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The Latest on Wellness Programs: EEOC Proposes Rule to Address Legal Hurdles Under the ADA

Employment Law Update

May 19, 2015


Wait a minute. You mean to tell me that, even if I follow the guidance issued under the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA), in implementing a “legally-compliant” wellness program, I might still violate the Americans with Disabilities Act (ADA)?

Maybe. However, the Equal Employment Opportunity Commission (EEOC), which is charged with enforcing the ADA, issued proposed regulations on April 20, 2015 that would permit some wellness programs without running afoul of the ADA.

Notably, the proposed regulations represent a significant change in the EEOC’s approach since the agency sued three employers at the end of 2014 for violating the ADA by implementing wellness programs that the EEOC alleged were not “voluntary.” Indeed, in at least one of those cases, the employer’s wellness program satisfied the requirements of HIPAA. Although the proposed rules are good news for employers, there are a few lingering issues under the ADA.

What Are Wellness Programs?

Wellness programs provide incentives and other rewards to employees who participate in activities designed to encourage and promote healthy lifestyles. They seek to improve worker productivity, to provide for participant engagement in their health and well-being and, ultimately, to save health care costs for employers and participants.

The programs can take a variety of forms and functions. From gym reimbursements, to discounts and rebates on premiums, to cash incentives and gift cards, to exercise and weight loss challenges, employers are limited only by their imagination – and, of course, the law.

Overview Of HIPAA Guidance

Since 2006, HIPAA regulations have provided that group health plans may not discriminate against similarly situated individuals based upon an individual’s health status in terms of eligibility, premium contributions or benefits. However, under an exception to this nondiscrimination rule, plans may provide for certain premiums, discounts or other modifications as long as those benefits meet certain requirements. The Department of Labor clarified this exception in 2013 with final regulations issued under the Affordable Care Act. These requirements divided wellness programs into two categories: participatory wellness programs and health-contingent wellness programs.

Participatory Wellness Programs

As the name implies, participatory wellness programs provide rewards to employees for mere participation. As long as all similarly situated individuals may participate regardless of health status, the program is deemed to comply with the HIPAA nondiscrimination requirements. For example, an employer could sponsor a program offering a premium reduction for any participants who agree to undergo health biometric screenings or health risk assessment. In that example, because any participant may take advantage of the premium reduction, the program complies with the HIPAA nondiscrimination rules.

Health-Contingent Wellness Programs

Health-contingent wellness programs, on the other hand, require participants to either satisfy a certain health standard or engage in a health-related activity (e.g., take smoking cessation classes, participate in a walking program, follow a low cholesterol diet, etc.) in order to obtain a reward. Not surprisingly, because the availability of rewards is contingent on meeting certain health standards, the HIPAA regulations impose more stringent requirements for these programs.

First, the regulations limit the size of the reward. Health-contingent wellness program rewards or surcharges cannot exceed 30 percent of the cost of employee-only coverage (or spouse/family coverage, if dependents may participate in rewards). For programs related to tobacco cessation, those rewards can be up to 50 percent of the cost of that coverage.

Additionally, these programs must be reasonably designed to promote health and prevent disease. This means that in addition to having a reasonable chance of improving an individual’s health, participation must not be unduly burdensome or merely a pretext for discrimination based on a health standard.

Finally, in conjunction with any health-contingent wellness program, the employer also must offer reasonable alternative standards that allow participants to obtain the same reward using a standard that is more in line with an individual’s capabilities. For example, a participant may request and complete a walking program in lieu of an employer-instituted running program. Alternatively, a participant could be required to complete a weight-loss program instead of a program that rewards participants who meet standards related to BMI (Body Mass Index) or blood pressure. Employers must notify participants of the availability of these alternative standards, noting that they will accommodate the reasonable recommendations of an individual’s physician.

The EEOC’s Take On Wellness Programs

The ADA prohibits employment discrimination against individuals on the basis of a disability; requires employers to provide reasonable accommodations to enable disabled employees to have the same access to employment-based benefits; and restricts employers from making disability-related inquiries or requiring medical examinations. The ADA contains important exceptions permitting bona fide employee benefit plans and voluntary health questionnaires and examinations.

Most wellness programs are structured to include health risk assessments and biometric screenings to measure health risk factors, such as body weight, cholesterol, blood pressure and blood glucose. Further, most employers who offer these programs provide rewards to participants. Thus, the crux of the ADA question pertaining to wellness programs is whether the disability-related inquiries or medical examinations are voluntary.

Despite the HIPAA regulations approving the provision of rewards in properly structured wellness programs and the recent congressional action taken to bolster them under the Patient Protection and Affordable Care Act, the EEOC remained an opponent, taking the position that any reward provided to employees made the program involuntary and thus violated the ADA. Additionally, the EEOC started filing suits against employers, raising concerns that the agency’s position would reverse advances made in the area of workplace wellness.

The EEOC finally yielded to political pressure, which included the introduction in the U.S. House of Representatives in March 2015 of the Preserving Employee Wellness Programs Act. The EEOC’s proposed rule issued on April 20 generally approves the use of health risk assessments and biometric screening in the workplace, finding them to be “voluntary” programs, provided that the reward does not exceed more than 30 percent of the cost of employee-only coverage and that a number of other requirements are satisfied.

Although the EEOC’s proposed rule under the ADA in large part echoes the HIPAA wellness program regulations, the EEOC guidance is more restrictive in a number of ways. Some of the key distinctions are highlighted in the table included below.

The EEOC’s rule is in proposed form, and the comment period closes June 19, 2015. Although there could be further movement to eliminate these distinctions in response to the comments the EEOC receives, employers should be mindful of the EEOC’s position in constructing their wellness programs.

Moreover, compliance with these wellness regulations does not automatically ensure compliance with other employment discrimination laws, such as Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967 and Title II of the Genetic Information Nondiscrimination Act of 2008.

Let us know if you have comments or questions about the proposed regulations.

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