17 April 2015

EEOC Issues Proposed Rule Addressing ADA Compliance And Wellness Programs

Littler Mendelson


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The Equal Employment Opportunity Commission has issued a proposal to provide guidance on how to structure an employee wellness program without running afoul of the Americans with Disabilities Act.
United States Employment and HR
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The Equal Employment Opportunity Commission has issued a proposal to provide guidance on how to structure an employee wellness program without running afoul of the Americans with Disabilities Act. The proposed rule would amend ADA regulations and interpretive guidance as they apply to programs that use incentives to encourage employee participation in programs that may include disability-related questions and/or medical examinations.

Employers have increasingly turned to wellness programs as a way to both control health care costs and improve the health of their workers. Many companies offer "participation only" wellness programs, whereby employees attend periodic wellness seminars or complete health risk assessment questionnaires to obtain a reward from the employer, usually a discount on the cost of health insurance. Employers also offer "outcome-based" wellness programs, which condition the reward on the employee meeting a certain health-related benchmark, such as an appropriate body mass index (BMI) or blood cholesterol level, or remaining tobacco-free. Biometric screenings are a common part of these wellness and health promotion programs.

Recognizing the benefit and popularity of such programs, Congress—in one of the few areas of bipartisan agreement—included measures in the Affordable Care Act to explicitly promote their use. Specifically, the ACA codified and built upon regulations under the Health Insurance Portability and Protection Act (HIPAA), which provided that a wellness program conditioning a financial incentive on the participant meeting a standard related to a health factor is acceptable so long as it met certain criteria. The ACA and its implementing regulations expressly affirm the use of rewards, providing that the total reward offered to an individual under all health contingent wellness programs 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.

The EEOC, however, had taken aim at employer wellness years in recent months. The agency's General Counsel, David Lopez, filed several lawsuits against employers in 2014 alleging their wellness programs violated federal anti-discrimination law, including the ADA. Lopez seemed to interpret the ADA as precluding many incentive-based wellness programs, even though the ADA permits "voluntary" medical examinations that are part of an employee health program, and the statute's safe harbor provision allows a covered organization to establish, sponsor, observe, or administer the terms of a "bona fide benefit plan" that is based on "underwriting risks, classifying risks, or administering risks based on or consistent with state law."

The EEOC's treatment of wellness programs has recently come under scrutiny by Congress. In March, Rep. John Kline (R-MN), Chairman of the House Education and Workforce Committee, and Senator Lamar Alexander (R-TN), Chairman of the Senate HELP Committee, introduced legislation, the Preserving Employee Wellness Programs Act, to provide certainty for employers regarding wellness plans. The bill provides that wellness programs will not violate the ADA or GINA if they offer rewards up to the allowed percentage amounts set by the ACA.

The EEOC's proposed rule attempts to clarify what does and does not constitute a permissible wellness program in light of the ADA's protections. According to the proposal, the EEOC's interpretation of the term "voluntary" with respect to the ADA's disability-related inquiries and medical examinations provision "is central to the interaction between the ADA and HIPAA's wellness program provisions, as amended by the Affordable Care Act." The Commission stated that " it has a responsibility to interpret the ADA in a manner that reflects both the ADA's goal of limiting employer access to medical information and HIPAA's and the Affordable Care Act's provisions promoting wellness programs."

To this end, the proposal makes a number of changes, including the following:

  • A wellness 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. To meet this standard, 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."
  • In order for the wellness program to truly be voluntary an employer cannot require an employee to participate in such a program and 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 fail to achieve certain health outcomes.
  • If the wellness program is part of a group health plan, the employer must provide a notice clearly explaining what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure of medical information.
  • Offering limited incentives to participate in a wellness program that is part of a group health plan and includes disability-related questions or examinations does not render a program involuntary, provided the total allowable incentive available under all programs does not exceed 30 percent of the total cost of employee-only coverage, which generally is the maximum allowable incentive available under HIPAA and the Affordable Care Act for health-contingent wellness programs.
  • The medical information collected through an employee health program may only be provided to a covered entity under the ADA in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of specific individuals, except as needed to administer the health plan and for other limited purposes described in the regulations.

The references in the proposed rule regarding the requirement to provide a notice and the use of incentives, and changes to the corresponding section of the interpretive guidance, apply only to wellness programs that are part of or provided by a group health plan or by a health insurance issuer offering group health insurance in connection with a group health plan.

The EEOC is inviting interested parties to provide input on this proposal. The Commission has asked for comments on whether certain additional requirements should be imposed on wellness programs. For example, the EEOC asks:

  • Whether to be "voluntary" under the ADA, entities that offer incentives to encourage employees to disclose medical information must also offer similar incentives to persons who choose not to disclose such information, but who instead provide certification from a medical professional stating that the employee is under the care of a physician and that any medical risks identified by that physician are under active treatment.
  • Whether it would be appropriate for the Commission to provide that the incentives employers offer to employees to promote participation in wellness programs must not render the cost of health insurance "unaffordable" to employees within the meaning of the ACA employer mandate.
  • Should the proposed notice requirements also include a requirement that employees participating in wellness programs that include disability-related inquiries and/or medical examinations, and that are part of a group health plan, provide prior, written, and knowing confirmation that their participation is voluntary?

Littler will publish a more detailed discussion of this proposed rule and its implications for employer wellness programs. In the interim, the Departments of Health and Human Services, Labor, and the Treasury—the agencies charged with implementing regulations under the ACA—have issued a set of frequently asked questions on wellness programs. A separate set of FAQs issued by the HHS on health insurance market reforms and wellness can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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