Wellness Programs Alive and Well?
The Equal Employment Opportunity Commission (EEOC) has issued proposed regulations under the Americans with Disabilities Act (ADA) regarding employer-provided wellness programs that were published in the Federal Register on April 20, 2015. The proposed regulations are intended to reconcile rules under the ADA with rules the tri-agency task force1 previously issued under the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Patient Protection and Affordable Care Act (PPACA), finally giving employers clear guidance as to how to design wellness programs without running afoul of these laws. In related actions, on April 16, 2015 the tri-agency task force issued two Frequently Asked Questions (FAQs) regarding wellness programs and two divisions of HHS issued FAQs on wellness issues related to HIPAA privacy and PPACA market reforms.
Many employers have implemented wellness programs based on the final regulations issued by the tri-agency task force under HIPAA and PPACA (the Tri-Agency Rules), but the limited guidance under the ADA and informal comments made by EEOC staff regarding wellness arrangements caused uncertainty about whether some aspects of the arrangements might violate the ADA. This uncertainty increased when the EEOC recently filed lawsuits against companies, including Honeywell International Inc., alleging their wellness programs violate the ADA prohibition on “involuntary” medical screenings. In each of these lawsuits, the EEOC claims the wellness programs violate the ADA’s rules regarding employee medical exams and inquiries because they are not truly voluntary given the “dire consequences” for those who choose not to participate.2
While the new proposed regulations would impose additional requirements and restrictions on wellness programs that are not in the Tri-Agency Rules, the preamble to the rules notes that the EEOC felt “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 Patient Protection and Affordable Care Act’s provisions promoting wellness programs.” Thus, if the EEOC wellness program rules become final, employers may have to modify their programs to comply, but should not have to completely dismantle their current wellness initiatives.
Employer wellness programs generally encourage healthier lifestyles in return for a reward with the hope that the changes to behavior will help contain health care costs. While these programs can take many forms, the Tri-Agency Rules divide them into two primary categories: participatory arrangements that either do not provide a reward or do not condition a reward on attaining a particular health status, and health-contingent arrangements that require an individual to achieve a health goal or status to qualify for a reward. In return, employers may reward employees with cash or reduced health premiums or may impose a surcharge or other financial penalty on employees who do not participate.
Participatory Programs. A participatory program may include reimbursement for gym membership, diagnostic testing (with no effect on the reward for outcomes), attending health presentations or joining a smoking cessation program (regardless of whether the employee actually quits smoking). Under the Tri-Agency Rules, the only restriction applicable to participatory wellness programs is that they be made available to all similarly situated individuals. In the past, the EEOC indicated concern over such programs that make participation contingent on receiving employer sponsored health insurance.3 Reflecting these concerns, as discussed below, the EEOC proposed rules would impose additional restrictions on participatory arrangements.
Health-Contingent Programs. A health-contingent program conditions a reward on an employee’s ability to meet a health-related goal, with these arrangements being further subdivided into activity-only wellness programs and outcome-based wellness programs. In an activity-only wellness program, the employee must perform an activity related to a health factor to obtain a reward (e.g., walking, or joining an exercise program). In contrast, an outcome-based wellness program requires an individual to achieve a specific health outcome (e.g., not smoking, or reaching a certain cholesterol level). Either type of health- contingent program must meet five requirements:
- The program must give individuals an opportunity to qualify for the reward at least once per year.
- The reward must be no more than 30 percent of the cost of coverage or 50 percent of the cost for a program designed to prevent or reduce tobacco use.
- The reward must be available to all similarly situated individuals (and a reasonable alternative standard (or a waiver of the otherwise applicable standard) must be available to participants who are unable to meet the usual standard due to medical reasons4).
- The program must be designed to promote health or prevent disease and must not be a subterfuge to discriminate based on a health factor. A program satisfies this standard if it has a reasonable chance of improving health of, or preventing disease in, individuals. It cannot be: (1) overly burdensome; (2) a subterfuge for discriminating based on a health factor; or (3) highly suspect in the method chosen to promote health or prevent disease.
- The program must disclose that alternative standards (or waivers) are available. For example, the Tri-Agency Rules as amended in 2013 state that the following language or language that is substantially similar will suffice:
Your health plan is committed to helping you achieve your best health. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact us at [insert contact information] and we will work with you (and, if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status.
EEOC Proposed Rules
Under the ADA, an employer may not require an employee to complete a physical examination or answer medical inquiries unless the medical examination is voluntary and part of an employee health program that is reasonably designed to promote health or prevent disease.5 In previous guidance on wellness programs under the ADA, the EEOC stated that: “[a] wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.” However, a strict interpretation of this standard would likely result in many current programs being viewed as noncompliant. Further, neither the statute nor EEOC’s regulations provided insight regarding how incentives would affect the voluntary nature of a wellness program until now.
The EEOC proposed regulations would provide that a wellness program will meet the ADA’s “voluntary” standard if it satisfies the following requirements:
- Employees may not be required to participate.
- Employees may not be denied coverage or be subjected to other coverage limitations under any of the employer’s group health plans for non-participation.
- Employees may not suffer adverse employment action, retaliation, interference, coercion, intimidation or threats related to participation or outcomes.
For a wellness plan that is part of a group health plan, each employee must receive a notice that:
- the employee is reasonably likely to understand;
- describes the medical information that will be obtained and the specific purposes for its use; and
- describes the restrictions on the disclosures of the employee’s medical information, the parties with whom it will be shared, and the methods that will be used to ensure the medical information is not improperly disclosed (including the HIPAA privacy and security standards).
