The Equal Employment Opportunity Commission (EEOC) has issued final rules for wellness programs under both the Americans with Disabilities Act (ADA) (the “Final ADA Rule”) and the Genetic Information and Nondiscrimination Act (GINA) (the “Final GINA Rule”). The release is accompanied by Frequently Asked Questions posted to the EEOC website, as well as interpretive guidance discussing the Final ADA Rule. Employers must comply with both sets of rules as of the first group health plan year that begins on or after January 1, 2017. Despite a torrent of highly critical comments submitted during the comment period and ongoing litigation surrounding the EEOC’s interpretation of the limits imposed on wellness programs by the ADA and GINA, the final rules differ very little from the proposed rules and continue to depart in significant ways from the final regulations issued by the Department of Labor, Department of the Treasury, and the Department of Health and Human Service under the Health Insurance Portability and Accountability Act (HIPAA) (the “Final HIPAA Regulations”). In this two part series, we discuss the differences between the proposed and final versions of each rule and highlight changes that may be required to existing wellness programs. Part I concerns the Final ADA Rule.
Scope of the Final ADA Rule
As with the proposed rule, the Final ADA Rule applies only to employee wellness programs (whether part of a group health plan or not) that include disability-related inquiries or medical examinations. Thus, wellness program designs that include health risk assessment (HRA) questionnaires or biometric screenings will be subject to the rule, whereas “less invasive” exercise and educational programs available to all employees will not. This limitation reflects the scope of the ADA, which generally prohibits employers from making disability-related inquiries or requiring medical examinations unless the inquiry or exam is “voluntary” or constitutes a term of a “bona fide benefit plan.”
Rejecting the Bona Fide Benefit Plan Safe Harbor
The ADA allows an employer to establish and administer the terms of a “bona fide benefit plan” by underwriting and classifying risks, and federal courts have found that a wellness program offering an incentive in exchange for participation in a health screening can be a “term” of a benefit plan that does not violate the ADA. Nevertheless, the Final ADA Rule reaffirms the EEOC’s position that the bona fide benefit plan safe harbor does not apply to wellness programs covered by the rule.
In the view of the EEOC, an employer’s use of a wellness program to improve employee health and reduce health care costs does not constitute protected “underwriting” or “risk classification” contemplated under the safe harbor. In the preamble to the Final ADA Rule, the EEOC explains that it views the safe harbor as limited to insurer underwriting and rate-making practices in effect prior to the Affordable Care Act and dismisses the federal court decisions stating that both cases were wrongly decided. Because the EEOC claims that neither court held that the safe harbor unambiguously extended to wellness programs the EEOC asserts that it has the authority to provide its own statutory analysis and interpretation.
Requirements for a “Voluntary” Plan
Having rejected the application of the bona fide benefit plan safe harbor to wellness programs, the Final ADA Rule primarily describes the requirements a wellness program must satisfy in order to be considered “voluntary” under the ADA. In rejecting most critical comments on the issue, the final rule follows the proposed rule by departing from the Final HIPAA Regulations in significant ways.
First, the Final ADA Rule expressly prohibits “gateway” provisions that would deny coverage or benefit options to employees who fail to complete an HRA or biometric screening or fail to satisfy a particular health metric required by a wellness program. Second, the Final ADA Rule requires that a covered wellness program provide written notice to participants that explains how their health information will be collected, how it will be used, with whom it will be shared, restrictions on its disclosure, and how it will be kept confidential. Unlike the proposed rule, the Final ADA Rule requires that this notice be provided regardless of whether the wellness program is part of an employer’s group health plan. The EEOC promises to provide a sample notice that complies with the rule on its Web site within 30 days of publishing the Final ADA Rule.
