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EEOC Issues Proposed Wellness Incentives Rule

Programs must be voluntary and nondiscriminatory

View the Fact Sheet for Small Business

By Dana Wilkie  4/16/2015

The proposal, which the EEOC announced April 16, 2015, would amend regulations implementing the equal employment provisions of the Americans with Disabilities Act (ADA) to address the interaction between Title I of the ADA and financial incentives as part of wellness programs offered through employer group health plans. The U.S. Equal Employment Opportunity Commission (EEOC) has issued a proposed rule to help clear up confusion over using financial incentives in worksite wellness programs.

The proposal was published April 20, 2015, in the Federal Register with a 60-day public notice and comment period, through June 19, 2015.

The proposal provides what an EEOC press release described as “much needed guidance” to employers and employees about “how wellness programs offered as part of an employer’s group health plan can comply with the ADA consistent with provisions governing wellness programs in the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA).”

Many companies that provide health insurance offer wellness programs that encourage healthier lifestyles. To participate in these wellness programs, employees may be required to undergo health risk assessments that measure body weight and cholesterol, blood glucose, and blood pressure levels. Some programs offer employees financial and other incentives to encourage them to participate.

The ADA limits the circumstances in which employers may ask employees about their health or require them to undergo medical examinations. It allows such inquiries and exams if they are voluntary and part of an employee health program. Workers, however, can’t be required to participate in such programs, and they can’t be denied health coverage or disciplined if they refuse to participate.

The EEOC and the Republican-led Congress have been at loggerheads over the acceptability of “aggressive” financial incentives in wellness programs. On March 24, the House Education and the Workforce Committee held a hearing on a proposed bill that would limit EEOC enforcement activity toward these initiatives—H.R. 1189, the Preserving Employee Wellness Programs Act.

In recent months, the EEOC has filed three lawsuits alleging that employees lost out on financial incentives because they declined to participate in their employers’ wellness programs, and that this violated the ADA because the incentives rendered the programs involuntary. The proposed legislation is intended to protect wellness programs that offer incentives that fall within the maximums established by the ACA: up to 30 percent of the cost of annual health coverage; and for tobacco cessation programs, up to 50 percent of the cost of health coverage.

In addition, the ACA and its implementing regulations require that wellness programs provide a reasonable alternative or waiver for achieving the incentive if an individual can’t participate or achieve program goals due to a health condition or disability.

The EEOC’s proposed rule makes clear that wellness programs are permitted under the ADA, but that they may not be used to discriminate based on disability.

“Employers … may not subject employees to interference with their ADA rights, threats, intimidation, or coercion for refusing to participate in a wellness program or for failing to achieve certain health outcomes,” the press release states. “Individuals with disabilities must be provided with reasonable accommodations that allow them to participate in wellness programs and to earn whatever incentive an employer offers.”

The EEOC is also publishing a Fact Sheet for Small Businesses and a Question and Answer document for the public.

Proposed Rule Could Trim Tobacco-Cessation Incentives

Among the key differences between the Equal Employment Opportunity Commission (EEOC) proposed rule on workplace wellness programs, published in the Federal Register on April 20, and previous federal agency guidance on the Affordable Care Act is that the EEOC proposal limits the size of financial incentives related to tobacco-cessation programs, according to an analysis by Epstein Becker Green P.C.ACA regulations issued in 2013 had increased the maximum total health-contingent wellness program incentive from 20 percent to 30 percent of the total cost of coverage under the group health plan and to 50 percent if used for tobacco cessation, echoing the statutory language of the ACA. But the EEOC’s proposed rule excludes the additional 20 percent incentive available for wellness programs related to tobacco cessation.

“By excluding the additional 20 percent incentive allowed under the ACA, employees lose the opportunity to lower their premiums by that additional amount. Even more troubling is that, depending on the employee, a refusal to permit the full tobacco cessation incentive might tip an employee over the ACA’s 9.5 percent threshold for ‘affordability,’ possibly resulting in assessable payments under the shared employer responsibility provisions,” according to the analysis.

Taking a somewhat different view, an alert from attorneys at Seyfarth Shaw LLP notes, “This proposed rule would further undercut the HIPAA rules which would permit a 50 percent incentive for smoking cessation programs even if a disability-related question or medical exam is required. (Presumably, the 50 percent incentive would still be permissible if no disability-related inquiry or medical exam is required, although the EEOC requests comments on this point.)”

According to attorneys at Epstein Becker Green P.C., “It is also of great significance that the EEOC takes the position that the measure of affordability and the impact of a 30 percent reward or penalty are based on self-only coverage. “It makes no sense that, where there is family or tiered coverage and the potential reward is available to all those covered, the 30 percent reward limitation should be based on self-only coverage.”

The attorneys also noted, “The proposed rule does not address whether the EEOC’s interpretation of the term “voluntary” and its interplay with wellness program incentives under the ADA cross over to similar provisions under GINA [the Genetic Information Nondiscrimination Act]. The EEOC says further rulemaking on GINA and wellness programs will be forthcoming.”

What Must Be Disclosed in the Wellness Program Notice?

As highlighted by attorneys at Seyfarth Shaw LLP, under the proposed EEOC rule the wellness program sponsor must provide a notice to participants that clearly explains:• What medical information will be obtained.

  • How the medical information will be used.
  • Restrictions on its disclosures.
  • How the program will prevent improper disclosure of the information (including whether the program complies with HIPAA Privacy requirements).


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