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By: Jonathan R. Mook, DiMuroGinsberg, P.C.
Given concerns over rising health care costs and missed workdays by employees suffering from various illnesses, many employers have implemented employee wellness programs and activities to promote healthier lifestyles or to prevent disease with the expectation that such programs will reduce healthcare costs.1 However, these programs must be appropriately designed so as not to run afoul of existing anti-discrimination laws, including laws prohibiting discrimination based on disability or genetic information, among others.
ON MAY 16, 2016, THE U.S. EQUAL EMPLOYMENT Opportunity Commission (EEOC) took a big step forward by providing guidance on how wellness programs should be fashioned to comply with the requirements of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) by issuing Final Rules on the application of both laws to employer wellness programs.2
The ADA contains a number of exceptions to its general rule prohibiting employers from making disability-related inquiries or requiring medical examinations. One of the exceptions applies to certain voluntary wellness programs.3 The ADA Final Rule makes it clear that medical inquiries or medical examinations as part of an employee health or wellness program are allowed under the ADA as long as the inquiries and examinations are conducted in connection with an “employee health program” (as defined below) and are truly voluntary, and the information obtained is used only for purposes of the program and satisfies confidentiality requirements.4 While employees may not be required to participate in an employer’s wellness program, the ADA Final Rule allows a company to offer incentives to encourage employees to participate. However, the incentives must be consistent with the nondiscrimination provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Affordable Care Act (ACA),5 which generally limits incentives to 30% of the total cost of employeeonly coverage.6
The ADA Final Rule specifically revises Section 1630.14 of its regulations7 in the following manner to address when and how medical examinations and inquiries are permitted in the context of an employee health or wellness program.
The EEOC, for the first time, defines what constitutes an employee health program that may rely on the wellness program exception to the ADA’s prohibition on requiring medical examinations and making health-related inquiries: it is a program “reasonably designed to promote health or prevent disease.” Under the regulations, a program will satisfy this standard if the program (1) has a reasonable chance of improving the health of, or preventing disease in, participating employees; (2) is not overly burdensome nor a subterfuge for violating the law; and (3) is not highly suspect in the method chosen to promote health or prevent disease.8
According to the EEOC, this definition is satisfied if an employer institutes a program to conduct a health risk assessment or biometric screening of employees for the purpose of alerting them to health risks of which they may not be aware. An employer’s use of aggregate information from employees’ health risk assessments to design and offer health programs aimed at specific conditions that are prevalent in the workforce will also pass regulatory muster. On the other hand, the EEOC explains that if an employer collects medical information on a health questionnaire without providing employees any follow-up programs, information, or advice, this activity will not satisfy the definition of an employee health program and will not be eligible for the wellness program exception to the ADA rules.9
Also excluded from the definition are programs designed mainly to shift costs from the employer to targeted employees based on their health and programs where an employer imposes overly burdensome amounts of time for participants to achieve a reward, requires unreasonably intrusive procedures, or places on the employee significant costs related to medical examinations.10
Under the ADA, medical inquiries or required medical examinations in connection with a wellness program must be voluntary. The ADA Final Rule sets forth four factors that must be met for employee medical inquiries or medical examinations to be voluntary. These factors are as follows:
To ensure that participation in an employee wellness program is truly voluntary, the Final Rule makes clear that it would be unlawful for an employer that offers both a traditional preferred provider health plan and a high deductible plan to limit the traditional plan coverage only to those employees who participate in a wellness plan that includes a health risk assessment. It would also be unlawful for an employer to condition participation in the employer’s group health plan on an employee completing a health risk assessment.12
Read in isolation, the requirement that participation in a wellness program must be voluntary might be construed as preventing employers from offering rewards to their employees for their participation or imposing penalties for non-participation in wellness programs (at least to the extent they are not de minimis). However, as the EEOC explained in discussing its Final Rule, the ADA, as interpreted in light of the HIPAA non-discrimination rules, as amended by the ACA, “does not prohibit the use of incentives to encourage participation in employee health plans,” although the ADA “does place limits on them.”13
