EEOC Issues Final Rules on Employee Wellness Programs

05/19/2016
Client Alert
This client alert was re-published in Westlaw Journal - Employment on June 21, 2016.

Can an employer offer financial incentives to its employees for participating in employee wellness programs that seek health-related information?  According to new rules issued by the Equal Employment Opportunity Commission (EEOC), the answer is yes, within certain limits.

Employee wellness programs are an increasingly popular way for employers to encourage healthy activity and manage health care costs.[1] These programs may include health risk assessments, smoking cessation or weight loss programs, or activity challenges, among others.  While laws like the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) limit an employer’s ability to request certain health-related information, they provide exceptions that permit the collection of such information in connection with a voluntary wellness program.  For participation in the program to be truly voluntary, employees must not be required to participate in the program or penalized for non-participation.  This raises the question of whether participation may cease to qualify as voluntary, if the employer offers financial or similar incentives to encourage employees to participate in the program.

On May 16, 2016, the EEOC issued new regulations under the ADA (the ADA Rule),[2] and amended regulations under GINA (the GINA Rule, and together with the ADA Rule, the “Rules”),[3] to answer this question.

Limits on Incentives

The ADA Rule allows employers to offer incentives to employees for participating in a voluntary wellness program that seeks ADA-covered health information, as long as the incentives do not exceed 30% of the total cost of self-only coverage under the relevant group health plan or insurance policy.

The GINA Rule allows employers to offer incentives to employees and their spouses for participating in wellness programs that involve completion of health risk assessments that include questions about family medical history or other genetic information, as long as it’s made clear that the incentive is available regardless of whether the employee or spouse answers those questions, and provided that the incentives to each do not exceed 30% of the total cost of self-only coverage under the relevant group health plan or insurance policy.

Limits on Information Obtained by Employer

Both Rules state that the health-related information obtained through wellness programs may only be provided to the employer in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of any individual.  This may effectively limit an employer’s ability to conduct its own in-house wellness programs that seek health-related information, and may weigh in favor of using third-party wellness programs and vendors.

New Notice Obligations

The ADA Rule imposes new notice obligations on employers offering wellness programs that request ADA-covered health information.  Employers must give participating employees a notice informing them what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, the limits on disclosure, and the ways in which the information will be kept confidential.  The notice must be in language reasonably likely to be understood by the employee from whom medical information is being obtained.  The EEOC has indicated that it will provide within the next 30 days an example of a notice that complies with these requirements.

Applicability to Smoking Cessation Programs?

The restrictions under these new Rules apply only to wellness programs that seek health-related information covered by the ADA or GINA, as applicable.  The ADA restricts disability-related inquiries and medical examinations of employees, while GINA restricts inquiries about the manifestation of disease or disorder in the employee’s family or other genetic information.  Employee wellness programs that do not collect such information are not subject to these new Rules.  However, determining whether an employee wellness program is covered by the Rules may require a fact-based analysis.

Several commenters asked the EEOC to clarify when these Rules apply to employer-sponsored tobacco-related wellness programs, such as smoking cessation programs.  The final ADA Rule explains that smoking cessation programs that merely ask employees whether or not they use tobacco are not covered by the ADA because they do not include a disability-related inquiry or medical examination, and thus they are not subject to the new 30% incentive limit under the ADA Rule.[4] However, any biometric screening or other medical procedure, such as a blood test, that tests for the presence of nicotine or tobacco is a medical examination under the ADA, and would be subject to the 30% incentive limit and other provisions of the ADA Rule.

In comparison, the GINA Rule explains that wellness programs that ask questions about tobacco use, or require taking a blood test to determine nicotine levels, do not request genetic information or information about the manifestation of a disease or disorder.  Therefore, the new GINA Rule does not apply to smoking cessation programs.

Conclusion

Particularly in light of rising health care costs, employee wellness programs will certainly continue to grow in importance.  The final ADA and GINA Rules make clear that that the EEOC will continue to monitor companies’ legal obligations around their use.  Though the new provisions of the final Rules do not take effect until January 1, 2017 at the earliest,[5] employers should begin to review their employee wellness programs for compliance and modify them as necessary before open enrollment season begins.



[1] For more information about employee wellness programs, see “Going to the Heart of Workplace Health Programs and Apps” (http://www.mofo.com/~/media/Files/Articles/2015/10/151009Workplace
HealthProgramsApps.pdf).

[2] https://www.federalregister.gov/articles/2016/05/17/2016-11558/regulations-under-the-americans-with-disabilities-act.

[3] https://www.federalregister.gov/articles/2016/05/17/2016-11557/genetic-information-nondiscrimination-act.

[4] Note that the regulations implementing section 2705(j) of the Public Health Service Act cap incentives at 50% of the cost of self-only coverage for such a program.  45 C.F.R. §146.121. 

[5] The new provisions of the ADA and GINA regulations regarding incentives and the new provision of the ADA rule regarding notice obligations will take effect on the first day of the first employer health plan year that begins on or after January 1, 2017.  The Rules provide that all other provisions are clarifications of existing obligations that are already in effect.



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