EEOC Issues Final Rules on Wellness Programs

Overview.

On May 17, 2016, the Equal Employment Opportunity Commission (EEOC) published two final rules on wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The final rule amending the regulations and guidance implementing the ADA as they relate to wellness programs, addresses the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations. It generally finalizes, with some notable changes, the provisions of the proposed rule issued in April 2015, including limiting the use of incentives with respect to an employee to no more than 30 percent of the total cost of self-only coverage.

The final rule amending the regulations implementing GINA as they relate to wellness programs, addresses the extent to which employers may offer employees inducements where the employee’s spouse completes a health risk assessment and/or takes a biometric screening (together, an “HRA”). It generally finalizes, with some notable changes, the provisions of the proposed rule, issued in October 2015. In particular, it revises the proposed incentive limitation: the maximum incentive for a spouse will be 30 percent of the total cost of self-only coverage.

Significantly, both final rules apply to employee health programs broadly, regardless of whether they are included as part of a group health plan or a stand-alone wellness program. In addition, the incentive limit applies regardless of whether the wellness program is (1) offered only to employees enrolled in an employer-sponsored group health plan, (2) offered to all employees whether or not they are enrolled in such a plan, or (3) offered as a benefit of employment where an employer does not sponsor a group health plan or group health insurance coverage.

Effective Dates.

While the final regulations are technically effective 60 days after publication in the Federal Register (July 16, 2016), they are generally effective immediately, as the EEOC has characterized the guidance as a clarification of existing law. New expanded notice requirements (under the ADA rules) and the rules regarding the use of financial inducements (under both rules) do not apply until plan years beginning on or after January 1, 2017.

Key Provisions of the ADA Final Rule.

• The rule is limited to programs involving a disability-related inquiry or medical examination. The final rule makes clear that all of the provisions of the final ADA rule apply to all employee health programs that ask employees to respond to disability-related inquiries and/or undergo medical examinations. Significantly, wellness programs that do not include disability-related inquiries or medical examinations are not subject to this final rule.
• The EEOC interprets the ADA’s statutory “bona fide benefit plan” safe harbor. The statutory text of the ADA contains a safe harbor for “bona fide benefit plans.” In the final rule, the EEOC reaffirms its position that the safe harbor does not apply to an employer’s decision to offer rewards or impose penalties in connection with wellness programs that include disability-related inquiries or medical examinations.
• Wellness programs must be reasonably designed. Generally to be reasonably designed, the programs 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 to prevent disease.
• The programs must be “voluntary.” To be a voluntary program, an employer:
• may not require employees to participate in the program;
• may not deny coverage under any group health plan (or particular benefits packages within a group health plan) to employees for non-participation or limit the extent of benefits (except for permitted incentives);
• may not take any adverse action, retaliate against, or coerce employees who choose not to participate; and
• must satisfy a specific notice requirement.
• A program cannot deny access to a group health plan (or particular benefits within a group health plan) for failure to participate in the wellness program. This is part of the “voluntary” requirement described above.
• The final rule imposes new incentive limitations that generally do not align with HIPAA’s rules. The final rule limits the use of incentives with respect to the employee to no more than 30 percent of the total cost of self-only coverage. However, the final rule does not govern the financial incentives used with respect to the spouse.
• Final incentive limits apply broadly. The incentive limits apply regardless of whether the wellness program is included as part of a group health plan.
• Where participation in a wellness program depends on enrollment in a particular group health plan, the employer may offer an incentive of up to 30 percent of the total cost of self-only coverage under that plan.
• Where an employer offers a single group health plan but participation in the wellness program does not depend on the employee’s enrollment in that plan, an employer may offer an incentive of up to 30 percent of the total cost of self-only coverage under that plan.
• Where an employer has more than one group health plan but participation in the wellness program does not depend on the employee’s enrollment in any plan, the employer may offer an incentive of up to 30 percent of the total cost of the lowest cost self-only coverage under a major medical group health plan offered by the employer.
• Where an employer does not offer a group health plan or group health insurance coverage, the rule uses the cost of the second-lowest cost Silver Plan for a 40-year-old non-smoker available through the Marketplace/Exchange in the location that the employer identifies as its principal place of business as a benchmark for setting the incentive limit.
• The final rule only permits financial incentives beyond 30 percent of self-only coverage for qualified tobacco cessation programs in the absence of a biometric screen or test. The final rule provides that a smoking cessation program that merely asks employees whether or not they use tobacco is not an employee health program that includes disability-related inquiries or medical examinations. Thus, the 30 percent incentive limit does not apply.
• There will be an enhanced notice requirement imposed on wellness programs. The EEOC will be providing a sample notice on its website within 30 days of the final rule’s publication.
• Additional confidentiality requirements will be imposed by the final rule. Significantly, a wellness program that is part of a group health plan likely may satisfy its obligation to comply with the final rule’s confidentiality requirements by adhering to the HIPAA privacy rule.

Key Provisions of the GINA Final Rule.

• The GINA final rule applies to all wellness programs that request genetic information, whether or not offered as part of a group health plan.
• It imposes a reasonable design requirement. Employers may request, require, or purchase genetic information as part of health or genetic services, only when those services are “reasonably designed” to promote health or prevent disease.
• Maximum incentive limitations are imposed that mirror ADA limits for employee incentives. The GINA final rule limits the maximum total inducement for a spouse to provide information about his or her manifestation of a disease or disorder to 30 percent of the total cost of self-only coverage, so that the combined total inducement for an employee and his or her spouse will be no more than twice the cost of 30 percent of self-only coverage (a change from the proposed rule). Like the ADA final rule, for wellness programs unrelated to a group health plan, the GINA final rule looks to an external benchmark plan to calculate the incentive limits.
• As with the ADA final rule, employers cannot deny access to group health plan coverage (or particular benefits package within a group health plan) solely for failure to complete an HRA.
• Employers cannot provide any financial incentives for use with child HRAs.
• The GINA final rule confirms that information regarding tobacco use is not genetic information. An employer-sponsored wellness program does not request genetic information when it asks the spouse of an employee whether he or she uses tobacco or when it requires a spouse to take a blood test to determine nicotine levels.
• Generally, there is no change to existing rules regarding notice and authorization. The GINA final rule reaffirms that, when an employer offers an employee an inducement in return for his or her spouse’s providing information about the spouse’s manifestation of disease or disorder as part of an HRA, the HRA must otherwise comply with the written authorization requirements already applicable to the employee in the same manner as if completed by the employee, including the requirement that the spouse provide prior knowing, voluntary, and written authorization.
• The GINA final rule prohibits conditioning receipt of inducement on a waiver of confidentiality protections.