Accordingly, the ADA Final Rule clarifies that the use of incentives in an employee health program, either in the form of a reward or penalty, does not render the program involuntary.14 In doing so, the EEOC concluded that regulatory limits on incentives to participate in wellness programs “cannot be so substantial as to be coercive.”15 In general conformity with HIPAA’s regulations, the ADA Final Rule, therefore, allows an employer to offer incentives of up to 30% of the total cost of employee-only coverage under the employer’s group health plan (or, in the absence of an employer plan, an ACA Exchange plan), whether in the form of a reward or penalty, to promote an employee’s participation in a wellness plan that includes disability-related inquiries or medical examinations.16
The incentive rule applies to all employee health programs whether they are offered only to employees enrolled in an employer sponsored group health plan, offered to all employees whether or not they are enrolled in such a plan, or offered as a benefit of employment where an employer does not sponsor a group health plan or group health insurance coverage. The 30% limit is in reference to the cost of employee-only coverage (including both the employee’s and the employer’s contribution) under, as applicable: (1) the wellness program offered if it is a stand-alone group health plan; (2) the group health plan in connection with which the wellness program is offered; (3) the employer’s lowest-cost group health plan if the wellness program is not offered in connection with a particular plan and the employer has more than one plan; or (4) if the employer does not offer health insurance, the second-lowest-cost Silver Plan on the ACA Exchange for the jurisdiction of the employer’s principal place of business (applicable to a 40-year-old non-smoker).17
Significantly, the ADA Final Rule goes beyond the existing HIPAA requirements, which impose a 30% limit on incentives for health contingent wellness programs (i.e., programs where the incentive is contingent in part on an activity or outcome related to a health factor). The ADA Final Rule’s incentive limit applies to both health contingent and participatory wellness programs that include a health risk assessment (in a participatory program, the reward or penalty is based only on participation). The HIPAA rule places no limits on incentives for participatory wellness programs.
The EEOC’s proposed ADA wellness program regulations already required that medical records developed in the course of providing voluntary health services to employees, including wellness programs, be maintained in a confidential manner, be kept separately from other records, and not be used for any purpose violative of the statute.18 The ADA Final Rule includes added confidentiality protections by limiting the information received by an employer as part of an employee health program only to aggregated data in a format that does not disclose, nor is reasonably likely to disclose, the identity of specific individuals, except to the extent necessary to administer the plan.19 Additionally, medical information collected from employees as part of a wellness program that is part of a group health plan also comes within the confidentiality protections of HIPAA as protected health information.20 Thus, in the Interpretive Guidance to the ADA Final Rule, the EEOC opines that a wellness program governed by HIPAA “likely will be able to comply with its [confidentiality] obligations under [the ADA] by complying with the HIPAA privacy rule.”21
The Interpretive Guidance also sets forth various steps the Commission believes an employer should take in order to protect the confidentiality of employee medical information:
Importantly, the EEOC suggests that, as a best practice, those individuals who are privy to medical information disclosed as part of an employee health program be separate from those persons responsible for making decisions relating to a worker’s employment, such as hiring, termination, or discipline. The EEOC opines that the use of a third party vendor to administer a wellness program may reduce the risk for employers that medical information may be disclosed improperly to individuals who make employment decisions.23
Although not specifically referenced in the text of the ADA Final Rule, the EEOC’s Interpretive Guidance makes it clear that even if a wellness program is deemed voluntary and provides incentives of no more than 30% of the total cost of employee-only coverage, this does not end an employer’s obligations under the ADA. That is because, in addition to prohibiting discrimination on the basis of disability and the collection of disability-related information, the ADA requires employers to provide reasonable accommodations to employees with disabilities. This statutory obligation includes assisting disabled employees in participating in wellness programs as well as achieving any health-related goals and incentives that the plan may incorporate. As the EEOC’s Interpretive Guidance states, an employer must provide “reasonable accommodations . . . , absent undue hardship, to enable employees with disabilities to earn whatever financial incentive an employer or other covered entity offers.”24
