In April 2015, the U.S. Equal Employment Opportunity Commission ( EEOC ) published proposed regulations that describe how Title I of the Americans with Disabilities Act ( ADA ) applies to employee wellness programs that are a part of an employer s group health plan, 1 and include medical exams or questions about an employee s health. HEALTHCARE Already in place are rules under the Health Insurance Portability and Accountability Act of 1996 ( HIPAA ), which prevent employers from discriminating against employees with respect to eligibility, benefits, premiums, or employee contributions based on a health factor such as a medical condition, claims experience, receipt of health care, medical history, genetic information, and disability. An exception to this general prohibition allows premium discounts or other awards in exchange for participation in certain wellness programs. Wellness programs refer to programs and activities designed to improve employees health and reduce health care cost. The Departments of Labor, Treasury and Health and Human Services (the Departments ) issued final regulations in 2013 which address changes made by the Patient Protection and Affordable Care Act ( PPACA ) to wellness programs subject to HIPAA nondiscrimination rules. Compliance with those regulations is in addition to compliance with the EEOC s proposed regulations. Deborah Baughman, Partner 248.727.1383 dbaughman@jaffelaw.com To understand the new EEOC proposed rules, one has to see them in context with existing wellness program requirements. The following summarizes the HIPAA nondiscrimination requirements for offering wellness program incentives. HIPAA (as amended by PPACA) Wellness Programs HIPAA s nondiscrimination rules and the Departments final wellness regulations divide wellness programs into two types: participatory wellness programs and health-contingent wellness programs. A wellness program is participatory if none of the conditions for obtaining the reward are based on an employee satisfying a standard that is related to his or her health. The program must be available to all similarly situated employees. Completion of a health risk assessment that does not base a reward on the outcome of the assessment, or attending a free health seminar, are examples of participatory wellness programs. 1 Any wellness program that includes health questions and medical screenings would be considered part of a group health plan.
A health-contingent wellness program requires the employee to reach or maintain a goal related to a health factor to receive a reward or incentive. The regulations further divide this type of wellness program into two categories: activityonly wellness programs and outcome-based wellness programs. Both types of programs must meet five requirements set out in the regulations. Under an activity-only program, an employee is required to perform an activity related to a health factor to receive the reward. Examples of activity-only wellness programs include walking or exercise programs. The employer must provide alternative ways to obtain the reward if an employee is unable to participate or complete the activity. Under an outcome-based program, an employee must meet certain standards based on results of tests, measurements, or screenings to receive the reward. Requiring an employee whose cholesterol level is outside an acceptable level to take additional steps to obtain a reward is an example of an outcome-based wellness program. Employee Protections on Health-Contingent Wellness Programs Health-contingent wellness programs are subject to 5 requirements: 1. Opportunity to qualify for reward. Employees must be given the opportunity to qualify for the reward at least once per year. 2. Size of reward. The maximum reward for participation in a non-tobacco wellness program is 30% of the total cost of coverage. A reward of 50% may apply to a wellness program designed to prevent or reduce tobacco use. The total cost of coverage includes the employee s and the employer s contributions. If an employee s family members are eligible to participate in the wellness program the total cost of coverage is based on the cost of family coverage in which the employee is enrolled rather than employee-only coverage. A reward includes lower premiums, reductions in cost-sharing, or the avoidance of a penalty, such as the absence of a premium surcharge for tobacco use. Rewards associated with participatory programs do not count toward the healthcontingent reward limit. 3. Reasonable design. Health-contingent wellness programs must be reasonably designed to promote health or prevent disease, not be overly burdensome, or be a ploy for discriminating based on a health factor.
