EEOC Issues Final Rules on Employer Wellness Programs

The rules clarify limits on financial incentives to spur participation in voluntary programs

By Stephen Miller, CEBS May 17, 2016
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The U.S. Equal Employment Opportunity Commission (EEOC) has issued new final rules that describe how employer-provided wellness programs can comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The two rules, published in the Federal Register on May 17, also address how ADA- and GINA-compliant wellness programs can stay consistent with the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA).

The EEOC also posted question-and-answer documents that address the ADA rule and the GINA rule, and fact sheets for small businesses regarding the ADA rule and the GINA rule.

The final rules, which will go into effect in January 2017, apply to all workplace wellness programs, including those in which employees or their family members may participate without also enrolling in a particular health plan.

“All in all, the rules are very much in line with what the EEOC proposed last year,” said Brian Marcotte, president and CEO of the National Business Group on Health, a nonprofit association of large U.S. employers. “While we may have hoped for some additional flexibility, the rules do what the EEOC was asked to do—clarify for employers where their wellness plan incentives stand with respect to ADA and GINA compliance.”

But Nancy Hammer, senior government affairs policy counsel at the Society for Human Resource Management (SHRM), said that “the EEOC failed to change many of the aspects of the rules that SHRM felt conflicted with existing rules under the ACA for wellness plans, and which SHRM felt served as roadblocks to employers trying to improve the overall wellness of their employees and keep their health care costs in check,” some of which are noted below.

What’s Allowed and What Isn’t

The ADA and GINA generally prohibit employers from obtaining and using information about employees’ health conditions or about the health conditions of their family members, including spouses. Both laws, however, allow employers to ask health-related questions and conduct certain medical examinations, such as biometric screenings to determine risk factors, as part of a voluntary wellness program. Last year, the EEOC issued proposed rules that addressed whether offering an incentive for employees or their family members to provide health information as part of a wellness program would effectively render the program involuntary.

“The EEOC received comments on both rules from a broad array of stakeholders and considered them carefully in developing this final rule,” said EEOC Chair Jenny R. Yang, in a news statement.

Limits on Financial Incentives

Under HIPAA as amended by the ACA, wellness programs may offer incentives of up to 30 percent of the cost of an individual’s annual health premiums, and for tobacco-cessation programs, up to 50 percent of the cost of health premiums.

The final ADA rule clarifies that wellness programs that ask questions about employees’ health or include medical examinations may offer incentives of up to 30 percent of the total cost of self-only coverage, and that, specifically:

  • Where the employer requires the employee to be enrolled in a particular health plan in order to participate in the wellness program, the incentive to the employee may not exceed 30 percent of the total cost of the self-only version of the plan in which the employee is enrolled.
  • Where the employer offers more than one self-only health plan, and does not require the employee to be enrolled in a particular health plan in order to participate in the wellness program, the incentive may not exceed 30 percent of the lowest cost major medical self-only plan the employer offers.
  • Where the employer does not offer a health plan, and offers a wellness program that is open to employees, the incentive may not exceed 30 percent of the total cost to a 40-year-old nonsmoker purchasing self-only coverage under the second-lowest cost Silver Plan available on the state or federal exchange in the location that the employer identifies as its principal place of business.

“The final rules still limit the incentive an employer can offer to encourage participation in a wellness plan to 30 percent of total costs of ‘employee-only coverage,’ even though the ACA expressly permits employers to offer incentives based on the cost of the [health plan] the employee selects—whether employee-only or family coverage,” said Hammer.

That puts the EEOC’s rules at odds with the incentive cap under final wellness rules issued in 2013 jointly by the Departments of Health and Human Services, Treasury and Labor, said Ilyse W. Schuman, co-chair of the Workplace Policy Institute and a shareholder at Littler in Washington, D.C.

In addition, the final GINA rule provides that the value of the maximum incentive attributable to a spouse’s participation may not exceed 30 percent of the total cost of self-only coverage, the same incentive allowed for the employee.

Under the GINA rule, no incentives are allowed in exchange for the current or past health status information of employees’ children or in exchange for specified genetic information (such as family medical history or the results of genetic tests) of an employee, an employee’s spouse, and an employee’s children.

Under the EEOC final rules, these caps apply to incentives for both progarm participation and to outcomes-based goal achievements, such as meeting weight-reduction targets, Schuman noted.

