EEOC Regs on Wellness Incentives: Progress, but Many Issues

On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released proposed regulations to guide employers on designing their wellness programs and associated incentives in compliance with the Americans with Disabilities Act (“ADA”).

On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released proposed regulations to guide employers on designing their wellness programs and associated incentives in compliance with the Americans with Disabilities Act (“ADA”). The comment period for the proposed regulations closes June 19, 2015. While the regulations move closer to the standards of the Affordable Care Act (“ACA”) and the Health Insurance Portability and Accountability Act (“HIPAA”), there are significant issues that remain.

Under the proposed regulations:

• A wellness program, including any disability-related inquiries or medical examinations that are part of such a program, must be reasonably designed to promote health or prevent disease. This requirement is met if the program has a reasonable chance of improving the health of, or preventing disease in, participating employees, and it is not overly burdensome, is not subterfuge for violating the ADA or other laws prohibiting employment discrimination, and is not highly suspect in the method chosen to promote health or prevent disease.
• If the program includes disability-related inquiries or medical examinations, the program will be considered voluntary if it does not require employees to participate; does not deny coverage under any group health plan or benefits package based on non-participation, or limit benefits for employees who did not participate; and does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees.
• The reward or penalty imposed under the program must not exceed 30 percent of the cost of employee-only coverage.  This amount can rise to 50 percent (like the ACA/HIPAA) but only if the smoking program does not require tests for nicotine usage through a biometric screening or other medical exam to validate smoking status.
• The medical information collected may only be shared with the employer in aggregate form that is not reasonably likely to identify specific employees, except as needed to administer the health plan.
• If the program is part of a group health plan, the employees must be provided with a notice written in a manner reasonably likely to be understood by the employee, describing the types of medical information being obtained and the specific purposes for which it will be used as well as the restrictions on the disclosure of the information, the parties with whom the information will be shared, and the methods that will be used to safeguard the information under HIPAA’s Privacy Standards.

While the regulations would close the gap with the ACA and HIPAA, many significant issues remain including:

• The proposed regulations would apply to all programs – both participation-only programs and outcome-based programs while the ACA/HIPAA rules apply to only outcome-based programs.
• The proposed regulations would allow the 50 percent limitation to apply to smoking programs like the ACA and HIPAA but only if program does not test for nicotine usage through a biometric screening or other medical exam but rather validates only by asking employees whether they use tobacco. If a test is used, the 30 percent incentive limitation would apply.
• Under the proposed regulations, the calculation of the total cost of coverage is based only on the cost of coverage for the employee. Under ACA and HIPAA, it is based on the total cost of coverage of the employee and any of the employee’s dependents.
• The proposed regulations do not address the legality of tying incentives to family members’ participation in a wellness program under the Genetic Information Nondiscrimination Act (“GINA”).
• The EEOC continues to disagree with the Eleventh Circuit’s view in Seff and does not believe the insurance safe harbor can exempt wellness programs from the ADA.

These issues and a few others remain problematic and inconsistent with the ACA and HIPAA. A step in the right direction but if these inconsistencies are not cleared up, it will be two steps forward and one step back.

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