This is the 50th in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the ACA). This article discusses proposed regulations issued last month by the Equal Employment Opportunity Commission (EEOC) (EEOC Wellness Rules) to amend its existing regulations under Title I of the Americans with Disabilities Act of 1990 (ADA). The EEOC Wellness Rules provide guidance explaining how employers must structure incentives for wellness programs to avoid violations in connection with disability-related inquiries or medical examinations. We will consider the impact of the EEOC Wellness Rules on wellness programs that are already up and running. We also will discuss what employers should do in response to the EEOC Wellness Rules now and for future planning purposes.
In 2013, the Treasury, Labor (DOL) and Health and Human Services (HHS) departments – the three agencies primarily responsible for implementing the ACA – issued final regulations (ACA Wellness Rules) on incentives that may be offered under nondiscriminatory, employer-sponsored wellness programs. The ACA Wellness Rules clarified earlier regulations (issued in 2006) and focused primarily on expanded incentives for wellness programs included under the ACA. Most employers that provide wellness programs have looked to these regulations for guidelines; many employers have had a variety of wellness initiatives or wellness programs for 10 or more years.
Enter the latecomer: Almost two years after the issuance of the ACA Wellness Rules, the EEOC proposed the EEOC Wellness Rules. As noted in a McGuireWoods Legal Alert, EEOC Wellness Rules are intended to reconcile the confidentiality provisions in Title I of the ADA with the nondiscrimination provisions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), with further revisions under the ACA.
ACA Wellness Rules
Most existing wellness programs are designed to comply with the ACA Wellness Rules. Under these rules, a program is either a “participatory wellness program” or a “health-contingent wellness program.”
- A participatory wellness program is one without a reward or where the reward is not tied to a health factor. Examples of participatory programs include those that reimburse for the cost of a fitness club membership or that provide a reward for participating in a diagnostic test that has no requirements based on the outcome of the test. The amount of the reward or incentive is not limited in this type of program, though certain rewards or reimbursements may represent taxable income to the recipient. Most participatory wellness programs are not related to an employer-sponsored group health plan.
- A health-contingent wellness program provides a reward based on satisfaction of a standard related to a health factor. Health-contingent wellness programs can be either activity-based or outcome-based. Examples of health-contingent wellness programs include a program that includes a premium surcharge based on tobacco usage and a program that provides a discounted premium for employees who are identified through a health risk assessment to be within a normal or healthy range for certain biometrics (for example, cholesterol or glucose levels) while requiring other employees not meeting the health standard to take additional measures (meeting with a health coach or following a health improvement plan, for example) to qualify for the reward. The general limit for a wellness program incentive is 30 percent of the total cost of coverage (based on the coverage in which the employee/dependents are enrolled). The limit is 50 percent for health-contingent wellness programs designed to prevent or reduce tobacco use. Health-contingent wellness programs are generally part of or related to an employer-sponsored group health plan.
EEOC Wellness Rules
The EEOC Wellness Rules interpret the ADA and therefore do not necessarily apply to all of the programs – or all of the features of a program – that exist under the ACA Wellness Rules. The EEOC Wellness rules focus on the elements of wellness programs that include disability-related inquiries or medical examinations. These terms are intended to be broadly interpreted. For example, although asking if an employee uses tobacco is not a disability-related inquiry, testing an employee for tobacco use would constitute a medical examination. Medical examinations include drawing blood, taking blood pressure and measuring glucose levels as well as other medical procedures, regardless of the setting (health fair or health clinic).
The basic requirements of the EEOC Wellness Rules include the following factors:
- Reasonably Designed to Promote Health and Prevent Disease.Wellness programs must be reasonably designed to promote health and prevent disease; this includes disability-related inquiries and medical examinations that are part of such programs. Such programs may not be (1) overly burdensome; (2) a subterfuge for violating the ADA or other discrimination laws; or (3) highly suspect in the method chosen to promote health or prevent disease. In addition, reasonable accommodation must be made, including for disability-related inquiries or medical examinations.
- Voluntary Participation. To comply with the EEOC Wellness Rules, a wellness program must be voluntary. This means that employers may not:
- require employees to participate;
- deny access to coverage – or to specific coverage options – under the employer’s group health for refusal to participate;
- limit coverage under a group health plan for nonparticipation, except to the extent of foregoing a permissible financial incentive; or
- take any other adverse action (including employment actions) against employees who choose not to answer disability-related questions or submit to medical examinations.
