EEOC proposed wellness regs: What employers need to know

EEOC proposed wellness regs: What employers need to know

On April 16, 2015, the Equal Employment Opportunity Commission issued a long-awaited proposed regulation with respect to employer-sponsored wellness programs and the Americans with Disabilities Act. While not yet final, the proposed regulation provides important 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.

The proposed regulation is quite long and nuanced; however, highlights are described below.

Reasonable design. The proposed regulation states that 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.” The proposed regulation provides that this requirement is satisfied if a program:

  • has a reasonable chance of improving the health of, or preventing disease in, participating employees;
  • is not overly burdensome;
  • is not a subterfuge for violating the ADA or other laws prohibiting employment discrimination; and
  • is not highly suspect in the method chosen to promote health or prevent disease.

This requirement is consistent with the reasonable design requirement applicable to health-contingent programs under the Health Insurance Portability and Accountability Act.  However, it would expand the requirement to participatory programs, which are not subject to the “reasonable design” requirement under HIPAA.

Voluntary requirement. Per the terms of the ADA, wellness programs must be voluntary if they include a disability-related inquiry or medical examination. The proposed regulation provides that a wellness program that includes a disability-related inquiry (e.g., those included in a health risk assessment) and/or a medical examination will satisfy the voluntary standard if the employer:

  • does not require employees to participate;
  • does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation, or limit the extent of benefits (except for wellness program incentives that are expressly allowed, as described below) for employees who do not participate;
  • does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of section 503 of the ADA; and
  • where the wellness program is part of a group health plan, provides employees with a notice that satisfies certain requirements.

The proposed regulation also addresses the level of incentive that may be offered in a wellness program that includes disability-related inquiries and/or medical examinations, where such program is part of a group health plan. Under the proposed regulation, such a program will not be deemed involuntary if the maximum incentive under the program, combined with the maximum incentive for other programs that include a disability-related inquiry and/or medical examination, does not exceed 30% of the total cost of employee-only coverage.

Of note, the proposed regulation provides that the maximum incentive is determined based on the cost of employee-only coverage. This differs from the HIPAA regulations, which allow the maximum reward to be determined based on the total cost of coverage in which an employee and any dependents enroll in cases where dependents may participate in the wellness program. In the absence of clarification from the EEOC, there is concern that wellness programs seeking to comply with the ADA and HIPAA may not exceed the potentially lower ADA incentive limit.

Under HIPAA, incentives related to tobacco use may be up to 50% of the cost of coverage. The text of the proposed regulation appears to only permit use of incentives beyond the 30% limit mentioned above if the tobacco program merely asks participants whether they use tobacco. If the program relies on a biometric screen (such as a cheek swab), it appears the program will be subject to a maximum incentive of 30% of employee-only coverage.

Significantly, the proposed regulation leaves unanswered what level of incentive may be used with respect to a wellness program that is not part of a group health plan. Many programs sponsored by employers may not be part of a group health plan – for example, a program consisting of a health risk assessment, where the incentive is provided in the form of cash or other taxable benefit. While the proposed regulation indicates de minimum incentives may be permitted, no other guidance is provided on this important issue.

Confidentiality. The proposed regulation would impose certain confidentiality rules on wellness programs, including that medical records developed in the course of providing voluntary health services to employees, including wellness programs, must be maintained in a confidential manner and must not be used for any purpose in violation of the ADA.

Reasonable accommodation. The proposed regulation would apply the ADA’s reasonable accommodation requirement to all wellness programs regardless of whether the program includes a disability-related inquiry or medical examination. The requirements for a reasonable alternative standard under HIPAA likely would fulfill this requirement for health-contingent programs. However, an employer would still have to provide a reasonable accommodation for a participatory program.

What’s next?

The proposed regulation is not technically applicable until finalized – and the rule is not expected to become final until late summer at the earliest.  Nonetheless, employers would be wise to review their existing wellness programs to begin to get a sense as to how their programs measure up to the proposed regulation. Additionally, the EEOC’s regional offices, which are charged with enforcing the ADA, may feel compelled to pursue enforcement activity against employers with regard to their wellness programs before the proposed regulation is finalized. In this regard, it seems possible that the regional offices could refer to the proposed regulation as part of any enforcement activity.

Some areas on which employers should focus include:

  • Whether your program meets the “reasonably designed” requirement described above.
  • Whether your program meets the “voluntary” standard described above – specifically, whether any incentives provided would meet the maximum threshold of 30% of employee-only coverage.
  • Whether your tobacco cessation program involves a medical examination for purposes of the ADA (such as a cheek swab or blood test) and, if so, whether your incentives meet the reduced incentive limits.
  • Whether your wellness program is part of a group health plan and, if not, whether the incentives could be construed as more than de minimis.