Employees may not receive a reward, or incur a penalty, greater than 30 percent of the total cost of employee-only coverage for either participatory or health-contingent programs.
- While the Tri-Agency Rules only impose the 30 percent limit on health-contingent programs, the EEOC rules would also apply it to participatory programs.
- If spouses or dependents are eligible to participate in a wellness program, the Tri-Agency Rules permit the limit to apply to the total cost of coverage the employee has (e.g., employee-only or family). In contrast, the ADA rules describe the limit as being based on employee-only coverage. It is unclear if EEOC intended this difference in the rules; both the preamble to the regulations and an EEOC question and answer document indicate the EEOC intended the rules to be consistent.
- Finally, the ADA regulations do not fully adopt the Tri-Agency Rules incentive allowance for smoking cessation programs. The EEOC rules would only allow employers to ask employees whether or not they use tobacco (without a medical examination) in order to apply a 50 percent incentive/penalty (based on the total cost of employee-only coverage). If the employer uses a biometric screening or medical examination to determine tobacco use, then the incentive must be limited to 30 percent to meet the ADA rules, even though 50 percent would be permitted under the Tri-Agency Rules.
Comments on the EEOC proposed rules are due June 19, 2015. In the related question and answer document, the EEOC said that employers are not required to comply with the proposed rules but may do so. Among the issues on which EEOC specifically sought comments on the rules was whether the notice requirements should include a requirement that an employee provide a written acknowledgment that his or her participation is voluntary.
What the EEOC Rules Do Not Do
There are two things that the EEOC proposed rules do not do:
- Address the extent to which an employer can condition a wellness reward on a family member’s participation in a wellness program, which may run afoul of Title II of the Genetic Information Nondiscrimination Act (GINA). The preamble to the EEOC regulations notes that the issue will be addressed in future rulemaking.
- Discuss in any detail whether the statutory provision, which at least two courts have held provides the basis for permitting wellness programs under the ADA, i.e., the insurance safe harbor or exception, which among other things permits an employer to observe the terms of a bona fide employee benefit plan, provides an alternative means for wellness programs to comply with the ADA.6 The EEOC did note in the preamble to the proposed rule its view that the insurance safe harbor is not the “proper basis for finding wellness program incentives permissible” because, in the EEOC’s view, that would result in the voluntary provision being superfluous.
Tri-Agency FAQs. As noted above, the tri-agency task force released two FAQs on wellness programs on April 16, 2015. One FAQ cautions that an employer’s compliance with the Tri-Agency Rules will not necessarily mean that the employer’s wellness program is compliant with all applicable law. The FAQ notes the need for an employer-provided wellness arrangement to comply with the ADA, the Employee Retirement Income and Security Act, the Internal Revenue Code, the privacy and security rules under HIPAA and other federal or state law. In addition, the FAQ provides a reminder that compliance with the Tri-Agency Rules is not determinative of the tax treatment of a wellness reward or whether disclosure requirements are met.
The FAQs also clarify the requirement in the Tri-Agency Rules that a health-contingent wellness program be reasonably designed to promote health or prevent disease, saying that the determination is based on all relevant facts and circumstances. The FAQs further say that the regulations are intended to allow experimentation and the use of evidence-based clinical standards to design programs is not required, though the use of practices found in two named guides to preventive services is encouraged.
The FAQs note several practices or program designs that may be problematic:
- programs designed to discourage participation by individuals who are sick or who have high claims;
- programs that collect a substantial amount of health data without assisting the participants to make changes, such as by controlling diabetes or losing weight; and
- programs that require unreasonable travel or time commitments, which may fail as being overly burdensome.
HHS FAQs. In two separate postings, HHS also issued FAQs regarding the application of HIPAA privacy and security rules and certain PPACA health insurance market reforms to wellness programs. The FAQs on HIPAA privacy say wellness programs that are part of a group health plan are subject to the HIPAA privacy rules, but a wellness arrangement offered directly by an employer outside its group health plan, such as a gym membership, would not be. A second FAQ provided a reminder on the restrictions that must be observed and the ability to provide health information to the employer if the wellness program is part of the group health plan and, therefore, subject to the HIPAA privacy rules. The HHS FAQs on PPACA market reforms clarify several rules for health insurance issuers that offer wellness programs. Among other things, the FAQs say an insurer cannot choose to offer wellness programs only to certain employers or industry groups, also noting that this restriction does not apply to excepted benefits, such as an employee assistance plan, or a wellness program with a reward that does not affect health coverage, such as a gym membership.
1 The tri-agency task force consists of the Internal Revenue Service (IRS), the Department of the Treasury, the Employee Benefits Security Administration of the Department of Labor (DOL), and the Department of Health and Human Services (HHS).
2 See, e.g., EEOC v. Honeywell International, Inc. (D. Minn., filed Oct. 27, 2014).
3 See EEOC Informal Discussion Letter (Mar. 6, 2009) and EEOC Informal Discussion Letter (Aug. 10, 2009).
4 The standard for providing a reasonable alternative varies between activity-based programs and health-contingent based programs.
5 The “reasonably designed” requirement is met if the program has a reasonable chance of improving health or preventing disease, is not overly burdensome, is not a subterfuge to violate employment discrimination laws, and does not utilize a highly suspect method.
6 See, Seff v. Broward County, No. 11-12217 (11th Cir. Aug. 20, 2012).