May 01, 2015

EEOC Proposes Rules for Employer Wellness Programs

In response to the increasing cost of providing group health coverage, employers have begun encouraging their employees to participate in wellness programs with the goal of improving overall employee health and reducing health insurance costs. Many employers offer incentives for participation in these wellness programs, including reduced health care premiums, cash bonuses or other rewards. Although recent regulations implementing the Affordable Care Act (ACA) were designed to promote further development of and participation in employer wellness programs and expressly permit such incentives, employers still face the risk that incentive-based wellness programs violate the Americans with Disabilities Act (ADA), which generally prohibits employers from making disability-related inquiries and requiring medical examinations unless such disclosures are “voluntary.” 

Recent lawsuits by the Equal Employment Opportunity Commission (EEOC) challenging employer wellness programs have highlighted this concern. In three lawsuits filed late last year, the EEOC alleged the employer wellness programs at issue were too “coercive” to be voluntary under the ADA, despite the lack of any guidance from the EEOC regarding what programs would satisfy the ADA’s requirements. See EEOC v. Honeywell, No. 0:14-04517 (D. Minn. 2014); EEOC v. Flambeau, Inc., No. 3:14-00638 (W.D. Wis. 2014); EEOC v. Orion Energy Sys., Inc., No. 1:14-01019 (E.D. Wis. 2014).

In the Honeywell case, the challenged program clearly complied with regulations implemented by the Department of Labor under the ACA, but the EEOC alleged that the program did not comply with the ADA. The district court denied the EEOC’s request for a preliminary injunction in that case because, among other things, “great uncertainty persists in regard to how the ACA, ADA and other federal statutes such as GINA are intended to interact” and, as such, there was not a likelihood of success that the EEOC could prevail with its claims.

In an attempt to address this uncertainty, the EEOC published proposed regulations on April 20, 2015, setting forth the circumstances under which disability-related inquiries and medical examinations in connection with an employer’s wellness program are sufficiently “voluntary” for purposes of the ADA. The EEOC’s stated purpose in drafting the proposed regulations is to “interpret the ADA in a manner that reflects both the ADA’s goal of limiting employer access to medical information and HIPAA’s and the [ACA’s] provisions promoting wellness programs.” 

Under the proposed rules, employer health programs that include disability-related inquiries and medical examinations would be permissible under the ADA if:

  • Participation in the wellness program is voluntary;
  • The employee health program is “reasonably designed” to promote health or prevent disease;
  • Any incentive to participate in the program, whether in the form of a reward or a penalty, does not exceed 30 percent of the total cost of employee-only coverage;
  • The employer provides notice to employees explaining (1) what medical information will be obtained, (2) how the medical information will be used, (3) who will receive the medical information, (4) restrictions on disclosure of the medical information, and (5) the methods the employer uses to prevent improper disclosure;
  • Medical information collected through an employee health program is only provided to the employer in the aggregate; and
  • Reasonable accommodations are provided to employees with disabilities to assist in their participation in the wellness program and earn whatever incentives the employer offers.

The EEOC’s proposed regulations depart from the regulations implementing the ACA in a few notable ways. First, existing ACA regulations set a 30 percent cap on incentives an employer can offer in connection with “health-contingent” wellness programs, or programs that require individuals to meet a health-related goal or standard to qualify for the incentive. The EEOC’s proposed rule would extend the 30 percent limitation beyond health-contingent programs to any wellness program that includes an incentive for participation. Second, the ACA provides for a 50 percent cap on incentives offered in connection with smoking cessation programs. The EEOC’s proposed rules, on the other hand, do not permit any additional incentive for smoking cessation programs. However, the EEOC did clarify that a smoking cessation program that merely asks an employee whether or not he or she uses tobacco, or whether he or she ceased using tobacco after completion of a program, is not a health program that includes disability-related inquiries or medical examinations, and therefore would not be subject to the 30 percent cap proposed by the EEOC.  

For the most part, however, the EEOC’s proposed rules bring the agency’s approach to employer wellness programs in line with the approach outlined in the regulations implementing the ACA. The proposed regulations are open for public comment until June 19, 2015. Although a final rule will not be adopted for several months, employers should consider taking steps now to ensure that employee participation in any wellness program is strictly voluntary and to prepare the required notices described in the proposed rules. 

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