EEOC Final Rules on Wellness Programs

By Matt Lynch
Shareholder
Sebris Busto James

Original Publish Date: October 11, 2016

On May 17, 2016 the U.S. Equal Employment Opportunity Commission (EEOC) issued final rules describing how employer-provided wellness programs can comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The rules also address wellness plan compliance with the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA).

The final rules become effective in January 2017, and apply to all workplace wellness programs, including those in which employees or their family members may participate without also enrolling in a particular health plan.

The ADA and GINA prohibit employers from obtaining and using information about employees’ health conditions or about the health conditions of their family members, including spouses. The laws allow employers to ask health-related questions and conduct certain medical examinations, such as biometric screenings to determine risk factors, as part of a voluntary wellness program.

Under HIPAA as amended by the ACA, wellness programs may offer incentives of up to 30 percent of the cost of an individual’s annual health premiums, and for tobacco-cessation programs, up to 50 percent of the cost of health premiums.

The final ADA rule clarifies that wellness programs that ask questions about employees’ health or include medical examinations may offer incentives of up to 30 percent of the total cost of self-only coverage. In particular,

Where the employer requires the employee to be enrolled in a particular health plan in order to participate in the wellness program, the incentive to the employee may not exceed 30 percent of the total cost of the self-only version of the plan in which the employee is enrolled.
Where the employer offers more than one self-only health plan, and does not require the employee to be enrolled in a particular health plan in order to participate in the wellness program, the incentive may not exceed 30 percent of the lowest cost major medical self-only plan the employer offers.
Where the employer does not offer a health plan, and offers a wellness program that is open to employees, the incentive may not exceed 30 percent of the total cost to a 40-year-old nonsmoker purchasing self-only coverage under the second-lowest cost Silver Plan available on the state or federal exchange in the location that the employer identifies as its principal place of business.

In addition, the final GINA rule provides that the value of the maximum incentive attributable to a spouse’s participation may not exceed 30 percent of the total cost of self-only coverage, the same incentive allowed for the employee.

Regarding tobacco cessation incentives, the ADA rule distinguishes between tobacco cessation programs that require employees to be tested for nicotine use and programs that only ask employees if they smoke. According to the EEOC, “a wellness program that merely asks employees whether or not they use tobacco (or whether they ceased using tobacco by the end of the program) is not a wellness program that asks disability-related questions. Therefore, the rule's 30 percent incentive limit does not apply and an employer can offer an incentive up to 50 percent of the cost of self-only coverage.” If an employer requires any biometric screening or other medical procedure that tests for the presence of nicotine or tobacco, the rule’s 30 percent incentive limit applies.

In its final ADA rule, the EEOC also stated that “the ADA requires employers to make all wellness programs, even those that do not obtain medical information, available to all employees [and] to provide reasonable accommodations (adjustments or modifications) to employees with disabilities.” These accommodations should “enable employees with disabilities to earn whatever financial incentive an employer or other covered entity offers.” The only exception to this requirement is if the accommodation would cause an undue hardship to the employer.

ADA rules already in effect prohibit the disclosure of an employee's medical information. The final rule does not change any of the exceptions to confidentiality in EEOC's existing ADA regulations, but adds two new requirements. An employer:

May only receive information collected by a wellness program in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals except as necessary to administer the plan; and
May not require an employee to agree to the sale, exchange, transfer, or other disclosure of medical information or to waive confidentiality protections under the ADA in exchange for an incentive or as a condition for participating in a wellness program, except to the extent permitted by the ADA to carry out specific activities related to the wellness program.

The ADA rule also requires that employers give participating employees a notice that tells 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 way information will be kept confidential.

The GINA rule includes a requirement that statutory notice and consent provisions for health and genetic services be provided to employees and their family members. The interpretive guidance published along with the final ADA rule and the preamble to the GINA final rule identify some best practices for ensuring confidentiality, such as:

Adopting and communicating clear policies.
Training employees who handle confidential information.
Encrypting health information.
Providing prompt notification of employees and their family members if breaches occur.

Plan sponsors should work with their plan consultants to ensure compliance with these rules beginning in 2017. The provisions of the new rules requiring a notice and establishing incentive limits apply only prospectively to wellness programs as of the first day of the first plan year that begins on or after January 1, 2017, for the health plan used to determine the level of incentives permitted under the rule. For example, if the health plan used to calculate the permissible incentive limit begins on January 1, 2017, that is the date the provisions of this rule governing incentives and the notice requirements apply to the wellness program. If the plan used to calculate the incentive limit begins on March 1, 2017, the rule applies as of that date.

Other parts of the rule that are clarifications of existing obligations, such as the provision that says employers cannot retaliate against someone for refusing to participate in a wellness program and the provisions requiring confidentiality, already apply to wellness programs.

Matt Lynch is a shareholder with Sebris Busto James. Matt represents private and public sector health care and other employers in all aspects of labor relations, including in collective bargaining, grievances and labor arbitrations. He has handled many cases in front of the NLRB and PERC, and also advises employers on day-to-day and strategic employee relations issues, including discipline and discharge, employee leaves, employment agreements, policy development, handbooks, wage and hour and discrimination. Contact Matt at mlynch@sebrisbusto.com or 425-450-3387.