Alerts and Updates
EEOC Proposed Rule Would Amend Regulations and Interpretive Guidance Implementing Title I of ADA Related to Employer Wellness Programs
April 17, 2015
In order to attempt to improve employees' health and reduce healthcare costs, many employers that provide health coverage also offer employee health programs and activities to promote healthier lifestyles or prevent disease—referred to as workplace wellness programs.
On April 16, 2015, the Equal Employment Opportunity Commission (EEOC) issued a proposed rule amending the regulations and interpretive guidance implementing Title I of the Americans with Disabilities Act (ADA) as they relate to employer wellness programs. The proposed rule provides guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations.
In order to attempt to improve employees' health and reduce healthcare costs, many employers that provide health coverage also offer employee health programs and activities to promote healthier lifestyles or prevent disease—referred to as workplace wellness programs. Some employers offer incentives to encourage employees only to participate in a wellness program, while others offer incentives based on whether employees achieve certain health conditions.
Employee health programs have to comply with the laws enforced by the EEOC, including Title I of the ADA, which restricts the medical information employers may obtain from applicants and employees and makes it illegal to discriminate against individuals based on disability. Additionally, wellness programs that are part of an employer's group health plan must comply with the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Patient Protection and Affordable Care Act (ACA).
HIPAA Nondiscrimination Requirements
HIPAA's nondiscrimination rules prohibit group health plans from discriminating against participants and beneficiaries in premiums, benefits or eligibility based on a health factor. An exemption allows premium discounts or rebates or modification to otherwise applicable cost sharing in return for adherence to certain programs of health promotion and disease prevention—i.e., wellness programs.
HIPAA's nondiscrimination provisions discuss two types of wellness programs: participatory and health-contingent. Participatory wellness programs do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual's satisfying a standard related to a health factor. Participatory wellness programs are permissible provided they are made available to all similarly situated individuals.
In contrast, health-contingent wellness programs, which may be either activity-only or outcome-based, require individuals to satisfy a standard related to a health factor to obtain a reward (or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward). Activity-only programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, but do not require that individual to attain or maintain a specific health outcome. Outcome-based programs require individuals to attain or maintain a specific health outcome (such as not smoking or attaining certain results in biometric screenings) in order to obtain a reward.
There are five requirements for health-contingent wellness programs:
- All individuals who are eligible must be given the opportunity to qualify for the reward at least once per year.
- The total reward offered to an individual under all health-contingent wellness programs with respect to a plan cannot exceed 30 percent of the total cost of employee-only coverage under the plan (or 50 percent to the extent that the additional percentage is attributed to tobacco prevention or reduction).
- Must be reasonably designed to promote health or prevent disease.
- The full reward must be available to all similarly situated individuals. For this purpose, an activity-only program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard, and for an individual for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard (with verification provided from a physician regarding the applicable standard being "unreasonably difficult" or "medically inadvisable," as appropriate). An outcome-based program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward to any individual who does not meet the initial standard based on a measurement, test or screening that is related to a health factor, without regard to the need for medical necessity. For example, if a lower premium is offered to individuals who do not use tobacco, a reasonable alternative for those who do smoke would be completion of a smoking cessation education program.
- Plans and issuers must disclose the availability of a reasonable alternative standard in all materials describing the terms of a health-contingent wellness program and in any disclosure that an individual did not satisfy an initial outcome-based standard.
The EEOC notes that compliance with the above HIPAA nondiscrimination rules is not determinative of compliance with any other programs of any other state or federal law—including the ADA.
Governing Rules of the ADA
Title I of the ADA prohibits discrimination against individuals on the basis of disability in regard to employment compensation and other terms, conditions and privileges of employment, including fringe benefits available by virtue of employment. The ADA requires employers to provide reasonable accommodations to enable individuals with disabilities to have equal access to the fringe benefits offered to individuals without disabilities.
The ADA also restricts employers from obtaining medical information from current employees by requiring any medical inquiries to be job related and consistent with business necessity. Employers, however, may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees. Employee health programs include workplace wellness programs. It is this concept of "voluntary" medical examinations and medical histories in relation to the incentives offered under a wellness program that is addressed in the proposed rule.
The EEOC "concludes that allowing certain incentives related to wellness programs, while limiting them to prevent economic coercion that could render provision of medical information involuntary, is the best way to effectuate the purposes of the wellness program provisions of both [the ADA and HIPAA]."
