive would be applicable.

Confidentiality Requirement

The ADA requires that medical records that are developed as part of an employee health program be maintained in a confidential manner and must not be used for purposes other than in connection with the employee’s participation in such health program. Further, all medical information collected in connection with an employee health program may only be provided to the employer in aggregate terms that do not disclose the identity of the specific individuals, except as necessary to administer the health program. If a wellness program is part of a group health plan, any individually identifiable health information that is collected will be “protected health information” under HIPAA and subject to the HIPAA privacy, security and breach notification rules.

The proposed rules suggest that a wellness program that is part of a group health plan will likely satisfy the ADA confidentiality requirements by complying with the HIPAA privacy rules. However, both employers and wellness programs must take steps to protect the confidentiality of employee medical information that is received in connection with an employee health program, which includes maintaining clear policies and procedures regarding the collection, storage and disclosure of medical information and the training of the individuals who handle such medical information. The proposed rules further provide that a best practice is not to permit individuals who handle medical information that is part of an employee health program to make decisions relating to employment, such as decisions relating to hiring, termination or discipline.

Conclusion

As a result of the EEOC’s proposed rules, employers now have a roadmap to follow in designing compliant wellness programs. We recommend that employers begin evaluating (or re-evaluating, as the case may be) their wellness programs to ensure continuing compliance with the HIPAA nondiscrimination rules and compliance with the proposed rules, if and when such rules are finalized.

The EEOC has requested input and written comments on issues relating to the proposed rules and such comments must be received by the EEOC by June 19, 2015.