Wellness Program Incentives – New Year, New EEOC Proposed Rules

For years we have been trying to understand how the EEOC regulates wellness programs. Although we still do not have a complete picture, we are getting closer with the EEOC’s new Notices of Proposed Rulemaking on wellness programs under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). This blog summarizes the status of the ADA wellness program rules and the changes under the recently released proposed ADA wellness program rules.

Title I of the ADA

Title I of the ADA prohibits discrimination against individuals on the basis of disability in regard to employment compensation and other terms, conditions, and privileges of employment, including “fringe benefits available by virtue of employment, whether or not administered by the covered entity.” The ADA also restricts the medical information employers may obtain from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations. However, the ADA provides an exception to this rule for voluntary employee health programs, which include many workplace wellness programs.

The EEOC’s 2016 Final ADA Wellness Program Regulations

In 2016, the EEOC clarified what it considers “voluntary” for ADA purposes in its final wellness program regulations. The regulations apply to “employee health programs” which the EEOC defines as wellness programs that include disability-related inquiries and medical examinations. Importantly, if a wellness program is not an employee health program because it does not include a disability-related inquiry or medical examination it is not subject to the ADA’s 2016 wellness program regulations. However, such programs still must be available to all employees and must provide reasonable accommodations to employees with disabilities.

As explained in our previous blog “EEOC Final Rules on Wellness Programs and the ADA – Worth the Wait?” the 2016 rules generally provide that the EEOC will consider a wellness program to be voluntary if it:

  • Does not require employees to participate;
  • Does not deny coverage under any of its group health plans (including benefit packages) for non-participation, or limit the extent of benefits (with limited exceptions) 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 ADA Section 503; and
  • Provides employees with a notice that generally explains what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential.

In addition, the 2016 rules provide that unless it is necessary to administer the wellness program, an employer may only receive medical information collected by the wellness program in the aggregate and the employer may not require the employee to agree to sell, exchange, share, transfer or disclose medical information, or waive any confidentiality protections to participate in the wellness program, or receive an incentive thereunder.

Finally, in regard to incentives, the 2016 rules allowed an employer to offer limited incentives for employees who participate in a wellness program (i.e., an incentive that did not exceed 30% of the total cost of self-only coverage). However, in 2018 the EEOC removed this provision in response to the AARP v. EEOC ruling (see our previous blog here) and that created uncertainty for employers. Although employers were not necessarily prohibited from implementing an incentive up to the 30% threshold, they also could not rely on the EEOC’s safe harbor rules to demonstrate that their wellness program’s financial incentive was voluntary (see our previous blog here).

The EEOC’s 2021 Proposed ADA Wellness Program Regulations

On January 7, 2021, the EEOC released proposed rules that amend the 2016 ADA wellness program rules. Importantly, the 2021 proposed rules have not yet taken effect and may not be finalized as they are currently written. Also, the fact that the 2021 proposed rules have not yet been published in the Federal Register, suggests that they may be subject to a regulatory freeze under the January 20, 2021 Memorandum for the Heads of Executive Departments and Agencies. Therefore, the 2021 proposed rules show insight into the EEOC’s position, but employers cannot yet rely on them. Here are the major takeaways from the proposed rules:

  • Rules Apply to Disability-Related Inquiries and Medical Examinations: Like the 2016 rules, the 2021 proposed rules apply to wellness programs that are considered “employee health programs.”  Wellness programs that do not include disability-related inquiries or medical examinations are not subject to the 2021 proposed rules.  Nevertheless, employers must still make any wellness program available to all employees, provide reasonable accommodations to employees with disabilities, and generally comply with the ADA provisions that prohibit discrimination in the terms, conditions, and privileges of employment.  Employers must also protect the confidentiality of medical information obtained and comply with other rules enforced by the EEOC and other agencies.
  • Wellness Programs May Offer De Minimis Incentives:  The 2021 proposed rules provide that in order to be voluntary a wellness program cannot offer more than a de minimis incentive (e.g., a water bottle or gift card of modest value) unless the wellness program is a health-contingent wellness program that falls within the safe harbor rule.
  • Health-contingent Wellness Programs May Offer Limited Incentives: Although the general rule is that a voluntary wellness program cannot offer more than a de minimis incentive, the 2021 proposed rules provide an exception for health-contingent wellness programs that are part of or qualify as a group health plan.  A health-contingent wellness program is subject to the HIPAA nondiscrimination rules that allow a wellness program to offer an incentive up to 30% of the total cost of coverage (or 50% if the wellness program is designed to prevent or reduce tobacco use) as long as the wellness program complies with the five HIPAA requirements for such plans.  Health-contingent wellness programs, which may be either activity-only or outcome-based, require individuals to satisfy a standard related to a health factor to obtain a reward (or require an individual to undertake more than a similarly situated individual to obtain the same reward).  Examples include programs that reward employees for walking, dieting, or exercising (activity-only wellness programs) or programs that use biometric screening or a health risk assessment to identify employees with certain medical conditions or risk factors (such as high cholesterol, blood pressure, or blood glucose levels) and reward those at low risk or those who meet certain health outcomes (outcome-based wellness programs).  See our newsletter “Health Care Alert – Final Wellness Rules May Require Review of Existing Wellness Programs” for more information on the HIPAA wellness program rules.
  • ADA Wellness Program Notice No Longer Required: As noted above under the EEOC’s 2016 final wellness program rules, an employer that offers a wellness program must provide employees with a notice that generally explains what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential.  The 2021 proposed rules removed this requirement because the EEOC believes that it is not necessary and that the de minimis incentive standard makes it unlikely that an employee will to choose to participate in a program that requires providing medical information unless the employee understands how the information will be used and protected.

Conclusion

Recently many employers have made, or are considering, wellness program design changes to accommodate their remote workforce and address the COVID-19 pandemic. For example, many employers want to incentivize their employees to receive a COVID-19 vaccination. Employers contemplating such changes may want to consider the EEOC’s proposed and final ADA rules as well as the implications under ERISA, COBRA, ACA, HIPAA, GINA, the Code, and the FLSA.

This entry was posted in Employee Benefits, Health & Welfare Plans, Health Care Reform and tagged , , , , , .

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