On January 7, the Equal Employment Opportunity Commission (EEOC) issued proposed wellness program rules that, if they become effective, will significantly restrict the ability of employers to provide incentives to participate in wellness programs. While the proposed rules are not final and may be relied upon, employers maintaining wellness programs should pay close attention and be prepared to redesign their wellness strategies.
The Americans with Disabilities Act (ADA) broadly prohibits employers from:
- requiring employees to undergo medical examinations, or
- asking employees disability-related inquiries.
Importantly, however, an exception is available for “voluntary” wellness programs. Relying on this exception, employers commonly offer wellness benefits that reward employees for receiving an annual physical or completing a health risk assessment.
Initially, the EEOC did not provide any guidelines regarding the level of reward that would result in some employees feeling coerced to participate in the wellness program and thereby cause the program to fall outside the voluntary exception. Then, in 2016, the EEOC finalized regulations permitting an incentive of up to 30% of the cost of self-only coverage under the employer’s health plan. However, a federal court struck down the 2016 regulations, holding that the EEOC had not justified its conclusion that a 30% incentive level was a reasonable interpretation of the term “voluntary” within the meaning of the ADA statute.
The proposed rules
In January, the EEOC issued new proposed rules addressing the ADA’s voluntary requirements. The proposed rules distinguish between two types of wellness programs:
1. Health-contingent programs. A health-contingent program is a wellness program that requires a participant to satisfy a standard related to health factor in order to earn a reward. Notably, health-contingent programs must comply with the Health Insurance Portability and Accountability Act (HIPAA). Health-contingent programs can be either activity-only or outcome-based:
- An activity-only wellness program requires an individual to perform or complete an activity related to a health factor in order to obtain a reward – e.g., walking, diet, or exercise programs.
- An outcome-based health-contingent wellness program is one that requires an individual to attain or maintain a specific health outcome – e.g., not using tobacco or attaining specified results on biometric tests.
The proposed rules generally allow a health-contingent wellness program to offer incentives of up to 30% of the cost of self-only coverage under the employer’s health plan, provided such program is a component of, or qualifies as, a group health plan. The health-contingent wellness program must also be compliant with HIPAA.
2. Participation-only programs. A participation-only program is a wellness program that either does not provide a reward or does not include any condition for obtaining a reward that is based on an individual satisfying a health standard – e.g., a program that rewards employees for receiving an annual physical or completing a health risk assessment.
Contrary to the EEOC’s 2016 guidance, the proposed rules provide that participation-only wellness programs may only offer “de minimis” incentives such as a water bottle or a gift card of modest value. In contrast, annual gym memberships, airline tickets or a $50 reduction in the employee’s required monthly health insurance premium contribution would not be de minimis.
The EEOC’s proposed rules would also affect wellness program rules under Title II of the Genetic Information Nondiscrimination Act (GINA). GINA prohibits employers from requesting or using genetic information – including family medical history – unless the information is provided “voluntarily.” The proposed rules permit an employer wellness program to offer only a de minimis incentive to an employee or the employee’s family member in return for the family member providing medical or genetic information.
Note, the proposed GINA regulations apply to both participation-only and health-contingent wellness programs. Thus, under the proposed rules, incentives that are more than de minimis may not be conditioned on an employee or an employee’s family member providing family medical or other genetic information.
To summarize, under the proposed rules, employers would be unable to offer more than de minimis incentives for (1) an employee completing a health risk assessment or receiving a physical, or (2) an employee or an employee’s family member for providing information about family medical history. However, employers would be able to offer more significant incentives to an employee who completes walking, dieting or exercise goals, or meets certain health standards – e.g., quitting tobacco or achieving a target BMI – provided the wellness program is a HIPAA-compliant group health plan (or a component of a HIPAA-compliant group health plan).
Employers commonly sponsor participation-only wellness programs that offer incentives much larger than the de minimis threshold. If the proposed rules are finalized in their current form, employers would need to consider either reducing the incentives offered or turning any participation-only wellness programs into health-contingent wellness programs.
Given the expected volume of public comments and the impending change in presidential administrations, the proposals may undergo substantial revisions before they are finalized. However, employers committed to improving the health and well-being of their workforce may want to consider a close review of the proposed rules and how they may affect the employer’s wellness programs.