On May 17, 2016, the Equal Employment Opportunity Commission (EEOC) issued two separate sets of final regulations that provide compliance guidance on employer-sponsored wellness programs in accordance with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The final rules (which can be found here) confirm the proposed rules that were issued previously but with two key clarifications/additions addressing the 30% incentive limit and a notice requirement. As discussed in detail below, the final rules generally require wellness plans to be voluntary, limit incentives to 30% of self-only coverage, provide notice and reasonable accommodation, maintain confidentiality of medical information and comply with other employment non-discrimination laws.
A wellness program is basically a health promotion and disease prevention program and/or activity offered to employees either as part of the group health plan or separately as a workplace wellness benefit. Some employers offer incentives to encourage employees just to participate in the wellness program (i.e., participatory program), while other employers offer incentives based on whether employees achieve certain health outcomes (i.e., health-contingent program).
Title I of the ADA prohibits discrimination against individuals on the basis of disability in regard to employment compensation and other terms, conditions and privileges of employment, including fringe benefits. Although the ADA generally restricts employers from obtaining disability-related medical information from employees (and job applicants), the law permits an exception for inquiries about employees health and authorizes medical examinations that are part of a voluntary employee health program, such as a workplace wellness program. The ADA also requires employers (1) to make wellness programs available to all employees by providing reasonable accommodations for those with disabilities to enable equal access to the fringe benefits from the wellness programs, and (2) to keep confidential all medical information obtained in connection with its wellness programs.
Title II of GINA generally protects job applicants, and current/former employees, etc. from employment discrimination because of their genetic information. Specifically, GINA restricts employers from requesting, requiring, or purchasing genetic information to use in making decisions on employment matters unless one (or more) of the six narrow exceptions applies. Genetic information includes genetic tests and information about the manifestation of a disease or disorder of a family member, including a spouse (i.e., family medical history). Furthermore, employers (1) cannot condition eligibility or financial inducements on the provision of an employees (or applicants) genetic information and (2) are strictly limited on when genetic information in their possession may be disclosed.
So, in essence, both the ADA and GINA contain exceptions that allow employers to ask health-related questions and conduct certain medical examinations (e.g., health risk assessments and biometric screenings) to determine risk factors as part of a voluntary wellness program that is reasonably designed to promote health or prevent disease.
Final Regulations Highlights of General Requirements
Medical examinations and inquiries are permitted under wellness programs if they generally meet the following requirements to comply with the ADA and GINA:
- Must be an employee health program that is reasonably designed to promote health or prevent disease. Information collected must either provide results or advice to improve the health of participants, or be used to design a program that would address some of the identified conditions. The program may not require an overly burdensome amount of time, require unreasonably intrusive procedures, or place significant costs on participants. And the program may not exist simply to shift costs to targeted participants or to provide information to predict future healthcare plan costs.
- Must be voluntary. A wellness program is voluntary if the covered entity (1) does not require employees to participate; (2) does not deny coverage (or limit benefits) for non-participation; (3) does not take any adverse employment action, or retaliate, interfere with, coerce, intimidate, or threaten those who do not participate or fail to achieve certain health outcomes; and (4) provides an easy to understand notice (described further below).The final rules clarified that a tiered health plan structure (also known as a gateway plan) under which the employee is denied access to some of the plans for a failure to participate in the wellness program is not allowed.
- 30% limit on financial incentives based on self-only coverage (new). The maximum incentive (financial or in-kind) that an employer can offer for an employees participation in a wellness program that includes disability-related inquiries or medical examinations is 30% of the total cost of self-only coverage. The same cap applies for a spouse who provides information about the manifestation of a disease or disorder. For example, if the employer offers self-only coverage for a total cost of $6,000, and also offers a wellness program to the employee and spouse if they participate in the plan, the employer may not offer more than $1,800 ($6,000 x 30%) to the employee and $1,800 to the spouse (up to $3,600 total) as an incentive for participating. The calculation of the 30% cap differs slightly depending on the scenarios described in the table below:
|Employer has a wellness program||30% maximum incentive is based on:|
|Only for enrolled employees||Total cost of self-only coverage under the plan in which the individual is enrolled|
|Even for non-enrolled employees in the employers single health plan||Total cost of self-only coverage under that plan regardless of enrollment in that plan|
|Even for non-enrolled employees in any of the employers multiple health plans||Total cost of the lowest cost self-only major medical coverage regardless of enrollment in a particular plan|
|But does not offer a group health plan||The cost of the second lowest cost Silver Planfor a 40-year old non-smoker available through a public Exchange established in the location that the employer identifies as its principal place of business|
Note that EEOC guidance confirmed that for a tobacco-cessation program which merely asks whether an individual uses tobacco would not fall under the ADA (thus, the 50% maximum incentive under HIPAA would apply); but if the program involves any medical testing to verify the presence of nicotine/tobacco, the ADAs 30% limit would apply. We will provide a separate alert addressing the IRS recent memo 2016-22031 regarding the taxability of wellness program rewards/incentives.
- Must provide notice to employees (new). Employers must provide a notice to participating employees that clearly describes the details of the wellness program, including: what information will be collected; how it will be used; who will receive it; restrictions on the disclosure of such information; and how the information will be kept confidential. Click here for a copy of the EEOCs model/sample notice.
- Must maintain confidentiality of medical information. Information collected by a wellness program may generally be provided only in aggregate form that is unlikely to disclose the identity of specific individuals except as necessary to administer the plan. Information must be collected on separate forms, maintained in separate files, and treated as a confidential medical record. Also, an employer may not require an employee to agree to the sale, transfer, exchange or other disclosure of medical information in exchange for an incentive or as a condition for participating in a wellness program, except to the extent authorized under the ADA to carry out the purpose of the wellness program. The final rules provide some best practices for maintaining confidentiality, such as adopting policies, communicating such policies, training employees, using encryption, and offering breach notification.
- Reasonable accommodations. Generally speaking, all wellness programs, including those that do not obtain medical information, must be made available to all employees. Accordingly, under the ADA, employers must provide reasonable accommodations if a disability (or medical condition) prevents an employee from participating in order to ensure that disabled employees can earn whatever financial incentive is offered through the wellness program. In other words, the wellness program must provide a reasonable alternative standard for such employees. Also note that a spouse who is unable to participate or earn an incentive due to a disability or medical condition, must have the requirement waived or be provided with a reasonable alternative standard to avoid violating GINA.
- Employers cannot retaliate. Employers are prohibited from retaliating against any employee (including denying or limiting access to health insurance or any package of benefits) or spouse who refuses to provide information about his/her current or past health status to an employer wellness program.
The new provisions under the EEOCs final rules relating to the inducement limits and notice requirements will be effective for plan years that begin on or after January 1, 2017. Employers should review their current wellness programs and consider limiting all incentives to 30% of the total cost of self-only coverage (50% for tobacco-cessation programs that have no medical testing at all). As for the notice requirement, employers should review their current notice to align with the EEOCs sample notice, or simply adopt the EEOCs notice.
Note that all other provisions under the final rules are considered clarifications of existing obligations that already apply to wellness plans.
The EEOC provided some best practices suggestions for complying with the confidentiality requirementsemployers should take the following action steps:
- Adopt and communicate clearly written confidentiality policies.
- Train employees who handle confidential information.
- Encrypt health information.
- Provide prompt notification to employees (and affected family members) in the event of a breach.