- Notice Requirements. If an employer’s wellness program is part of or related to its group health plan, then the voluntary requirement includes certain notice requirements. The employer must provide a notice explaining the medical information that will be obtained under the wellness program and the methods or procedures that will be employed to ensure that medical information is not improperly disclosed.
- Confidentiality Requirements. Disclosure of medical information must be in aggregate form, unless further information is required for administration of the group health plan; the privacy rules under HIPAA are not changed by the EEOC Wellness Rules.
- Employee Incentives. Wellness programs that are part of an employer-sponsored group health plan may provide incentives in the form of a reward or penalty. Employee incentives (reward or penalty) are limited to 30 percent of the total cost of employee-only health insurance coverage, based on the cost of both employer and employee contributions.
Impact of EEOC Wellness Rules on Existing Wellness Programs
The EEOC Wellness Rules overlap, but do not always line up with, the ACA Wellness Rules. The EEOC has indicated that its proposed rules attempt to balance the ADA provisions with the guidance already issued under HIPAA and the ACA. Treasury, HHS and DOL – in frequently asked questions issued at the same time as the EEOC Wellness Rules – reminded employers and practitioners that being compliant with the ACA Wellness Rules is not a guarantee that a wellness program is compliant with any other laws, including the ADA.
The EEOC Wellness Rules are in proposed form, so they are not currently effective. However, the insight into the EEOC’s position on compliance with the ADA, especially what constitutes a voluntary program, allows employers and practitioners to plan for necessary changes to existing and future wellness programs.
Discussed below are some of the typical wellness program designs and the issues raised for those programs under the EEOC Wellness Rules. One key concern under these rules is whether the program is part of an employer-sponsored group health plan. Also, the rules primarily cover programs that ask questions about a disability or require a medical examination. As shown from the following discussions about various types of existing programs that are generally compliant with the ACA Wellness Rules, the EEOC Wellness Rules often will require changes to remain compliant with the ADA.
- Participatory Wellness Programs. These programs provide either (1) no reward; or (2) a reward that is not based on a health standard or health outcome. These programs must be made available to all similarly situated individuals, regardless of health status. Examples are (1) reimbursement for fitness center fees; (2) a reward for attending a stress reduction program; (3) a reward for participation in a walking program; (4) a reward for completing a health risk assessment; and (5) a reward for completing a biometric screening. These program examples generally would be compliant under the EEOC Wellness Rules as long as they are not part of or related to the employer-sponsored group health plan and as long as the rewards included are de minimis incentives (though that term is not defined in the EEOC Wellness Rules). Please note that other features of the EEOC Wellness Rules may apply, such as reasonable accommodation that may be necessary for certain employees to participate in these programs.
- Activity-Only Wellness Programs. These programs provide a reward to an individual for performing or completing an activity related to a health factor and generally are related to an employer-sponsored group health plan. Consider the following examples:
- Example 1: The program offers a reduction in health plan premiums or a health savings account contribution for completing a plan-approved diet or exercise program (with no requirements other than completion of the program). Assume that the rewards fit within the ACA Wellness Rules requirements of being no more than 30 percent of the total cost of coverage.
- Example 2: The program offers a reduction in health plan premiums or a health savings account contribution for completing a biometric screening (no requirements other than completion of the program). Assume that the rewards fit within the ACA Wellness Rules requirements of being no more than 30 percent of the total cost of coverage.
- Are these programs compliant under the EEOC Wellness Rules? If the programs otherwise comply with the ACA Wellness Rules, the key issue under the EEOC Wellness Rules is whether the program is truly voluntary. Based on the description given, there would be no penalty for not participating (just giving up the potential monetary reward). To comply with the ACA Wellness Rules, a reasonable alternative would be available, which also would support the reasonable accommodation and voluntary standards under the EEOC Wellness Rules. In Example 1, there is no apparent disability-related question or medical examination required, so there would be no problem under the EEOC Wellness Rules. However, if the program were to ask about high blood pressure or high blood sugar levels, then the program may be deemed to include disability-related questions. The biometric screening in Example 2 is a medical examination per the EEOC Wellness Rules and the program therefore must comply with the EEOC Wellness Rules.
