Well Now…EEOC Issues Wellness Program Proposed Rule
Written By Jason Rothman
As employers develop and administer wellness programs, they generally do so with the Health Information Portability and Accountability Act (HIPAA) and Affordable Care Act requirements in mind. However, employers all too often have forgotten or didn't realize that wellness programs are subject to the Americans with Disabilities Act (ADA) as well (whether a participatory or a health-contingent wellness program). The ADA generally prohibits employment discrimination against disabled individuals and limits the circumstances in which an employer may require physical exams or answers to questions about employee medical conditions. Voluntary medical exams and inquiries may be permitted as part of an employee health program so long as: participation is voluntary; information obtained about employee conditions is kept confidential; and information obtained is not used to discriminate against employees. As such, employer wellness programs that require medical exams and/or provide information about medical conditions must take into account the ADA.
Historically, there was little guidance, either from the courts or the Equal Employment Opportunity Commission (EEOC), explaining whether or how an employer-sponsored wellness program may encourage participation, or penalize non-participation, and still be considered "voluntary" under the ADA. The EEOC did issue an opinion letter stating that requiring a health risk assessment as a condition for health plan enrollment meant that a wellness program could not be considered voluntary. That letter also indicated that an incentive of up to 20% of the total cost of coverage could be offered without violating the "voluntary" standard. The latter portion of the letter was later withdrawn raising questions on ADA compliance.
The ADA has certain safe harbors for insurers and bona fide plans that exempt such programs from ADA restrictions. Under these safe harbors, employers, insurers, and plan administrators are permitted to establish a health insurance plan (or a self-insured plan) that is "bona fide" based on underwriting risks, classifying risks, and administration that is not used as a "subterfuge" to evade the purposes of the ADA. The EEOC has generally stated that the safe harbor is to allow the development and administration of benefit plans in accordance with accepted principles of risk assessment. The first court to analyze a wellness program under the ADA (a wellness program generally composed of a biometric screening and health risk assessment to employees who participated in the group health plan with a $20 surcharge for those who failed to participate), found the wellness program to satisfy the bona fide plan safe harbor and thus didn't have to analyze the voluntary requirement under the ADA (see Seff v. Broward County).
Recently, the EEOC itself has initiated litigation against employers who sponsor wellness programs. The focus of the claims is that the plans: (1) are not voluntary and (2) do not comply with the Genetic Information Nondiscrimination Act (GINA). Of note is action taken against Honeywell International Inc. – who sponsors a wellness program that has incentives/surcharges tied to participant (and spouse) biometric screening and tobacco use (a plan design not too uncommon these days) and of which complies with HIPAA and the Affordable Care Act. In light of this EEOC action, employers are concerned about just how far they can go in using incentives/surcharges in their wellness program, even when the wellness programs are compliant with HIPAA and the Affordable Care Act.
The Proposed Rule
The proposed rule is a welcomed piece of guidance for employers as it provides clear guidance as to how to design a wellness program in compliance with the ADA. Please note that while the guidance does not address the GINA issue being raised by the EEOC, the EEOC stated that this issue will be addressed in future guidance.
Among the key items that the proposed rule explains include the following:
1. What is an "employee health program" subject to the ADA;
2. What it means for an employee health program to be "voluntary" under the ADA;
3. What incentive may be offered under a voluntary employee health plan; and
4. Rules regarding notice and confidentiality requirements.
An "employee health program," including any disability-related inquiries and medical exams part of such a program (for example, a health risk assessment or biometric screenings), must be reasonably designed to promote health or prevent disease. Generally, this means that the program must have a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease.
To be considered "voluntary," the employer may not require participation in the wellness program and may not deny coverage under any of its group health plans or particular benefits packages within a group health plan, generally may not limit the extent of such coverage, and may not take any other adverse action against employees who refuse to participate in a wellness program or fail to achieve certain outcomes.
The EEOC guidance specifies that offering incentives to participate in a wellness program that is part of a group health plan and that includes disability-related inquiries and/or medical examinations will not render the program involuntary. A 30% of the total cost of employee-only coverage incentive/surcharge is set as the maximum (noting that the EEOC has specifically asked the public to comment on this 30% taking into account the HIPAA and Affordable Care Act incentive rules specifically relating to tobacco). Note that if there are no disability-related inquiries and/or medical examinations (say if the wellness program was a tobacco cessation program that only involved a participant certification of non-smoking status) it would not be subject to the ADA incentive limitations (but would continue to be subject to the general ADA rules).
To satisfy the voluntary standard, a notice must be provided to employees explaining what medical information will be obtained, how medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the employer will use to prevent improper disclosure of the information.
The ADA contains certain confidentiality requirements to medical records and the proposed rule adds new language impacting the confidentiality and use of medical information obtained per a wellness program. The interpretive guidance states that where a wellness program is part of a group health plan, the individually identifiable health information obtained is protected health information (PHI). As such, if the group health plan is subject to HIPAA, its obligation to comply with the new ADA rules may be satisfied by adhering to the HIPAA Privacy Rule.
Employers must keep in mind all the legal compliance areas when designing wellness programs (HIPAA, Affordable Care Act, ADA, ERISA, and Internal Revenue Code, among others). This guidance provides the employer community a roadmap in designing wellness programs in compliance with the ADA – something very well received in light of the recent EEOC litigation which had employers questioning what kind and level of incentives/surcharges they use to encourage plan participation.