On April 16, 2015, the Equal Opportunity Commission released proposed regulations under the Americans With Disabilities Act (ADA), relating to voluntary “employee wellness programs.” These new rules come on the heels of a series of lawsuits by the EEOC challenging whether such programs are really “voluntary” when they penalize non-participating employees.

The Basics of Voluntary Wellness Programs

Employers typically offer employee wellness programs as part of an employer-sponsored health plan. The goal is to promote employee health and fitness, which can help reduce costs of medical coverage and improve employee attendance and productivity. According to a Centers for Disease Control study in 2013, about one-half of U.S. employers offer some form of wellness program.

A “health-contingent” wellness program offers incentives to employees who satisfy specific health standards, such as quitting smoking or achieving a target cholesterol level. The rewards for meeting goals may be significant, such as reduced premiums or cash rewards. “Participatory” wellness programs are simply those that offer a reward for participation in the program, whether or not a specific health goal is achieved.

Wellness Programs and Regulatory Compliance

Wellness programs require careful coordination with anti-discrimination and medical privacy laws. For instance, the ADA generally prohibits an employer from requiring an employee to undergo a physical exam or answer inquiries about a disability, except in specific circumstances. The Act provides an exception for wellness programs, but only if the program is completely voluntary.

Similarly, the Genetic Information Nondiscrimination Act (GINA) bars employers in most circumstances from requesting genetic information or requiring employees to submit to testing. Although an exception allows an employer to acquire genetic information in connection with voluntary wellness programs, the employer may not offer financial incentives to do so.

The Affordable Care Act (ACA) and Health Insurance Portability and Accountability Act (HIPAA) also regulate what kind of incentives employers may provide. For health-contingent wellness programs, employers may offer financial incentives of up to 30% percent of the cost of an employee’s individual medical coverage, and up to 50% for programs designed to prevent or reduce tobacco usage. However, HIPAA prohibits employers from charging certain employees more for medical coverage or denying benefits because of any health factor, such as disability or genetic information. Both HIPAA and ACA regulations nevertheless permit health-contingent wellness programs if they meet certain factors designed to prevent discrimination, including offering reasonable alternatives for employees who cannot meet the program’s health-related goals due to medical conditions.

The EEOC Cracks Down on Less-Than-“Voluntary” Programs

In 2014, the EEOC filed three lawsuits against companies offering financial incentives for participatory wellness programs. The EEOC suggested that the financial incentives were effectively coercive penalties against non-participants, effectively rendering the programs involuntary and in violation of the ADA.

In August and September 2014, the EEOC filed civil suits against Wisconsin employers Flambeau, Inc., and Orion Energy Systems, Inc. Both companies were sponsoring participatory employee wellness programs in which employees were asked to submit to blood tests and risk assessments based on prior medical history. Orion was further requesting employees to take a “fitness” exam.

The companies offered to cover 75% to 100% of medical insurance premiums for participating employees, while employees declining to participate were required to shoulder 100% of their premiums. In addition, Orion had imposed an extra monthly surcharge for failure to complete the fitness exam. Because the difference could amount to thousands of dollars per month for a covered family, the EEOC argued that the program was coercive and not “voluntary” within the meaning of the ADA. The cases are still pending.

On October 27, 2014, the EEOC sought a temporary restraining order against Honeywell International, Inc. Honeywell was requesting employees to submit to blood testing and assessments such as waist circumference. If the employee or a covered spouse declined to participate, the employee would be ineligible for the company’s health savings account (HSA) contributions and subject to a surcharge to their medical coverage. A federal district court judge in Minneapolis denied the restraining order, but did not make a determination on the merits.

The EEOC Proposes New ADA Regulations Interpreting “Voluntary” Programs

On April 16, 2015, the EEOC released proposed regulations that would attempt to clarify the term “voluntary” as to the ADA only. For wellness programs, “voluntary” would mean that the employer does not: (1) require employees to participate, (2) deny coverage or limit the extent of such coverage to an employee who refuses to participate in a wellness program, and (3) take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who do not participate.

In addition, the employer must provide notice indicating: (1) what medical information will be obtained, (2) who will receive the medical information, (3) how the medical information will be used, (4) the restrictions on such information’s disclosure, and (5) the methods that the covered entity will use to prevent improper disclosure.

The proposed regulations also attempt to mirror the ACA’s 30% incentive limit, described above. However, the EEOC’s version would apply the limit to both health-contingent and participatory programs. The proposed regulations also do not contain the ACA’s 50% allowance for tobacco-related programs.

Best Practices

Although the EEOC’s regulations are not yet final, now is a good time for employers to evaluate wellness programs and anticipate what changes may need to be made. For instance:

  • Make sure your company is sticking to the 30% incentive limit for both participatory and health-contingent wellness programs. If your program is relying on the ACA’s 50% limit for tobacco-related programs, consider keeping the incentive at 30%.
  • Work on complying with the notice requirement, described above, regarding use of medical information.
  • Ensure your program doesn’t create the appearance of requiring employee participation or making coverage contingent on participation.
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