Is Your Wellness Program Healthy? EEOC Provides Much Needed Guidance in Proposed Rule

On April 16, 2015, the Equal Employment Opportunity Commission (EEOC) issued a proposed rule addressing how the Americans with Disabilities Act (ADA) applies to wellness programs that are part of group health plans and that include medical examinations or questions about employees’ health. Although not final and still open for public comment, this proposed rule provides important guidelines for employers in administering wellness programs.

Wellness programs are typically offered through employers’ group health plans to help employees improve health and reduce health care costs. For example, these programs encourage employees to become more active, eat healthier, quit smoking, and complete a health risk assessment, among other initiatives. A majority of employers now offer some sort of wellness program: 94 percent of employers with over 200 workers, and 63 percent of smaller ones.

Wellness programs are encouraged under the Affordable Care Act (ACA). Among other things, the ACA authorizes employers to offer monetary incentives to employees who participate in their wellness programs, up to a maximum possible reward or penalty of 30 percent of the total annual cost of individual-only coverage, and up to 50 percent for programs designed to prevent or reduce tobacco use. The ACA also allows for reasonable methods to allocate rewards among family members when not all family members qualify.

Although the ACA expressly authorizes wellness plans, the EEOC has expressed its doubts as to whether certain plans pass muster under the ADA. The ADA generally prohibits employers from obtaining medical information from employees, but allows medical examinations of employees and questions about employees’ health if they are part of a “voluntary employee health program.” The EEOC has taken a hard stance on what it means to be “voluntary” and filed three separate lawsuits in August, September, and October 2014 against employers who allegedly imposed penalties against or terminated employees who opted out of the company’s wellness program.

The EEOC received heavy criticism, including from Senate Republicans, for suing employers for doing what the ACA encourages them to do, before the Commission issued guidance on what is permissible under the ADA. But according to the EEOC’s General Counsel, David Lopez, the employers in those cases had threatened discipline against employees who did not participate and/or cut off insurance coverage altogether to employees who declined to sign onto the wellness program. John Hendrickson, regional attorney for the EEOC Chicago district, further noted that wellness programs “have to actually be voluntary. They can’t compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate.”

The EEOC’s proposed rule clarifies that wellness programs must be reasonably designed to promote health or prevent disease, must not be unduly burdensome to employees, and must not violate the ADA. For a wellness program to be considered “voluntary,” employees cannot be required to participate, employers cannot deny health insurance or limit coverage under its health plans for non-participation, and employers cannot take any other adverse action against employees who do not participate or who fail to achieve certain health outcomes. In addition, employers must provide employees with a notice describing what medical information will be collected as part of the wellness program, who will receive it, how the information will be used, and how it will be kept confidential.

The proposed rule also clarifies that the ADA allows employers to offer incentives up to 30 percent of the cost of employee-only health coverage to employees who participate in a wellness program and/or achieve health outcomes. For example, if the total cost of an employee’s self-only coverage is $5,000, the maximum incentive for the employee is $1,500. Previously, the EEOC had not stated whether employers could incentivize employee participation in wellness programs or whether offering incentives would make participation involuntary.

Further, employers may only receive medical information collected by a wellness program in aggregate form that does not disclose the identity of specific employees, except as is necessary to administer the plan. Wellness programs that are part of a group health plan can fulfill this confidentiality obligation by complying with the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule. Employers that are not HIPAA-covered entities can comply by signing a certification that they will not use or disclose individually identifiable medical information for employment purposes.

Importantly, the proposed rule clarifies that compliance with the ADA’s rules on voluntary employee health programs does not relieve a covered entity of its obligation to comply with other employment nondiscrimination laws. Moreover, employers must provide reasonable accommodations that enable employees with disabilities to participate in wellness programs and to earn the offered incentives.

The EEOC will accept public comments on the proposed rule through June 19, 2015. The agency will then make revisions to the proposed rule based on the public comments, before voting on the final rule.