The Equal Employment Opportunity Commission (EEOC) has decided that it will consider a new proposed rule addressing what level of incentives employers may lawfully offer to encourage employee participation in wellness programs that require disclosure of medical information, without violating the Americans with Disabilities Act (ADA). A draft of the proposed rule is not yet publicly available and there are a number of questions regarding the contents and effect of the proposed rule. This Update summarizes the background and likely next steps for the new wellness rules expected from the EEOC.
Wellness Programs Remain Popular
Wellness programs remain very popular with employers. Among large employers (200 or more workers) offering health benefits in 2019, 88% offered a wellness program or a health screening program. These large employers covered an estimated 63 million employees in 2019. Some of these wellness programs require disclosure of medical information and offer financial incentives to comply, which is the issue under the EEOC rules. Disclosure might be made through a health risk assessment or biometric screening (such as a physical exam or a lab test), and certain employers offer these incentives to employees under “health-contingent” wellness programs if they achieve actual biometric outcomes (such as a target BMI or cholesterol level).
HIPAA and ACA
Wellness program rules were initially promulgated under the Health Insurance Portability and Accountability Act (HIPAA). HIPAA prohibited group health plans from determining eligibility or varying premiums based on health status. However, HIPAA allows premium discounts or rebates or cost-sharing modifications as incentives for participation in a wellness program that met certain requirements. Under the Affordable Care Act (ACA) wellness program requirements, health-contingent wellness incentives can be as high as 30% of the cost of coverage (up from the 20% limit initially allowed under HIPAA) and the agencies increased that 30% up to 50% for wellness programs that target tobacco use. The rules are also clear that wellness programs have to comply with other federal laws, including the ADA and the Genetic Information Nondiscrimination Act (GINA), among others.
EEOC Role in Wellness
The EEOC’s role is to enforce federal laws prohibiting employment discrimination, such as the ADA, which applies to workplace wellness plans that ask for health information or include medical exams. The ADA and GINA generally prohibit employers from asking for or collecting employee health or genetic information, but one exception is when the information is collected voluntarily as part of an employee health program, including a workplace wellness program. Under those rules, a wellness program is considered “voluntary” if it is reasonably designed to promote health or prevent disease, is not overly burdensome, and is not a subterfuge for violating nondiscrimination laws. An employer could not require an employee to participate in the program, deny coverage under its group health plans or particular group health plan benefits, or take any adverse action against an employee who refuses to participate in a wellness program or fails to achieve certain outcomes under such a program. The EEOC included other requirements, such as that programs could not be established, for instance, mainly to shift costs to employees based on their health status.
So although HIPAA, as amended by the ACA, allows employers to generally offer incentives up to 30% of the total cost of health insurance to encourage participation in certain types of wellness programs, the ADA requires that employee participation in a wellness program that includes medical questions and exams be “voluntary”. In May 2016, the EEOC issued final rules addressing how the ADA “voluntary” participation requirement applies to employer-sponsored wellness programs that ask for responses to disability-related inquiries and/or require medical examinations. The 2016 final rules included the ability for both participatory and health-contingent wellness programs (and wellness programs offered in connection with, and not in connection with, a group health plan) to offer incentives of up to 30% of the cost of self-only coverage under certain plans, among other requirements, for wellness incentives to meet the “voluntary” standard. But a federal court vacated this incentive limit, effective January 1, 2019, and the EEOC removed the incentive section from the ADA rule and from the GINA rule under its final wellness rules. Since the removal of the incentive limit guidance from the ADA and GINA rules, there has been uncertainty with regard to the ability of employers to offer incentives in wellness programs subject to the ADA and GINA. Over the past few years, EEOC has been working toward new proposed rules, and was expected to issue new proposed rules in 2019 addressing permissible incentives for wellness plans, but the rules were delayed.
EEOC Proposed Rulemaking
In the absence of any ADA statutory definition of “voluntary,” the EEOC is now proposing that for most wellness programs employers may offer no more than a de minimis incentive to encourage participation, and must meet other requirements, to comply with the ADA. The proposed rule is intended to prohibit most types of wellness programs from using incentives to get employees to disclose health information (i.e., incentives that are too high would coerce employees into sharing this information, which violates the ADA and GINA). To be deemed voluntary, then, the proposed rule would require wellness programs to offer no more than de minimis incentives to employees to participate. It is not yet clear how “de minimis” will be defined but this will be an important issue. Certain wellness programs, however, will apparently still be permitted to continue to offer the allowed incentive under the HIPAA/ACA rules described above, provided they comply with the ADA’s requirement that participation in wellness programs is voluntary. In any event, the proposed rule will also continue to provide that employers will not be able to require an employee to participate in the program, deny coverage under its group health plans or particular group health plan benefits, or take any adverse action against an employee who refuses to participate in a wellness program or fails to achieve certain outcomes.
The EEOC next expected step will be to submit the proposed rule for review by the Office of Management and Budget (OMB). If approved, the rule will be released to the public for comment and the public will have a specified amount of time (say, 30 or 60 days) to review and comment on the rule. EEOC will then consider these comments and respond to them in the preamble of a final rule. This process will take many months unless the rule is seen as a significant priority. We also expect ongoing wellness plan litigation in the meantime.
Employer Action Steps
Until the EEOC issues new wellness rules, employers should carefully consider the level of incentives they use with their wellness programs that are subject to the ADA (i.e., those that collect medical information). Employers should also watch for any developments related to the EEOC’s wellness rules.
Conner Strong & Buckelew continues to monitor developments and will provide additional information as it becomes available. Please contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.