For example, the EEOC advises that in a situation where an employer may offer employees a financial incentive to attend a nutrition class, the employer will need to provide a sign language interpreter for an employee who is deaf and needs an interpreter to understand the information communicated in the class. The only exception is if providing the interpreter would create an undue hardship for the employer. If a wellness program distributes written materials, an employer will also need to provide the materials in an alternative format, such as enlarged print or on a computer disk, to an employee with a vision impairment. Additionally, the EEOC’s Interpretive Guidance opines that if an employee has a disability that makes drawing blood dangerous, the employer must exempt that employee from any biometric screening that includes a blood draw or provide an alternative test that the employee can safely undergo.25
As with reasonable accommodation, the ADA Final Rule does not specifically address smoking cessation programs. In its Interpretive Guidance, however, the EEOC explains that because these rules apply only to employee health programs that include disability related inquiries or medical examinations, a smoking cessation program that merely asks employees whether or not they use tobacco is not a program that implicates the ADA’s limitations on disability-related inquiries or medical examinations. Thus, the EEOC takes the position that the ADA Final Rule does not apply to incentives that an employer may offer in connection with a smoking cessation program. Accordingly, the EEOC opines that an employer can offer incentives as high as 50% of the cost of employee coverage under such a program, pursuant to the HIPAA regulations, without implicating or running afoul of the disability-related inquiries or medical examinations provision of the ADA.26
Like its ADA Final Rule, the EEOC’s GINA Final Rule clarifies the limited circumstances in which an employer can offer incentives under a wellness program. In particular, the regulations permit an inducement for an employee’s spouse who participates in the program to voluntarily provide medical information.27 The GINA Final Rule does not allow an employer to ask for the spouse’s genetic information, nor to seek either the genetic information or the current or past health status of the employee’s children.28 Instead, the GINA Final Rule limits the type of information that may be sought in a health risk assessment solely to the spouse’s manifestation of disease or disorder.29
More specifically, the GINA Final Rule provides that an employer’s wellness plan may offer a limited incentive (either in the form of a reward or penalty) for an employee’s spouse to provide information about the spouse’s manifestation of disease or disorder as part of a health risk assessment if (1) the health or genetic services offered under the program to the employee’s spouse are “reasonably designed” to promote health or prevent disease,30 and (2) the spouse gives prior, knowing, voluntary, written authorization to collect the information.31 Additionally, the Final Rule adds a provision stating that employers may not require employees (or employees’ spouses or dependents covered by the employer’s health plan) to agree to the sale or waive the confidentiality of their genetic information as a condition for receiving an incentive or participating in a wellness program.32 The Final Rule also includes a provision, not specifically contained in the proposed regulations, stating that it is a violation of Title II of GINA for an employer to deny access to health insurance or health benefits, or to retaliate against an employee, because the employee’s spouse declined to provide information as to the spouse’s manifestation of disease or disorder.33
The GINA Final Rule provides that where an employer provides an incentive for an employee’s spouse to participate in an employer sponsored wellness program with a health risk assessment, the inducement for the spouse to complete the assessment may not exceed over 30% of the total employee-only cost of the employer’s relevant group health plan (where the relevant plan is determined under similar rules as for the ADA Final Rule limitation discussed above).34 As with the ADA Final Rule, where the employer provides no group health plan, the 30% limit is in reference to the cost of insuring a 40-year-old non-smoker on the ACA Exchange’s secondleast- costly Silver Plan.35
Note that the GINA limitation is applied separately from the ADA limitation, so that the total incentive value can be up to 60% of the employee-only coverage if both apply. Thus, if an employer offers a health plan at a total cost of $14,000 (including both employer and employee contributions) for family coverage, and the plan costs $6,000 for self-only coverage, the inducement to the employee to participate and to the employee’s spouse to provide information about a manifested disease or disorder in a wellness program may not exceed $1,800 to the employee and $1,800 to the spouse.36 The value of any inducement is taken into account for this purpose whether it is in the form of financial or in-kind rewards, such as paid time off for the employee, prizes, or other items of value, or penalties, such as increased medical plan premiums.