Tobacco-Cessation Incentives

Regarding incentives to motivate employees to stop using tobacco, the ADA rule—unlike the ACA—makes a distinction between tobacco-cessation programs that require employees to be tested for nicotine use and programs that only ask employees if they smoke. “A wellness program that merely asks employees whether or not they use tobacco (or whether they ceased using tobacco by the end of the program) is not a wellness program that asks disability-related questions. Therefore, the rule's 30 percent incentive limit does not apply and an employer can offer an incentive up to 50 percent of the cost of self-only coverage,” the EEOC stated.

However, where an employer requires any biometric screening or other medical procedure that tests for the presence of nicotine or tobacco, the rule’s 30 percent incentive limit applies, according to the rule.

The new rules “contradict existing rules allowing an incentive up to 50 percent for smoking cessation, and they retained a convoluted requirement to apportion the incentive to spouses under the Genetic Information Nondiscrimination Act,” said Hammer.

The EEOC’s approach “is not consistent with the ACA’s statutory incentives or ACA regulations issued by the federal agencies,” Schuman said, “but the EEOC affirmatively rejected commenters’ requests to change the proposed rule to match with the ACA. The lack of alignment with ACA regulations means that employers are not going to have a synchronous set of rules for establishing and operating their wellness programs.”

Reasonable Accommodation

Under existing HIPAA regulations, a participatory wellness program must be made available to all similarly situated individuals regardless of health status. The ACA implementing regulations require that wellness programs provide a reasonable alternative or waiver for achieving a wellness incentive if an individual can’t participate or achieve program goals due to a health condition or disability.

In its final ADA rule, the EEOC reiterated that, “absent undue hardship” to the employer—a phrase that is not explained—“the ADA requires employers to make all wellness programs, even those that do not obtain medical information, available to all employees [and] to provide reasonable accommodations (adjustments or modifications) to employees with disabilities.” These accommodations should “enable employees with disabilities to earn whatever financial incentive an employer or other covered entity offers.”

Protecting Confidentiality

The ADA final rule does not change any of the exceptions to confidentiality in EEOC's existing ADA regulations, but adds two new requirements. An employer:

  • May only receive information collected by a wellness program in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals except as necessary to administer the plan.
  • May not require an employee to agree to the sale, exchange, transfer, or other disclosure of medical information or to waive confidentiality protections under the ADA in exchange for an incentive or as a condition for participating in a wellness program, except to the extent permitted by the ADA to carry out specific activities related to the wellness program.

The ADA rule also requires that employers give participating employees a notice that tells them what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, the limits on disclosure, and the way information will be kept confidential.

The GINA rule includes a requirement that statutory notice and consent provisions for health and genetic services be provided to employees and their family members.

The interpretive guidance published along with the final ADA rule and the preamble to the GINA final rule identify some best practices for ensuring confidentiality, such as:

  • Adopting and communicating clear policies.
  • Training employees who handle confidential information.
  • Encrypting health information.
  • Providing prompt notification of employees and their family members if breaches occur.

EEOC Appeals Wellness Suit Dismissal

Some of the provisions in the Equal Employment Opportunity Commission’s (EEOC’s) new final rules are likely to end up in court and the EEOC may not always prevail.

For instance, in January 2016 a federal district court in Wisconsin dismissed an EEOC lawsuit against an employer’s alleged “involuntary” wellness plan and held that the plan did not violate the Americans with Disabilities Act, as the EEOC contended. In the case, EEOC v. Flambeau Inc., the district court held that an employer can require workers to undergo health screenings as a condition for receiving employer-provided health coverage. The court agreed with the company’s stance that its wellness exams fell under the ADA’s safe harbor.

In April, the EEOC appealed that decision to the Court of Appeals for the Seventh Circuit. Whether the Seventh Circuit upholds or reverses the lower court’s decision, the case may ultimately be headed to the U.S. Supreme Court.

“The EEOC took the position in Flambeau that it then affirmed in its final rules, which is that the ADA’s safe harbor for group health plans doesn’t apply to wellness programs,” said benefits attorney Ilyse Schuman, a shareholder at Littler in Washington, D.C. “That’s an interpretation that many see as contrary to the statute itself, and another troubling aspect of the final regulation that’s likely to make its way up the appeals process.”

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.
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