Wellness Programs Are in Limbo Without EEOC Regulations

 

By Allen Smith, J.D., and Lisa Nagele-Piazza, J.D., SHRM-SCP May 24, 2019
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Employers may have to wait until at least December for a proposed rule from the Equal Employment Opportunity Commission (EEOC) on when they can impose penalties or rewards to encourage employees to disclose medical information in health risk assessments.

The EEOC initially planned to issue proposed regulations in January but delayed until June. According to the agency's spring 2019 regulatory agenda, however, the EEOC now expects to issue a Notice of Proposed Rulemaking by December.

In the meantime, employers will have to weigh the risks of implementing wellness programs, said Mathew Parker, an attorney with Fisher Phillips in Columbus, Ohio, and Melissa Shimizu, an attorney with Fisher Phillips in Irvine, Calif.

[SHRM members-only toolkit: Designing and Managing Wellness Programs]

The Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) generally prohibit employers from collecting employee health and genetic information. But both laws have an exception that permits the collection of such information as part of employer wellness plans, as long as an employee provides such information voluntarily.

In 2016, the EEOC issued a rule under the ADA and GINA stating that employers could implement penalties or rewards of up to 30 percent of the cost of employee-only health care coverage to encourage employees to disclose ADA- and GINA-protected information without causing the disclosure to be involuntary. The rule took effect Jan. 1, 2017.

However, AARP sued, contending that a 30 percent incentive or penalty made an employee's disclosure of ADA- and GINA-protected information involuntary. In the summer of 2017, a district court agreed with AARP and sent the regulations back to the EEOC for further revisions. In December 2017, the court then vacated the regulations, effective Jan. 1, 2019.

Three Options

Parker and Shimizu said that until the EEOC proposes new rules, employers have three options—depending on their risk tolerance—for implementing wellness programs that are subject to the ADA or GINA:

  • Highest risk: Keep any wellness incentive or penalty that is equal to 30 percent of the total cost of employee-only group health plan coverage.
  • Moderate risk: Significantly reduce the incentive or penalty to an amount that, regardless of an employee's income, could be viewed as small enough for the employee's participation to be considered voluntary. Based on the wellness programs they have reviewed, the majority of the incentives are relatively small and do not come close to 30 percent of the total cost of employee-only coverage. This approach could decrease the risk of an EEOC challenge, given that the agency generally will dispute only practices that it considers noncompliant. However, even if the EEOC does not challenge an incentive or penalty, individual employees or organizations could still pursue legal action against employers. In general, those lawsuits have not been successful unless they targeted a particularly aggressive incentive, such as a program that prevented an employee from enrolling in coverage until health information was provided.
  • Lowest risk: Eliminate any wellness incentive or penalty altogether and wait for further guidance from the EEOC.

HIPAA Risks

While the risks of lawsuits under the ADA and GINA have preoccupied employers, Ann Caresani, an attorney with BakerHostetler in Cleveland, said employers may have greater legal risks under Health Insurance Portability and Accountability Act (HIPAA) nondiscrimination provisions.

HIPAA prohibits group health plans from discriminating against individuals based on health-status factors. The law divides wellness programs into two general categories: participatory wellness programs and health-contingent wellness programs. In participatory programs, rewards are based only on an employee's involvement, and in health-contingent programs, incentives are attached to outcomes.

Health-contingent wellness programs generally reward individuals who meet a specific standard related to their health. Examples of health-contingent wellness programs include programs that provide a reward to those who do not use or decrease their use of tobacco, or programs that reward those who achieve a health-related goal, such as a specified cholesterol level, weight or body mass index, as well as those who fail to meet such goals but take certain other healthy actions.

"The distinction is important because participatory wellness programs are not required to satisfy the same nondiscrimination standards that apply to health-contingent ones," Parker and Shimizu noted.

Health-contingent wellness programs are required to follow five main standards related to nondiscrimination:

  • Participants must be given the opportunity to qualify at least once per year.
  • The incentive or penalty must be limited to 30 percent of the cost of the premium for the health plan and 50 percent for programs related to reduction of tobacco use.
  • The program must be reasonably designed to promote health or prevent disease.
  • The program must be uniformly available and provide a reasonable alternative for participants.
  • Notice must be provided of the availability of a reasonable alternative.

Participatory wellness programs are generally compliant with HIPAA so long as participation in the program is made available to all similarly situated individuals, regardless of health status. There is no limit on financial incentives for participatory wellness programs.

The Affordable Care Act's (ACA's) provisions build on HIPAA and set standards for health-contingent wellness programs. Under the ACA, employers may offer rewards or apply penalties for such programs if they don't exceed 30 percent of the cost of the health plan. Although the ACA doesn't limit incentives or set standards for any other types of workplace wellness programs, the act does require that such programs are offered to all similarly situated individuals, Parker and Shimizu explained.

"Wellness programs entail so many different compliance requirements that it is important that HR professionals are comfortable enough with the requirements or seek legal or other counsel to ensure that their program is designed to comply," Caresani said.


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