The proposed rule published by the EEOC outlines what an employee health program is, what it means for an employee health program to be voluntary, what incentives employers may offer as part of a voluntary employee health program and what requirements apply concerning notice and confidentiality of medical information obtained as part of voluntary employee health programs.
Content of EEOC's Proposed Rule
The proposed rule carries forward the requirement that an employee health program, including any disability-related inquiries and medical examinations that are part of such a program, must be reasonably designed to promote health or prevent disease. The proposed rule states that "the program must have a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease."
For such a program to be considered "voluntary," the employer:
- may not require an employee to participate in the program;
- may not deny coverage under any of its group health plans or particular benefits packages within a group health plan, generally may not limit the extent of such coverage and may not take any other adverse action against employees who refuse to participate in an employee health program or do not achieve certain health outcomes; and
- may not retaliate against, interfere with, coerce, intimidate or threaten employees within the meaning of Section 503 of the ADA.
In addition, to ensure that participation in a wellness program that includes disability-related inquiries and/or medical examinations is truly voluntary, the proposed rule states that an employer must provide a notice explaining what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure and the methods the covered entity will employ to prevent improper disclosure of the medical information.
The proposed rule clarifies that the offer of limited incentives to participate in wellness programs and that include disability-related inquiries and/or medical examinations will not render the program involuntary. However, the total allowable incentive available under all programs (both participatory and health-contingent programs) may not exceed 30 percent of the total cost of employee-only coverage, whether in the form of a reward or penalty.
As noted above, the HIPAA nondiscrimination rules permit employers to offer incentives as high as 50 percent of the total cost of employee-only coverage for tobacco-related wellness programs. The incentive rules set forth by the EEOC in the proposed rule apply only to employee health programs that include disability-related inquiries or medical examinations. A smoking cessation program that merely asks employees whether or not they use tobacco (or whether or not they ceased using tobacco upon completion of the program) is not an employee health plan that includes disability-related inquiries or medical examinations. As a result, the proposed rule would not apply to incentives an employer could offer in connection with such a program. By contrast, a biometric screening or other medical examination that tests for the presence of nicotine or tobacco is a medical examination, and therefore, the ADA financial incentive rules discussed in the proposed rule would apply to a wellness program that includes such a screening so that an employer would be subject to the more restrictive 30-percent rule under the ADA (at least as proposed) as opposed to the 50 percent permitted under HIPAA.
Finally, the proposed rule allows for the disclosure of medical information obtained by wellness programs to employers only in aggregate form, except as needed to administer the health plan. The EEOC repeatedly notes that the proposed rule does not implicate disability-related inquiries or medical examinations outside the context of a voluntary wellness program and that the rule does not relieve the employer of its obligation to comply with other employment nondiscrimination laws.
Implications of State and Local Disability Laws
As a reminder, states and municipalities have state or local anti-discrimination laws, which may also prohibit discrimination on the basis of disability. Consequently, it is important for an employer to consider the applicable federal laws (HIPAA, GINA, ACA, ADA) as well as state and local disability related laws to ensure that wellness programs comply with all applicable federal, state and local laws.
Wellness programs should be designed to address reasonable accommodations under Title VII relative to religious beliefs, under the ADA relative to disabilities (including medical limitations associated with pregnancy or childbirth) and under state or local laws that require that employers accommodate pregnant employees, even if they are not disabled.
The EEOC's proposed rule provides significant new guidance for employers sponsoring wellness programs for their employers. Such employers may want to examine their existing wellness programs to ensure they are compliant with the proposed EEOC rule, once finalized. In particular, employers offering an incentive over 30 percent in connection with a tobacco-related wellness program should ensure that they are compliant with the proposed rule and that the incentive in excess of 30 percent remains permissible. Employers should also be prepared to satisfy the notice requirement set forth in the proposed rule. In addition, employers who do not currently offer a wellness program to their employees are once again able to consider the benefits of adopting such a program.
The proposed rule concludes with a lengthy listing of the issues on which the EEOC is requesting comments. The issues include whether the EEOC's proposed rule with respect to the ADA's "voluntary" requirement is appropriate in connection with the wellness program provisions of the ACA; whether employees should be required to provide "prior, written, and knowing" confirmation that their participation is "voluntary" for purposes of the ADA; and what impact the proposed rule's 30-percent limit have on wellness programs designed to prevent or reduce tobacco use.
About Duane Morris
The attorneys in the Employment, Labor, Benefits and Immigration group will continue to monitor these issues and assist employers with respect to the issues under the proposed rule with respect to ADA, HIPAA and ACA compliance.
For Further Information
If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.