The GINA Final Rule 30% inducement limit generally parallels the limitations set forth in HIPAA, as amended by the Affordable Care Act, for health contingent wellness program inducements. The limit is also in line with the ADA Final Rule, which authorizes employers to provide incentives for employees to participate in a wellness program that collects information about the current or past health status of the employee. In promulgating that rule, the EEOC determined that allowing “incentives in excess of 30% of the cost of self-only coverage . . . would be coercive.”37 As the EEOC explained, it could “see no reason for adopting a different threshold where the employee’s spouse is the individual whose health information is being sought.”38
The EEOC considers many of the changes in the ADA and GINA Final Rules to be mere clarifications of the existing rules, and these have immediate effect. However, the new rules specifically concerning (1) the notice that must be provided to employees under the ADA Final Rule regarding the information being sought through medical inquiries or medical examinations and (2) the level of incentives permissible under GINA to induce an employee’s spouse to provide information about the spouse’s manifestation of disease or disorder apply only prospectively to employer wellness programs. The applicability date is the first day of the first plan year of the group health plan used to calculate the level of incentives that begins on or after January 1, 2017.39 Thus, if the plan year for the health plan used to calculate the permissible incentive limit begins on January 1, 2017, that is the date on which those provisions of the Final Rules apply to the wellness program.
The EEOC’s rules recognize that wellness plans can have an important role to play in health care, both in terms of promoting employee health as well as in controlling healthcare costs. Additionally, by allowing incentives in line with those allowed under HIPAA, the Commission’s regulations are particularly good news for employers.
The ADA Final Rule provides some necessary clarity as to how the EEOC views wellness programs and how the programs should be structured to be consistent with the ADA.
The GINA Final Rule also represents a significant step in eliminating past uncertainty as to whether offering an inducement to obtain health information from an employee’s spouse violates the requirements of the statute. The Final Rule clarifies that an employer will avoid GINA liability if it limits inducements to those permitted under the rule, which like the ADA Final Rule are in line with the HIPAA requirements. As the EEOC has said, “allowing inducements in return for a spouse providing information about his or her manifestations of disease and disorder, while limiting inducements to prevent economic coercion, is the best way to effectuate the purposes of the wellness provisions of GINA and HIPAA.”40
Thus, one of the major benefits that should flow from implementation of the EEOC’s Final Rules will be its assistance to practitioners in drafting effective wellness plans that include health risk assessments for both employees and spouses, yet still pass EEOC scrutiny. Accordingly, all practitioners who advise employers on health and benefit plan matters should carefully review the ADA and GINA Final Rules and take appropriate steps to ensure that wellness plans are drafted in a manner that conforms to the regulatory requirements.
In this regard, practitioners should consider the following guidance for their clients implementing wellness programs:
By following this guidance, practitioners can help ensure that the wellness plans they draft will not only lead to a healthier workforce, but also not become subject to a successful legal charge under the ADA or GINA.41
Jonathan R. Mook is a partner at DiMuroGinsberg, P.C. He represents employers and businesses on matters relating to employment law, business torts, and business disputes. He frequently counsels employers on issues involving compliance with the ADA and accommodating disabled employees, as well as other employment related matters. Mr. Mook is a nationally recognized practitioner in employment law and has written two treatises on the Americans with Disabilities Act, Americans with Disabilities Act: Employee Rights and Employer Obligations and Americans with Disabilities Act: Public Accommodations and Commercial Facilities, both published by LexisNexis.
