Many employers offer health promotion and disease prevention strategies, often referred to as workplace wellness programs, not only to improve employee health and productivity, but also in an attempt to reign in health care insurance premiums. Employers seek to incentivize employees to participate in such programs, but cannot violate federal laws prohibiting discrimination based on health status, disability, and genetic information, or the dissemination of personal health information, to do so. To harmonize these competing interests, the U.S. Equal Employment Opportunity Commission (EEOC) recently issued final rules (the "Final Rules") on how employer-provided wellness programs can simultaneously comply with the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA). The Final Rules become effective in January 2017 and apply to all workplace wellness programs. However, the Final Rules are not always consistent with the ACA and HIPAA, leaving employers to face overlapping and conflicting federal regulations. This article summarizes the Final Rules in the context of the ACA and HIPAA, and provides advice for employers seeking to implement or maintain corporate wellness programs.
Under the Final Rules, employee wellness programs must be "voluntary," which means that an employer may not require participation; may not deny health care coverage or restrict access to specific health care plans to employees who do not participate; and may not take any adverse action against an employee who does not participate or fails to achieve certain health outcomes. For programs that obtain medical information and/or medical examinations from employees, employers must also provide a notice explaining what medical information will be obtained, how it will be used, who will receive it, and restrictions on its disclosure. Similarly, the ADA and GINA allow employers to seek employee health and genetic information in connection with corporate wellness plans, so long as participation in the medical screening (under the ADA) or the wellness plan itself (under the GINA) is voluntary.
Program Must be "Reasonably Designed"
Under the Final Rules, employee wellness plans must be "reasonably designed to promote health or prevent disease," and cannot require an overly burdensome amount of time for participation, involve unreasonably intrusive procedures, be a subterfuge for violating discrimination laws, or require employees to incur significant costs for medical examinations. Examples of "reasonably designed" wellness programs include programs that ask employees to answer questions about their health or have a medical examination/screening to alert them to health risks (such as diabetes or high cholesterol), or the use of such information to design and offer programs aimed at specific conditions prevalent in the work place (such as hypertension). A wellness plan under the Final Rules is not "reasonably designed" if it is used to predict the employer's future health costs, exists to shift costs from the employer to the employee based upon the health screening results, does not provide any feedback to the employee about the medical screening performed, or does not use aggregate information collected from employees to design programs to treat common employee health conditions.
Examples of "reasonably designed" wellness programs include programs that ask employees to answer questions about their health or have a medical examination/screening to alert them to health risks, or the use of such information to design and offer programs aimed at specific conditions prevalent in the work place.
The Final Rules depart from the ACA and HIPAA regarding the limitations on financial incentives offered under corporate wellness plans. Under the Final Rules, wellness programs that ask questions about employees' health or include medical examinations can offer a maximum financial incentive of up to 30 percent of the total cost of an individual's annual health premiums. If the wellness program is only open to employees enrolled in a particular health plan, the maximum allowable incentive is 30 percent of the total cost for self-only coverage. If the employer offers more than one group health plan and participation in the wellness program is open to all employees regardless of whether they are enrolled in a health care plan, the employer can only offer a maximum incentive of 30 percent of the lowest cost self-only major medical plan it offers. If the employer does not offer health insurance but still wants to offer incentives to employees to participate in a wellness program, the employer can offer no more than 30 percent of the cost that a 40-year-old non-smoker would pay for self-only coverage under the secondlowest cost Silver Plan on the state or federal health care exchange in the location of the employer's principal place of business.
In contrast, HIPAA, as amended by the ACA, allows employers to provide an incentive of 30 percent of the "cost of coverage," and authorizes the Secretaries of Treasury, Labor, and Health and Human Services to increase the incentive limit to 50 percent. On June 3, 2013, the U.S. Departments of the Treasury, Labor, and Health and Human Services issued final regulations authorizing financial incentives under the ACA and HIPAA of 30 percent and up to 50 percent for plans encouraging smoking cessation. These incentive financial limitations are calculated based on the cost of the health plan in which the employee is enrolled, which includes coverage for dependents, whereas the Final Rules allow for an incentive of 30 percent of self-only coverage. Further, the ACA and HIPAA rules impose a 30 percent incentive limit only on health-contingent plans (which reward employees for achieving a specific health goal, such as lowering weight or cholesterol), but allow unlimited incentives for participatory wellness plans (which either provide no financial incentive or an incentive that is not contingent upon a health outcome), whereas the incentive limitations in the Final Rules apply to both participatory and health-contingent plans so long as the plans require a medical examination or inquiry. Finally, although HIPAA, as amended by the ACA, authorizes a 50 percent reduction in an individual's health insurance premium for undergoing smoking cessation screenings, under the Final Rules, if an employer requires any nicotine/tobacco medical screening or testing, the maximum financial incentive offered is 30 percent of an individual's plan.
