The EEOC’s Final Rules on Employer Wellness Programs

The EEOC’s Final Rules on Employer Wellness Programs

The U.S. Equal Employment Opportunity Commission (“EEOC”) recently issued two final rules confirming that employers can offer limited incentives (in the form of a reward or avoidance of a penalty) to encourage employees and their spouses to participate in workplace wellness programs.  Under these new rules, employers who offer wellness programs will be allowed to provide such limited incentives to employees or their spouses to induce them to provide information about their current or past health status.  The new rules modify regulations that pertain to Genetic Information Nondiscrimination Act (“GINA”) while creating new regulations that pertain to the Americans with Disabilities Act (“ADA”).

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The EEOC explained that many employers offer workplace wellness programs that are aimed at encouraging healthier lifestyles or preventing disease.  Such programs frequently offer financial or other incentives for employees to participate or achieve certain health goals, and they often use medical questionnaires or screenings to identify an employee’s health risks (for example, body weight, cholesterol, blood-sugar and blood-pressure levels).  However, the ADA and GINA generally prohibit employers from obtaining and using information about the health conditions of employees or their family members.  Consequently, the EEOC said the new rules were needed to strike a balance between those competing aims.

The new ADA rule applies to all employer-sponsored wellness programs that include disability-related inquiries and medical exams.  Likewise, the new GINA rule applies to all health plans offering wellness programs that include spousal coverage.  According to the EEOC, these new rules will help to ensure that employees and their covered spouses are not coerced into undergoing involuntary medical exams or divulging genetic information or family medical history.  Both rules prohibit employers from requiring employees or their family members to consent to the sale or other disclosure of their health information as a condition of participation in a wellness program or to receive an incentive.

Despite such noble aims, the new rules already have met criticism from both sides of the spectrum, with both employer and employee advocates voicing displeasure.  Employer-side groups have complained that the new rules are complicated and confusing and, therefore, will thwart rather than foster employer implementation of wellness programs.  On the other hand, disability-rights advocates have objected that the new rules diminish ADA and GINA protections for employees.

Barring congressional action to modify or negate them, these new rules will take effect on the first day of the first employer health plan year that begins on or after Jan. 1, 2017.  Unless changed, the final ADA rule will permit wellness programs that ask about employees’ health or require medical exams to provide participation incentives as high as 30 percent of the total cost for self-only insurance coverage.  Similarly, if left to stand, the final GINA rules will allow incentives offered for an employee spouse’s participation to reach the same percentage of self-only coverage.

Meanwhile, regulations promulgated by other federal agencies appear to allow employers to offer greater incentives under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Affordable Care Act (“ACA”).  For instance, the 30-percent limit under the new EEOC rules would apply to incentive programs that help employees or their spouses to quit smoking, while HIPAA and ACA regulations allow such incentives to go as high as 50 percent.

To comply with the new ADA rule, employers must give participating employees a notice telling them what information will be collected, letting the employees know with whom the information will be shared and for what purpose, and informing those employees of the limitations on disclosure and the manner in which information will be kept confidential.  According to the EEOC, if an employer’s existing written notice (e.g., a brochure or e-mail) describing the wellness program does not include this information, the employer may have to create a new notice to comply with the new ADA rule.  The new rules also state that information from wellness programs may be disclosed to employers only in aggregate terms.

Additionally, under these new rules, a wellness program “must be reasonably designed to promote health or prevent disease,” the EEOC said.  In other words, the EEOC has indicated that “the service must have a reasonable chance of improving the health of, or preventing disease in, participating individuals.”  At the same time, to comply with the new rules, the EEOC has indicated that “an employer-sponsored wellness program must not be overly burdensome to employees … or highly suspect in the method chosen to promote health or prevent disease.”  Critics have maligned this “reasonably designed” requirement on the ground that the EEOC lacks the authority to evaluate such a plan’s design.

Regardless, by the EEOC’s measurement, “A wellness program is not reasonably designed to promote health or prevent disease if it exists merely to shift costs from an employer to employees based on their health; is used by the employer only to predict its future health costs; or imposes unreasonably intrusive procedures, an overly burdensome amount of time for participation, or significant costs related to medical exams on employees.”  Similarly, the EEOC will not consider a wellness program to be “reasonably designed … if it consists of a measurement, test, screening, or collection of health-related information and that information is not used either to provide results, follow-up information, or advice to individual participants or to design a program that addresses at least some conditions identified.”

Employers who offer such wellness programs to their employees or their employees’ spouses should review their policies and consult with legal counsel to ensure that they are in compliance with these new rules.

Contributor: Brendan J. Begley, Attorney at Law | Weintraub Tobin

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