RESEARCH PATH: Labor & Employment > Employee Benefits > Health and Welfare Plans > Articles > Fringe Benefit and Wellness Programs
For more information on designing and operating an employer wellness program, see
> IMPLEMENTING COMPLIANT WELLNESS PROGRAMS
RESEARCH PATH: Labor & Employment > Employee Benefits > Health and Welfare Plans > Practice Note >Other Welfare Benefit Issues
For additional discussion about how employers can collect and use certain genetic and medical information, see
> FULFILLING THE REQUIREMENTS OF TITLE II OFTHE GENETIC INFORMATION NON-DISCRIMINATIONACT (GINA)
For guidelines designed to assist you in implementing a compliant wellness plan, see
> DESIGNING AND IMPLEMENTING COMPLIANT WELLNESS PROGRAMS—CHECKLIST
RESEARCH PATH: Labor & Employment > Employee Benefits > Health and Welfare Plans > Forms > Fringe Benefit & Wellness Programs
To see a sample notce form containing model clauses, see
> > HIPAA NONDISCRIMINATION NOTICE FOR WELLNESS PROGRAMS
RESEARCH PATH: Labor & Employment > Employee Benefits > Health and Welfare Plans > Forms > HIPAA and HITECH
1. See Kristin Madison, Reconciling Policy Objectives, 51 Willamette L. Rev. 407, 412–13 (2015). An annual survey conducted by the Kaiser Family Foundation Health Research and Educational Trust indicated that 55% of large firms that offered wellness programs said that most of their wellness benefits were provided by a group health plan. See Karen Pollitz & Matthew Rae, Kaiser Family Foundation, Workplace Wellness Programs Characteristics and Requirements 5 (2016), http://kff.org/private-insurance/issue-brief/workplace-wellness-programs-characteristics-and-requirements/. 2. EEOC, Final Rule, “Regulations Under the Americans with Disabilities Act,” 81 Fed. Reg. 31126 (May 17, 2016); EEOC, Final Rule, “Genetic Information Nondiscrimination Act,” 81 Fed. Reg. 31143 (May 17, 2016). The ADA Final Rule and GINA Final Rule apply regardless of whether the wellness program is related to a group health plan. 81 Fed. Reg. at 31132; 81 Fed. Reg. at 31152. 3. The ADA Final Rule does not pertain to wellness programs that do not request or require medical information from employees, such as programs that merely provide employees with information about health matters and healthy lifestyles. The rule also does not pertain to similar types of wellness plans that may be offered by entities other than those subject to Title I of the ADA, such as social service agencies covered under Title II of the statute, 42 U.S.C. § 12131, et seq., or public accommodations subject to Title III, 42 U.S.C. § 12181, et seq., which may provide similar programs to individuals who are considered volunteers. 4. 29 C.F.R. § 1630.14(d). 5. See Titles I and IV of the Health Insurance Portability and Accounting Act of 1996, Pub. L. 104-191, adding Section 9802 of the Internal Revenue Code and Section 2702 the Employee Retirement Income Security Act, and Section 2705 of the Public Health Service Act (PHS Act). The nondiscrimination provisions originally enacted in HIPAA set forth eight health status related factors, which the HIPAA final regulations refer to as ‘‘health factors.’’ 71 FR 75014 (Dec. 13, 2006). Under HIPAA and the final regulations, as well as under PHS Act Section 2705 (as added by the Affordable Care Act), the eight health factors are: health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of Final Rule, “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans,” 78 Fed. Reg. 33158 (June 3, 2013). 7. 29 C.F.R § 1630.14. 8. 29 C.F.R. § 1630.14(d)(1). This standard is similar to the standard under the regulations jointly issued by the Departments of Labor, Treasury, and HHS in implementing the Affordable Care Act amendments to HIPAA. See 26 CFR 54.9802-1(f)(3)(iii); 29 CFR 2590.702(f)(3)(iii); 45 CFR 146.121(f)(3)(iii). 9. 29 C.F.R. § 1630.14(d)(1). 10. Id. 11. 29 C.F.R. § 1630.14(d)(1). The EEOC has published a sample notice form that employers may use to comply with their written notice obligations under the Final Rule. The sample notice is available at https://www1.eeoc.gov//laws/regulations/ada-wellness-notice.cfm. 12. Id. 13. 