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EEOC Releases Final Rule on Employer Wellness Programs ‎

June 13, 2016

Overview

On May 17, 2016, the Equal Employment Opportunity Commission (“EEOC”) issued a final rule (the “EEOC Rule”) implementing Title I of the ‎Americans with Disabilities Act (“ADA”) as it relates to employer wellness programs.  The EEOC Rule provides guidance on the means by which employers may offer financial ‎or other incentives in exchange for an employee answering disability-related questions or taking medical ‎examinations as part of a wellness program, including those forming part of a group health plan.‎

Provisions of the EEOC Rule that will be of particular interest to employers are discussed below in the form of questions and answers.

‎Q.        How does the ADA apply to wellness programs?‎

Title I of the ADA is a federal civil rights law that prohibits employers from discriminating against individuals ‎on the basis of disability.  It also generally restricts employers from obtaining medical information from ‎applicants and employees, but allows them to make inquiries about an employee’s health, or to request medical ‎examinations, that are part of a “voluntary” employee health program.

‎Q.        How do the ADA wellness program standards differ from the HIPAA standards?‎

The HIPAA wellness program standards, which are governed by the IRS and Department of Labor, ‎apply to wellness programs that are part of an employer-sponsored group health plan.  The HIPAA ‎standards prohibit a plan from discriminating against an individual by reason of any health-related factor.‎

In contrast, the ADA wellness program standards enforced by the EEOC are directed toward medical ‎information solicited from employees.  The EEOC Rule applies to any wellness program ‎that requires employees to answer disability-related questions or undergo medical examinations, ‎including wellness programs that are not part of a group health plan.‎

Q.        What ADA standards apply to wellness programs?‎

The ADA allows employers to make disability-related inquiries, including asking ‎employees to complete a health risk assessment (“HRA”).  However, any disability-related inquiries or medical examinations that are part of such a program must ‎be “reasonably designed to promote health or prevent disease.”  The EEOC Rule provides that in order to meet this ADA standard, a wellness program cannot:

  • ‎Require an overly burdensome amount of time for participation;
  • Involve unreasonably intrusive procedures;
  • Be a subterfuge for violating the ADA or other laws prohibiting employment discrimination; or
  • Require ‎employees to incur significant costs for medical examinations.‎

‎Q.        What are some examples of wellness programs that meet the “reasonably designed” ‎standard?‎

A wellness program that asks employees to answer questions about their health conditions or have a ‎biometric screening or other medical examination for the purpose of alerting them to health risks (such as ‎having high cholesterol or elevated blood pressure) is deemed to be reasonably designed to promote health or prevent ‎disease. Collecting and using aggregate information from employee HRAs to design and offer programs ‎aimed at specific conditions prevalent in the workplace (such as diabetes or hypertension) also would meet the ‎reasonably designed standard.‎

Q.        What action must an employer take regarding the collected information?

Satisfaction of the reasonably designed standard requires that an employer take positive action with respect to the collected information.  A program that simply asks employees to provide medical information via an HRA without providing any feedback about ‎risk factors, or without using the collected information to design programs or treat specific conditions, would ‎not be reasonably designed to promote health or prevent disease.  In addition, a wellness program is not ‎reasonably designed to promote health or prevent disease if it exists merely to shift costs from the employer ‎to employees based on their health, or is only used by the employer to predict its future health costs.‎

‎Q.        When is an employee’s participation in a wellness program considered “voluntary”?‎

A wellness program that includes disability-related inquiries or medical examinations is acceptable under the ADA only if an employee’s participation is ‎considered to be “voluntary.”  Toward this end, the EEOC Rule provides that in order for participation in a wellness program to be held to be voluntary, the program:‎

  • May not require any employee to participate;‎
  • May not deny any employee who does not participate in a wellness program access to health coverage, ‎or prohibit any employee from choosing a particular plan; and
  • May not take any other adverse action or retaliate against, interfere with, coerce, intimidate, or threaten ‎any employee who chooses not to participate in a wellness program, or fails to achieve certain health ‎outcomes.‎

Accordingly, the EEOC Rule prohibits “gateway plans” that restrict employee enrollment in ‎a health plan based upon the completion of an HRA, or participation in a biometric screening program.‎

Q.        Are there any employee notice requirements?

Yes.  In order to ensure that an employee’s participation is voluntary, an employer must provide a ‎notice that clearly explains what medical information will be obtained, how it will be used, who will receive it, ‎and the restrictions on disclosure. 

The EEOC Rule does not state when the notice must be provided. Presumably, and as a best practice ‎method, the notice should be provided as part of any open enrollment materials.‎  The EEOC has committed to issuing a sample notice by June 16, 2016.‎

‎Q.        How much of an incentive may an employer offer to encourage employees to ‎participate in an ADA wellness program?‎

The maximum allowable ‎incentive an employer may offer is 30% of the total cost for self-only coverage of the plan in which ‎the employee is enrolled.‎ For example, if an employer offers three different major medical group health plans ranging in cost for self-‎only coverage from $5,000 to $8,000 and wants to offer an incentive to employees for participating in a ‎wellness program and completing an HRA, the employer could offer a maximum incentive of $1,500 (30% of its lowest cost plan).‎

‎Q.        How does the 30% ADA incentive limit reconcile with the 50% HIPAA limit for no-tobacco use programs?‎

The HIPAA wellness program nondiscrimination rules, as amended by the Affordable Care Act, allow a ‎plan to provide an incentive for non-tobacco use of up to 50% of the cost of self-only coverage.  The ‎incentive for other wellness factors is limited to 30% of the cost of such coverage.‎

The EEOC Rule does not have a special increased 50% limit for non-tobacco use.  However, it does provide that 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.  ‎In that case, the no-tobacco use program would not be governed by the ADA.  Consequently, the EEOC Rule’s 30% incentive limit does not apply, and an employer can offer an incentive up to ‎‎50% of the cost of self-only coverage, in accordance with the HIPAA standards for non-tobacco use. ‎

Q.        When does the EEOC Rule become applicable?

The EEOC Rule applies for ‎plan years beginning on or after January 1, 2017.‎

Q.        What actions should employers now undertake?

Employers that require an employee’s participation in a health risk assessment program or who require ‎employees to undertake a medical examination as a condition to participation in a group health plan ‎will need to revise these “gateway” conditions prior to the beginning of the 2017 plan year.‎

Employers that sponsor programs involving disability-related inquiries or medical examinations must also ‎review their current notices to employees to determine whether they comply with the new EEOC ‎standards.  If not, revisions will be required.  As stated above, the EEOC intends to release a sample ‎notice in the near future.‎

Finally, employers must also make sure that they are properly acting upon the medical information that is ‎captured through the HRA or medical examination process.  This could include providing feedback to ‎employees and alerting them to health risks ascertained through the wellness program process, or to ‎use the information to design programs aimed at specific conditions prevalent in the employer’s ‎workplace‎.

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For further information or questions regarding the EEOC Rule and its implications to wellness programs, please contact the Schwabe attorney with whom you work or Wally Miller at 541-686-3299 or wmiller@schwabe.com.


IRS rules of practice require us to inform you that any federal tax advice contained in this correspondence is not intended or written to be used, and cannot be used, by the recipient or any taxpayer for the purpose of avoiding tax penalties under the Internal Revenue Code.

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