The EEOC’s regulations allayed many concerns over the permissible level of incentives/penalties, as well as the challenge of dealing with inconsistent requirements under the various laws.
A version of this article was originally published in the July 2016 issue of The HR Specialist. It is reprinted here with permission.
In recent years, employee wellness programs have become increasingly popular. They have been regulated under the Health Insurance Portability and Accountability Act (HIPAA) — which prohibits discrimination against individual plan participants in eligibility, benefits or premiums based on health factors — and the Affordable Care Act (ACA), which modified the HIPAA requirements concerning wellness programs. Final regulations were issued and took effect January 1, 2014. Under the ACA, health-contingent wellness programs, i.e., those that require individuals to meet a health standard to get a reward, must satisfy five requirements.1 Participatory wellness programs, which do not require individuals to meet a health standard to get a reward or do not offer a reward at all, are not subject to these requirements.
Until recently, employers were left to wonder whether compliance with the HIPAA/ACA requirements constituted compliance with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The Equal Employment Opportunity Commission (EEOC) had not issued regulations or provided much clarity on lawful wellness programs under the ADA and GINA.
Then, in 2014, the EEOC brought three lawsuits challenging wellness programs, taking the position that those programs were not voluntary as required by the ADA. See EEOC v. Honeywell, No. 14-4517 (D. Minn. 2014); EEOC v. Orion Energy Sys., Inc., No. 14-1019 (E.D. Wis. 2014); EEOC v. Flambeau, Inc., No. 14-638 (W.D. Wis. 2014). In the Honeywell case, the EEOC filed a motion for preliminary injunction and asked the court to enjoin Honeywell from imposing any penalty on employees who declined to participate in the wellness program, leading employers to fear that offering anything more than a nominal reward/penalty would violate the ADA.
The EEOC recently clarified its position on May 17, 2016, issuing regulations under the ADA and GINA. The regulations try to harmonize that position with the HIPAA/ACA rules. The regulations also, however, create certain inconsistencies with the HIPAA/ACA regulations.
Under the ADA, employers are generally prohibited from making disability-related inquiries or requiring medical examinations of employees unless they are job-related and consistent with business necessity. An exception exists for “voluntary” wellness programs, which the EEOC defined as those in which an employer neither requires participation nor penalizes for non-participation. Before the EEOC issued its regulations, employers were unsure what financial incentives or penalties were permissible for wellness programs under the ADA. The regulations endorse HIPAA’s limit on incentives/penalties, but with some notable differences.
HIPAA imposes a 30-percent limit on incentives for health-contingent wellness programs only. In contrast, under the EEOC’s regulations, this limit also applies to participatory programs. Further, the EEOC’s limit is 30 percent of the cost of employee-only coverage, as compared to HIPAA’s limit of 30 percent of the cost of the coverage in which the employee is enrolled.
Also, HIPAA/ACA permits an incentive of up to 50 percent for programs that include a tobacco-cessation component. The EEOC’s regulations do not allow an increase to 50 percent for these programs. However, the EEOC’s 30-percent limit will not apply to tobacco-cessation programs if they do not involve nicotine testing, e.g., if employees are only asked if they are tobacco-free and receive the incentive if they affirm that they are.
Before the EEOC issued its GINA regulations, it had taken the position that spousal participation incentives in wellness programs violated GINA because GINA prohibits offering inducements to obtain genetic information, and spousal health information (as family history) is considered to be an employee’s genetic information. The EEOC’s regulations, however, make clear that employers may offer incentives for spousal participation in wellness programs.
As with the ADA regulations, the proposed GINA regulations limit allowable incentives as compared to HIPAA/ACA. Incentives for a spouse’s participation in a wellness program may not exceed 30 percent of the total cost of self-only coverage. The employee also may receive an incentive of up to 30 percent of self-only coverage based on his/her own participation in the wellness program, in contrast to 30 percent of the cost of coverage in which the employee is enrolled as permitted by HIPAA/ACA.
The EEOC’s regulations under the ADA and GINA allayed many concerns over the permissible level of incentives/penalties, as well as the challenge of dealing with inconsistent requirements under the various laws. Differences remain, however, and employers will need to be cognizant of the differences to ensure they are in compliance.