On April 16, the Equal Employment Opportunity Commission (the EEOC) released new proposed rules that describe the requirements a wellness program must meet to comply with the Americans with Disabilities Act (the ADA). Prior to these new rules, the EEOC pursued aggressive enforcement actions against certain companies with wellness plans that were otherwise compliant with the wellness program rules in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA). Most notably, last year the EEOC sued Honeywell International, arguing its wellness program was not “voluntary” within the meaning of the ADA because of the financial incentives involved in the program, which complied with HIPAA and the ACA. As a result of this suit and the EEOC’s aggressive enforcement position, many companies have been hesitant to implement financial incentives with their wellness programs.
The EEOC’s new rules provide welcome news for employers who have been concerned about this aggressive EEOC enforcement. The new rules generally reflect the requirements imposed by HIPAA with respect to wellness programs. However, the proposed rules provide additional guidance with regard to the determination of whether participation in a wellness program is “voluntary” and impose a new notice requirement for wellness programs. The EEOC is soliciting comments in connection with the new rules, which must be received before June 19, 2015.
General ADA Issue
Under the ADA, employers generally may not make disability-related inquiries or require medical examinations of employees. However, employers may make such inquiries and conduct medical examinations in connection with a wellness program that is:
- Reasonably designed to promote health or prevent disease
The “reasonably designed” requirement is met if the program has a reasonable chance of improving health or preventing disease, is not overly burdensome, is not a subterfuge to violate employment discrimination laws, and does not utilize a highly suspect method.
The proposed rules clarify that, although a wellness program may comply with HIPAA’s and the ACA’s requirements, such wellness program may still violate the ADA if it is not “voluntary” as defined in the new rules.
Previously, the EEOC had not provided guidance on whether a wellness program would be voluntary under the ADA if an employer provided incentives or penalties for participation. However, under the new rules, the EEOC takes the position that a wellness program will not be voluntary if an employer:
Requires employees to participate;
Denies coverage or limits benefits under any group health plan or benefits package for employees who do not participate; or
Takes adverse action against employees who do not participate.
Additionally, in order to consider a wellness program voluntary, employers generally must provide a notice to employees regarding the wellness program. Such notice must explain:
- What kinds of medical information will be collected from employees
- How the information will be used
- Restrictions on disclosure of the information
- Methods the employer will use to safeguard the information
Limitations on Incentives
Under the EEOC’s new rules, employers may not offer incentives in excess of 30% of the total cost of employee-only coverage under the employer’s group health plan. The incentive limitations under the new rules are generally consistent with existing law for health-contingent wellness programs. However, participatory wellness programs that were not previously required to comply with incentive limitations will be subject to the applicable 30% incentive limitation under the new proposed rules.
Importantly, the EEOC takes the position that a smoking-cessation wellness program that only asks employees whether they use tobacco (or whether they cease using tobacco after the completion of the program) does not involve disability-related inquiries or medical examinations. For this reason, smoking cessation programs that permit an incentive of up to 50% (which are permissible under HIPAA and the ACA) will not be impacted by the EEOC’s new rules.
The new rules impose additional confidentiality obligations on employers and service providers who administer wellness plans. Under the new rules, covered entities generally may only receive information collected through an employee wellness program in aggregate form that does not disclose the identity of specific individuals, except as needed to administer the plan or provide necessary accommodations. The new rules state that individually identifiable health information collected in connection with a wellness program is ”protected health information” under HIPAA, and that employers generally will be able to comply with the EEOC’s confidentiality obligations by complying with the HIPAA privacy rules.
Although only in their proposed form, the EEOC has stated that “[i]t is unlikely that a court or the EEOC would find that an employer violated the ADA if the employer complied with the [new proposed rules] until a final rule is issued.” Employers who have been concerned about recent EEOC actions against employers with wellness programs will be able to take some comfort in this additional guidance. The EEOC’s new proposed rules provide guidance generally consistent with prior law (previous to the EEOC’s aggressive enforcement position). However, employers should review their wellness programs to ensure they are consistent with the new rule’s standard for “voluntary” participation and provide incentives that satisfy the limits under HIPAA and the new ADA rules. Additionally, employers should prepare notices for their employees that satisfy the EEOC’s requirements and confirm the applicable confidentiality requirements are being followed.
For assistance with determining the impact of the EEOC’s new rules on your wellness program, please contact your Kutak Rock LLP attorney or a member of the Kutak Rock Employee Benefits Practice Group.