- One issue remains unclear in our comparison of the programs: If the reward is based on the premium cost for the employee and a dependent, this amount could exceed the EEOC Wellness Rules requirement that permits an employee incentive of only up to 30 percent of the total cost for employee coverage. This difference between the ACA Wellness Rules and the EEOC Wellness Rules is based on the ADA statutory language and the EEOC position that the ADA offers protections to the employee (and not to the dependents of the employee). If the incentive relating to a dependent’s coverage is not subject to the EEOC Wellness Rules, clarification of this point in the final rules would be most helpful.
- Outcomes-Based Wellness Programs. These programs are designed to provide a reward to an individual for attaining or maintaining a specific health outcome. They are generally related to an employer-sponsored group health plan. Also, being tied to a specific health outcome implies that there are disability-related questions and probably also medical examinations involved in the program (based on the broad interpretation of these concepts under the EEOC Wellness Rules). Consider the following examples:
- Example 3: The program offers a reduction in health plan premiums or a health savings account contribution for attaining or maintaining a body mass index (BMI) of a specified level for the entire plan year. Assume that the rewards fit within the ACA Wellness Rules requirements of being no more than 30 percent of the total cost of coverage. Also assume that the plan offers a reasonable alternative standard for every individual who does not (or cannot) meet the initial standard.
- Example 4: The program offers a reduction in health plan premiums or a health savings account contribution for not using tobacco products for the entire plan year. Assume that the rewards fit within the ACA Wellness Rules requirements of being no more than 50 percent of the total cost of coverage. Also assume that the plan offers a reasonable alternative standard for every individual who does not (or cannot) meet the initial standard.
- Example 5: The employer sponsors two options under its group health plan: The first is a PPO option and the second is a high-deductible health plan coupled with health savings accounts. The wellness program requires that all covered family members complete a health risk assessment in order to be eligible for group health plan coverage; failure to complete the health risk assessment results in the employee (and dependents) qualifying to enroll only in the high deductible plan with health savings accounts.
- Are these programs compliant under the EEOC Wellness Rules? If the programs otherwise comply with the ACA Wellness Rules, we return to the question of whether the program is truly voluntary. Based on the facts of Example 3, there would be no penalty for not participating (just giving up the potential monetary reward) and the employee would be able to request a reasonable alternative, also supporting the reasonable accommodation and voluntary standards of the EEOC Wellness Rules. Although each program must be analyzed based on its particular plan design, the program in Example 3 appears to also comply with the EEOC Wellness Rules.
- The program in Example 4 may comply, but compliance would be harder to establish. The standard of not using tobacco products for an entire plan year may not comply with the voluntary standard under the EEOC Wellness Rules. Also, the reasonable alternative standard must be assessed to determine whether it is overly burdensome. In fact, the program described would need careful analysis under the ACA Wellness Rules as well as the EEOC Wellness Rules to ensure that this element of the plan design is compliant. If the program itself survives this analysis, then the next issue is the 50 percent reward. Because the EEOC Wellness Rules only support an incentive of 30 percent of the total cost of employee-only coverage, at the very least the reward for this program would need to be adjusted to comply with the those rules.
- Example 5 may not explicitly violate the terms of the ACA Wellness Rules, although it may be difficult to argue that the program as described is not overly burdensome or a subterfuge for discrimination based on health status (a similar standard is also required under the ACA Wellness Rules). But this program does violate the requirement in the EEOC Wellness Rule that the program not deny coverage under any group health plan or particular benefit package within a plan.
Next Steps for Employers
With the issuance of the EEOC Wellness Rules, employers and practitioners have some guidance relating to what modifications of wellness programs are needed to comply with the ADA. Based on the EEOC Wellness Rules, together with the existing guidance offered by the ACA Wellness Rules, employers should review their existing wellness programs and determine whether any adjustments will be necessary. Also, designs for new wellness programs should be measured against the parameters in both sets of rules.
Employers also should consider making comments to the EEOC regarding the types of changes that would be most supportive of current wellness programs. Comments must be received by the EEOC on or before June 19, 2015.