Today, the Equal Employment Opportunity Commission (“EEOC”) released its final rules to amend regulations implementing Title I of the Americans with Disabilities Act (“ADA”) and Title II of the Genetic Information Non-Discrimination Act (“GINA”) as they relate to workplace wellness programs. The EEOC had originally issued two Notices of Proposed Rulemaking in 2015 to revise current regulations as a result of the confusion surrounding how both the ADA and GINA impact wellness programs under the Affordable Care Act (“ACA”) and its regulations. The final rules released today largely mirror the proposed regulations, with some important changes. They will apply only prospectively starting the first day of the first plan year that begins on or after January 1, 2017 for the applicable health plan.
Below are the major provisions from each rule, as well as a discussion of the current legal landscape for employer wellness programs based on recent lawsuits brought by the EEOC. Although the guidance from the EEOC is long overdue, the requirements these final rules impose do not completely align with the ACA, its regulations, or the intent to promote the use of wellness programs under the ACA.
Highlights of the Final Rule Revising ADA Regulations
As we discussed in a prior post, a major focus of the EEOC’s final rule is to address when a wellness program will be viewed as voluntary under the ADA. As employers may already be aware, the ADA generally prohibits disability-related inquiries or requests for medical examinations, but there is an exception that allows voluntary medical examinations and inquiries as part of an employee health program. Pursuant to this exception, the EEOC lays out three criteria a wellness program must meet to be considered voluntary under the ADA; namely, the covered entity (1) does not require employees to participate; (2) does not deny coverage under any group health plan for non-participation or limit the extent of benefits for employees who do not participate; and (3) does not take adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who do not participate.
These requirements apply to all wellness programs, whether participatory or health-contingent, that include disability-related inquiries or medical examinations. This is clearly at odds with the ACA’s regulations for wellness programs, which provide that the limitations outlined in those regulations, particularly the 30% cap on incentives, only apply to health-contingent wellness programs. Indeed, the EEOC explicitly explained its intent to apply the 30% cap to participatory wellness programs as well.
In further explaining the criteria for a voluntary program in its final rule, the EEOC specifically lays out how incentives can be used to encourage participation in a wellness program. The EEOC does allow for incentives to take the form of a reward or penalty, either financial or “in-kind,” but states that any incentive cannot be more than 30% of the total cost of self-only coverage. The final rule does not make an exception to the “self-only coverage” limitation for employees enrolled in family coverage with their dependents. Indeed, the final rule details exactly how to calculate an incentive based on self-only coverage, including using the lowest cost self-only coverage for employees that do not have to enroll in a group health plan to participate. Moreover, The EEOC further explains that the total financial value of any and all incentives associated with a wellness program provided under a group health plan cannot be more than 30% of the cost of the employer’s and employee’s contributions toward coverage.
Aside from the framework provided to establish what constitutes a voluntary wellness program under the ADA, the EEOC establishes requirements dictating what type of wellness program is permissible under the ADA and ACA, as well as what notice must be provided to employees if the program requires disclosure of medial information. Specifically, the EEOC explains that wellness programs must have a reasonable chance of improving health or preventing disease, not be overly burdensome, not allow for employment discrimination, and not employ a suspect method to meet its health promotion obligations. Additionally, it requires that an employer provide notice to its employees from whom it intends to obtain medical information pursuant to a wellness program, a language “reasonably likely” to be understood by the employee. This notice must explain what medical information will be obtained, who will receive it, how it will be used, restrictions on its disclosure, and how the employer expects to prevent improper disclosure. In the final rule, the EEOC recognizes that the notification requirement may be duplicative of that required by HIPAA, but states that if notification is already being provided, it must include the criteria for proper notice as laid out in this rule.
Finally, the EEOC requires employers to take several steps to ensure the confidentiality of medical information provided by employees. As explained in the proposed rule, the EEOC mandates that this information be collected and maintained on separate forms and in separate files that must be treated as confidential. Additionally, information collected may only be provided to a covered entity in the aggregate form that does not disclose the identity of the employee(s). The EEOC also adds a new requirement regarding confidentiality that prohibits entities covered by this regulation from requiring an employee to agree to the sale, transfer, exchange or other form of disclosure, or waive confidentiality protections as a condition of participation in the wellness program or to receive an incentive.
The EEOC has determined that these regulations apply to all wellness programs, including those offered to employees unrelated to a group health plan or group health insurance.
Highlights of the Final Rule Revising GINA Regulations
Similarly, pursuant to the final regulations addressing GINA’s impact on employer wellness programs, the EEOC attempts to tackle the issue of when and how incentives could be used to promote participation in a program without violating the provisions of GINA. Historically, GINA regulations have been interpreted to restrict wellness programs from requiring employees to provide genetic information in order to receive an incentive. Although the final rule does not alter this interpretation as it relates to the employee, it makes clear that this interpretation does not apply to the employee’s spouse. Indeed, the EEOC clarifies that an employer can offer a limited incentive for an employee’s spouse if the spouse (1) is covered by the employee’s health plan; (2) receives health or genetic services offered by the employer, including as part of a wellness program; and (3) provides information about his or her current health status. Such information is often provided through a health risk assessment.