29 C.F.R. 1630 Appendix § 1630.14(d)(3). 14. Id. 15. Id. 16. 29 C.F.R. § 1630.14(d)(3)(iv). For the limitations under HIPAA, see 26 CFR 54.9802-1(f)(3)(ii) and (4)(i); 29 CFR 2590.702(f)(3)(ii) and (4)(ii); 45 CFR 146.121(f)(3)(ii) and (f)(4)(ii). A special rule under HIPAA permits an incentive of up to 50% for participation in tobacco cessation programs as part of a wellness plan. See 26 CFR 54.9802-1(f)(5); 29 CFR 2590.702(f)(5); 45 CFR 146.121(f)(5). 17. Id 18. 29 C.F.R. § 1630.14(d)(4) (formerly § 1630.14(d)(1) and (2)). 19. 29 C.F.R. § 1630.14(d)(4)(ii) The disclosure exceptions under the proposed rules for relaying information about necessary restrictions on work duties and necessary accommodations, appropriate disclosure to first aid and safety personnel, and agency compliance audits also apply to this enhanced provision. Id. 20. See 45 C.F.R. Parts 160 and 164 (HIPAA Privacy, Security, and Breach Notification Rules). 21. 29 C.F.R. 1630 Appendix § 1630.14(d)(4). 22. Id. 23. Id. 24. 29 C.F.R. 1630 Appendix § 1630.14(d)(3). 25. Id. then the ADA’s financial incentive rules will apply, and in that instance, the ADA’s 30% rule will trump the 50% HIPAA provision. Id. 27. 81 Fed. Reg. 31143 (May 17, 2016). 28. 29 C.F.R. § 1635.8(b)(2) (iii). According to the EEOC, prohibiting incentives to obtain the genetic or health information of children is important to preventing discrimination against the employee. The Commission believes that the possibility of discrimination is greater where the employer has access to information about the health status of the employee’s children as opposed to the person’s spouse, due to the fact that information about an employee’s genetic make-up or predisposition to disease may be gleaned from information about the current or past health status of the employee’s children. 81 Fed. Reg. at 31147. 29. A spouse’s health risk assessment may include a questionnaire or a medical examination, such as a blood pressure test or blood test, to detect high cholesterol or high glucose levels. 29 CFR 1635.8(b)(2)(iii). 30. 29 CFR 1635.8(b)(2)(i)(A). According to the EEOC, this means that the service has a reasonable chance of improving the health of, or preventing disease in, participating persons. Thus, collecting information on a health questionnaire without providing follow-up information or advice is not allowed unless the information collected is actually used to design a program that addresses at least a subset of the conditions identified. Additionally, a program is not reasonably designed to promote health or prevent disease if it imposes, as a condition for obtaining a reward, an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or places significant costs related to medical examinations on employees. Nor is a program reasonably designed when it exists just to shift costs from the employer to particular employees based on their health. Importantly, GINA’s existing prohibition on use of genetic information for employment-based decisions is maintained. Thus, it is unlawful for an employer to use health information provided by a spouse to make an employment decision related to the employee. 81 Fed. Reg. at 31152. 31. 29 CFR 1635.8(b)(2)(i)(A). 32. 29 CFR 1635.8(b)(2)(iv). 33. 29 C.F.R. 1635.8(b)(2)(v). 34. 29 C.F.R. 1635.8(b)(2)(iii). 35. Id. 36. Id. at 31154. 37. 81 Fed. Reg. at 31154. 38. Id. 39. 81 Fed. Reg. at 31129 (ADA); Id. at 31147 (GINA). When an ACA Exchange Plan is used as a reference for the limitation, the plan year is the calendar year. Id. 40. 81 Fed. Reg. at 31146. 41. For additional information on the EEOC’s ADA and GINA rules see J. Mook, “EEOC Issues Proposed Rule on Wellness Programs,” 15 Bender’s Lab. & Empl. Bull. 213 (July, 2015); J. Mook, “EEOC Proposes Amending GINA Regs for Wellness Plans.” 16 Bender’s Lab. & Empl. Bull. 1 (Jan., 2016); J. Mook, “EEOC Issues Final ADA and GINA Rules on Wellness Programs,” 16 Bender’s Lab. & Empl. Bull. 203 (July, 2016). This EIA is adapted from the article, “EEOC Issues Final ADA and GINA Rules,” 16 Bender’s Lab. & Empl. Bull. 203 (July, 2016).