For some time, employers have faced uncertainty about the status of their wellness programs under the Americans with Disabilities Act (ADA). While the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA) have allowed employers to provide financial incentives for employee participation in wellness programs for several years, the U.S. Equal Employment Opportunity Commission (EEOC) increased employer anxieties over otherwise-compliant wellness programs in 2013 and 2014 by suing several large companies over alleged ADA-related defects in the design of their wellness programs. After holding contentious public hearings on wellness programs in 2013, the EEOC seemed poised to throw sand in the gears of the wellness machine, but on April 16, 2015, the EEOC had a surprise for the employer community in the form of highly anticipated proposed rules that attempt to reconcile the ADA with HIPAA and the ACA. The proposed rules provide guidance on the extent to which employers may use incentives (such as rewards or penalties in the form of prizes, cash, or a reduction or increase in health care premiums) to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations.
The ADA prohibits employers from making disability-related inquiries or requiring medical examinations; however, employers may conduct “voluntary” medical examinations or obtain medical histories as part of an employee health program, including wellness programs.
Previous EEOC guidance provided that a wellness program is “voluntary” if an employer neither requires participation by employees nor penalizes employees who do not participate. However, no guidance addressed the extent to which incentives (or penalties) might affect the “voluntary” nature of a wellness program for ADA purposes. This lack of guidance created uncertainty regarding the application of the ADA to wellness programs, particularly in light of the EEOC’s pursuit of claims against employers asserting that certain potentially punitive wellness program designs violated the ADA.
The Proposed Rules
The Voluntary Standard. The proposed rules list several requirements that must be satisfied for an employee health program (or wellness program) to meet the “voluntary” standard (and thus, comply with the ADA). Specifically, an employer may not require employees to participate in an employee health program or wellness program, may not deny access to health coverage or limit coverage for non-participation, and may not take adverse action, retaliate or take similar action—such as intimidation or coercion—against employees. In addition, if the wellness program is part of a group health plan, the employer must provide employees with a notice explaining what medical information will be obtained, how it will be used, who will receive it, the restrictions on its disclosure, and steps the employer will take to prevent improper disclosure. Many wellness programs will not encounter difficulty with these proposed requirements, but more aggressive plan designs may require adjustment to avoid EEOC scrutiny. Communications regarding wellness programs are also likely to require updates to provide more detailed disclosures about the particulars of the information to be collected through wellness testing and how that information will be used and safeguarded.
Incentive Limits. The proposed rules also set limits on the incentives that employers may use to encourage participation in wellness programs. However, because these limits do not exactly track those under HIPAA and the ACA, further clarification may be necessary in the final EEOC guidance. Under the proposed rules, the maximum permitted incentive for all wellness programs offered as part of a group health plan (regardless of whether those programs are participatory or health-contingent programs under the HIPAA regulations), cannot exceed 30% of the total cost of “employee-only coverage.” However, HIPAA and the ACA not only permit an incentive of up to 30% of the “total cost of the coverage in which the employee and any dependents are enrolled,” but also provide that the limitation is applied only with respect to health-contingent wellness programs. Thus, under HIPAA and the ACA, an employer could offer incentives for participatory wellness programs that would not be aggregated with the health contingent programs in determining whether the 30% limitation was exceeded. Further, an employee could receive an incentive of up to 30% of the total cost of family coverage if an employee is enrolled in family coverage versus self-only coverage. The EEOC’s final rule may address this discrepancy. If not, the EEOC will have introduced new complexities into the design and administration of wellness programs.
Smoking Cessation Programs. While HIPAA and the ACA permit incentives up to 50% of the employee-only premium (or family premium in some circumstances) for participation in a smoking cessation program, the 30% limitation found in the proposed rules may cap that incentive for some smoking cessation programs. Interpretive guidance issued with the proposed rules provides that the 30% incentive limit would apply to a smoking cessation program that includes a biometric screening or other medical examination, but a smoking cessation program that merely asks employees whether or not they use tobacco (e.g., by completion of an affidavit) could continue to use the “50% of the cost of employee coverage” limitation permitted under HIPAA and the ACA. As is suggested by the proposed “voluntary” standard, the EEOC appears to be concerned about more intrusive wellness testing methods such as blood tests to confirm non-use of tobacco products and has therefore limited the extent to which larger incentives may be used to encourage participation.
Not content to cede the wellness stage to the EEOC, the other three regulatory agencies with jurisdiction over wellness programs (i.e., the U.S. Department of Health and Human Services, the U.S. Department of Labor, and the U.S. Department of Treasury (the Departments)) issued their own guidance on April 16 in the form of additional frequently asked questions on its FAQs about Affordable Care Act Implementation (Part XXV) page. This guidance reiterates previous wellness guidance issued by the Departments, but also cautions that compliance with the Departments’ wellness program regulations is not determinative of compliance with other laws, such as the ADA. The EEOC indicated that the Departments worked in conjunction with one another on the proposed rules, but the EEOC and the Departments may recognize that all wellness program guidance is not perfectly reconciled.
Employer Action Items
While employers are not required to comply with the proposed rules at this time, it would be wise to review wellness programs now in light of these rules, particularly for wellness programs that use stricter standards or impose larger penalties on their prospective participants. In particular, employers should review the financial incentives currently provided under their wellness programs to see where they fall in relation to the 30% limitation of the new rules. In addition, employers should review their smoking cessation programs to determine whether those programs will be aggregated within the 30% rule or may continue to rely on the 50% limitation under HIPAA and the ACA.