In describing the permitted incentives in the final rule, the EEOC makes a significant and important change from what it laid out in its proposed rule. In the proposed rule, the EEOC explained that the 30% cap for incentives to the spouse for providing certain information would be based on the total cost of coverage. However, under the final rule for GINA, the cap is now set at 30% of self-only coverage to correspond with the inducement limit under the ADA. Additionally, the portion of the incentive attributable to the employee, alone, remains at the previously identified cap of 30% of the cost of self-only coverage. Therefore, the combined total inducement will be no more than twice the cost of 30% of self-only coverage (the incentive given to each participant).
Moreover, the final rule allows for a reward or penalty and the incentive can be financial or “in-kind” (i.e., time-off awards, prizes, or other items of value not to exceed 30% of the cost of coverage). To participate, the spouse would have to provide knowing, written, and voluntary authorization for the employer to collect genetic information, just like an employee. Notably, the rule is limited to incentives for an employee’s spouse providing current or past health status information or taking a medical examination. It does not apply to inducements for a spouse’s participating in other activities that do not require obtaining information about health status or a medical exam. Furthermore, it does not include any inducements for current or past health status of an employee’s child as the EEOC believes that this information could provide insight into the genetic make-up or predisposition of an employee.
Along with outlining the types of permissible incentives under GINA, the EEOC states that any information collected in relation to this rule must be obtained pursuant to a wellness program that is designed to promote health or prevent disease. Thus, under GINA, any wellness program must meet the same standards as delineated under the regulations for Title I of the ADA; for instance, not being overly burdensome to employees or a subterfuge for violating Title II of GINA. Furthermore, these regulations apply to all wellness programs, regardless of whether it is offered through a group health plan. Thus, as the EEOC provides in its rule for the ADA, the EEOC details how incentives should be calculated where the wellness program is offered through a group health plan, separate from a group health plan, or where the employer offers no group health plan. For example, the EEOC explains that lowest cost self-only coverage should be used where the employer has more than one group health plan, but enrollment is not a condition of participation in the wellness program.
The regulations also require an employer to treat information obtained pursuant to this rule in a confidential manner, similar to that laid out in the ADA regulations, including preventing an employer from requiring the employee to agree to the sale, exchange, transfer, or other distribution of information. Moreover, the final rule includes prohibitions against denying access to health insurance or benefits packages to, or retaliating against, any employee whose spouse refuses to provide information to an employer wellness program.
Current Legal Landscape in Light of Recent Lawsuits
The lack of clear regulations from the EEOC prior to today, however, did not stop this administrative body from filing a series of lawsuits against employers based on allegations that their wellness programs violate the ADA. However, the EEOC has been largely unsuccessful thus far. In 2011, the 11th Circuit upheld a district court decision in favor of Broward County, finding the court properly determined that the County’s wellness program fell within the ADA’s safe harbor and did not need to meet the requirements of the ADA as they relate to medical examinations and inquiries.
Moreover, of the three main lawsuits filed against employers in 2014, two have already been decided against the EEOC. In one case brought against Honeywell International, Inc. in Minnesota federal court, the court denied the EEOC’s request for an injunction to discontinue operation of Honeywell’s wellness program because it had not shown irreparable harm and the whole matter was later voluntarily dismissed. A second case brought against Flambeau, Inc. in Wisconsin federal court, asserted violations of the ADA because Flambeau’s wellness program required completion of a health screening and medical history questionnaire to qualify for coverage. The EEOC asserted that potential disqualification from coverage made participation in the program involuntary. The court, however, determined that the wellness program fell within the safe harbor provision of the ADA as part of an employer benefit plan and found in favor of Flambeau, Inc.
Despite these setbacks, however, the EEOC has continued to push its interpretation of the application of the safe harbor provision. Indeed, in the final rule pertaining to the ADA, the EEOC provided a more thorough explanation of its interpretation of the ADA’s safe harbor provision. First, the EEOC establishes that it has authority to interpret the safe harbor provision because of its application to Title I through IV of the ADA. Second the EEOC explains its continuing position that the safe harbor provision “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.” The EEOC concludes by stating that it disagrees with the decisions in Seff v. Broward County and EEOC v. Flambeau, and believes those cases were “wrongly decided.”
To ensure compliance with the Final Rule, employers should evaluate their wellness programs based on the criteria and limitations set forth by the EEOC. The ability to offer certain types of incentives to participate in wellness programs could benefit employers as they are continuing to look for ways to cut health care costs, as long as those incentives are compliant and the program is implemented in a manner that meets the ADA’s and GINA’s requirements. Additionally, employers should be careful in depending on the recent decisions against the EEOC based on the ADA’s safe harbor provision as the wellness programs in these cases were closely reviewed and determined to meet certain qualifications for the safe harbor provision, which may not always be the case. Employers can be sure the EEOC will continue to pursue claims against employers whose wellness programs buck its newly promulgated regulatory limits, especially in light of the EEOC’s own interpretation of the safe harbor provision.