The Final Rules were met with criticism by lawmakers and civil rights advocates. For instance, Senator Lamar Alexander (R-Tenn.), Chairman of the Senate Health and Labor Committee, stated:
Wellness programs are the only part of Obamacare that everyone agreed on--everyone except the EEOC. Congress was clear in its support of workplace wellness programs in the health care law--just about the only provision in the law with bipartisan support--and the Departments of Health and Human Services, Labor, and Treasury were clear in their regulations implementing the law. It seems the EEOC is the only one missing the mark.
Senator Alexander stated that he will push legislation, The Preserving Employee Wellness Programs Act, to reaffirm existing law, and is also considering introducing resolutions of disapproval under the Congressional Review Act to overturn the Final Rules by a majority vote in the Senate and House of Representatives. It remains to be seen whether the Final Rules will be overturned, but until then, employers should operate under the belief that the Final Rules will become effective the first day of the plan year starting on or after January 1, 2017.
Reasonable Accommodation Requirements
Under the Final Rules, employers must provide "reasonable accommodations" for disabled employees to participate in any employer-sponsored wellness plan. EEOC-provided examples include if an employer offers employees a financial incentive to attend a nutrition class regardless of whether the employees reach a healthy weight as a result of attendance, the employer would have to offer a sign language interpreter for a deaf employee (so long as providing the interpreter does not result in undue hardship to the employer), or, absent undue hardship, an employer would have to provide written materials that are part of a wellness program in an alternate format for an employee with a vision impairment. In contrast, under the ACA, an employer must provide "reasonable alternative standards" for healthcontingent wellness plans, but only under certain circumstances.
Under the Final Rules, employers must provide "reasonable accommodations" for disabled employees to participate in any employersponsored wellness plan.
The Final Rules do not change existing privacy laws under existing federal laws, but rather add two additional requirements: (1) an employer may only receive information collected by a wellness program in aggregate form that does not disclose and is not reasonably likely to disclose the identity of wellness program participants, and (2) an employer may not require an employee to agree to the sale, exchange, sharing, transfer, or disclosure of medical information as a condition for participating in a wellness program, except to the extent permitted by the ADA. The EEOC stated that a wellness program that is part of a HIPAA-covered entity "likely" will be able to comply with the first requirement by complying with the HIPAA Privacy Rule.
No Safe Harbor
The ADA's safe harbor provision allows insurers and plan sponsors to use medical information about risks posed by certain health conditions to make decisions about insurability. Without the safe harbor, these practices could violate the ADA by treating individuals with disabilities less favorably than individuals without disabilities. However, many of these practices, such as denying health coverage to individuals with preexisting conditions or charging individuals with disabilities more money for group health insurance plans, are now unlawful under the ACA.
Under the Final Rules, the ADA's safe harbor provision does not apply to employee wellness programs. The Final Rules are contrary to case law addressing this issue, in which both the Eleventh Circuit in Seff v. Broward Cnty., and the Western District of Wisconsin in EEOC v. Flambeau, Inc., held that corporate wellness programs were valid under the ADA's safe harbor provision. The EEOC appealed Flambeau to the Seventh Circuit (where it is set for argument on September 15, 2016), and after publication of the Final Rules, filed a Notice of Supplemental Authority asserting that the Final Rules have "retroactive effect" and are "entitled to deference." Currently pending in the Eastern District of Wisconsin is another case, EEOC v. Orion Energy Sys., in which the EEOC alleges that an employer violated the ADA by administering involuntary medical examinations and disabilityrelated inquiries as part of its wellness program. On the day the Final Rules were published, the EEOC filed a Notice of Supplemental Authority in Orion, again asserting that the Final Rules were to be provided "deference" and retroactive applicability. It remains to be seen whether courts will adhere to the Final Regulations and deny employers the right to utilize the ADA's safe harbor provision as part of corporate wellness programs.
Because the Final Rules are not entirely consistent with other federal regulations, mainly HIPAA and the ACA, employers are encouraged to consult with attorneys when administering corporate wellness programs to ensure such programs do not run afoul of the often-overlapping federal regulations. Pending action by Congress or the Courts to overturn the Final Rules, employers wishing to avoid litigation regarding the financial incentives offered under corporate wellness programs should abide by the more restrictive incentive limits found in the Final Rules.