Holding fast to the incentive levels described in the proposed rule, the EEOC continues to deviate from the Final HIPAA Regulations by capping the incentive amount at 30% of self-only coverage, rather than 30% of the cost of coverage in which the employee is enrolled (such as “employee + spouse” or “family”) and by refusing to allow an additional 20% incentive in programs that target tobacco use. Under the Final ADA Rule, the self-only coverage used to determine the allowed incentive depends on the coverage options offered by the employer’s plan and whether participation in the wellness program requires enrollment in one of the options. This chart summarizes the rule:
Wellness Participation and Group Health Plan (GHP) CoverageAllowed IncentiveParticipation in wellness program requires enrollment in particular group health plan (GHP)30% total cost of self-only coverage in that GHPEmployer offers single GHP, but GHP enrollment not required to participate in wellness program30% total cost of self-only coverage in that GHPEmployer offers several GHPs, but GHP enrollment not required to participate in wellness program30% total cost of self-only coverage under lowest cost GHP offered by employerEmployer does not offer GHP30% of the total cost to 40-year-old-non-smoker of second lowest cost “Silver Plan” available on Exchange in employer’s home state
As in the proposed rule, the 30% incentive limit will apply to the aggregate benefits provided by both participatory and health-contingent wellness programs subject to the Final ADA Rule. In addition, non-cash and de minimis incentives (such as free parking spaces and a relaxed dress code for participating employees) must count in determining the value of the incentive.
The EEOC rationalizes its adherence to an incentive limit equal to 30% of self-only coverage by explaining that the ADA’s prohibitions on discrimination apply only to employees, not an employee’s spouse or dependents; therefore, incentives for the participation of an employee’s family members must be addressed in the Final GINA Rule. As will be discussed in greater detail in Part II of this post, the Final GINA Rule does allow incentives for participation by a spouse but not in exchange for genetic and certain other information provided by an employee’s children. The Final GINA Rule limits incentives that may be offered to an employee’s spouse to 30% of the cost of self-only coverage in addition to any incentive that may be offered to the employee for participation. This limit differs from the limitations in the Final HIPAA Regulations but, in some cases, may actually provide a larger overall incentive.
The Final ADA Rule preserves the general statement in the proposed rules that medical information obtained as part of a wellness program must be “maintained in a confidential manner” and not used for a prohibited purpose, such as limiting insurance eligibility. Clarifying this standard, the Final ADA Rule explains that information collected through a wellness program may only be shared with an employer in aggregate terms that are not reasonably likely to disclose the identity of any employee. Interpretive guidance accompanying the final rule reiterates that when a wellness program is part of a group health plan it must comply with the HIPAA Privacy Rule and that compliance with the HIPAA Privacy Rule will likely result in compliance with the confidentiality requirements under the Final ADA Rule.
The Final ADA Rule does expand the confidentiality provisions in the proposed rule in one important way. The rule prohibits an employer from requiring employees to agree to the sale, exchange, transfer, or disclosure of their medical information, or from waiving the confidentiality provisions of the ADA as a condition of participating in or obtaining an incentive under a wellness program. An exception to this restriction allows for the sharing of information required to carry out the provision of the wellness program (for example, disclosing biometric results to a wellness coach or coordinator); however, employers should note that this change may require re-drafting existing authorization and disclosure forms provided to employee participants.
Despite the withering criticism hurled at the EEOC since the issuance of its proposed rule, the agency has essentially doubled down in publishing its Final ADA Rule. The EEOC continues to reject the application of the bona fide benefit plan exception to wellness programs and insists on limitations on financial incentives that are at odds with the rules updated three years ago by IRS, DOL, and HHS to conform to the Affordable Care Act. The EEOC’s dedication is surprising and disappointing given its failure to successfully advance its position regarding the bona fide benefit plan exception in the federal courts.
Time will tell whether the EEOC has overstepped its bounds by interpreting the statute in this way, and a case currently on appeal before the U.S. Court of the Appeals for the Seventh Circuit, EEOC v. Flambeau, Inc., may provide an answer by the end of this year. In the meantime, employers should be mindful that including wellness programs as a ”term” of their group health plan(s) may not provide the additional level of protection once thought to be available if validity of the program is challenged the ADA. Employers should also ensure that wellness programs satisfy the EEOC requirements for “voluntary” programs by using collected information to improve health and prevent disease, observing the limits on incentives, providing notice to participants about the information requested, and abiding by the confidentiality requirements with respect to the information collected.