4. Uniform availability and reasonable alternative standards. The full reward must be available to all similarly situated individuals. A reward will be deemed reasonably available to all similarly situated individuals if the program allows for a reasonable alternative standard (or waiver) to obtain the reward. Under an activity-based program the alternative standard must be available when it is unreasonably difficult and medically inadvisable due to a medical condition for the employee to meet the standard. Physician verification is permitted where it is medically inadvisable for the employee to meet the standard. Under an outcome-based program the plan must offer a reasonable alternative to earn the reward if the employee does not meet the initial standard for the test, measurement, or screening regardless of the employee s medical condition or other health status. What is reasonable depends on the facts and circumstances. 5. Notice of reasonable alternative standard. Plan materials describing a wellness program must disclose the availability of a reasonable alternative, along with contact information, and, in the case of an activity-based program, a statement that a recommendation of the employee s personal physician will be accommodated. (There is model language available.) EEOC Wellness Program Proposed Rules The ADA prohibits discrimination against individuals with a disability in regard to employment compensation and other terms and conditions of employment, including fringe benefits. To be permissible under the ADA, disability-related questions (that is, a series of questions likely to elicit information about a disability) or medical examinations must be job-related and consistent with business necessity or part of a voluntary wellness program. The EEOC has long held the belief that for a wellness program to be voluntary, employees must not be required to participate or be penalized for not participating. The new proposed regulations would amend the ADA regulations to provide guidance on the extent to which employers may use rewards or incentives to encourage employees to participate in wellness programs that are offered as part of the group health plan and include disability-related inquiries or medical exams. In order for a wellness program that is part of a group health plan to meet the EEOC s voluntary standard, it must: 1. be reasonably designed to promote health or prevent disease; 2. have a reasonable chance of improving the health of, or preventing disease in, a participating employee; 3. not be overly burdensome, a subterfuge for violating the ADA, or highly suspect in the method chosen to pro mote health or prevent disease; 4. not include incentives (or penalties) that exceed 30% of the cost of employee-only coverage. a. This is the same limit as HIPAA/PPACA provides
b. But it also applies to participatory wellness programs if required to answer disability-related questions, which goes beyond the no-limit HIPAA/PPACA rules for participatory wellness programs c. Incentive may reach 50% for smoking cessation programs if participation based only on employee stat ing he or she uses tobacco or doesn t use tobacco For a wellness program that is part of a group health plan to be voluntary, an employer may not: 1. require employees to participate; 2. deny access to health coverage or limit coverage for nonparticipation; 3. take any adverse action or retaliation against, interfere with, coerce, intimidate, or threaten employees who do not participate or who fail to achieve certain health outcomes. To ensure that participation is voluntary, the employer must provide a notice explaining what medical information will be collected, how it will be used, who will receive it, and the restrictions on disclosure. Reasonable accommodations must be provided for all wellness programs to enable employees to earn any incentive offered. How the Genetic Information Nondiscrimination Act affects a wellness program in which an employee s family participates or family health history is provided will be the subject of upcoming guidance. Open Issues The EEOC asked for additional input in developing the final regulations, which aim to reconcile the ADA s voluntary requirement with the HIPAA/PPACA wellness provisions. The comment period ended June 19, 2015. The range of comments requested suggests the final regulations may be very different from the proposed regulations. Specifically, the EEOC requested comments on the following issues. 1. Are there other methods by which the EEOC can achieve balance between voluntary and the provi sions of the PPACA intended to encourage workplace health and disease prevention? 2. Should employees be required to acknowledge in writing that their participation is voluntary? 3. Should the notice requirement only apply to wellness programs that offer more than de minimis incen tives or penalties?
4. Should the incentive limits also apply to wellness programs outside of group health plans? 5. Which best practices ensure that wellness programs are designed to promote health and do not operate to shift costs to employees with health impairments? 6. What will be the effect of limiting the incentive to 30% with respect to wellness programs intended to prevent or reduce tobacco use, where the program asks employees to respond to disability-related questions or undergo medical examinations? Effective Date There is no effective date for the proposed rules, and therefore compliance is not mandatory. But the EEOC would likely find a non-complying employer in violation of the ADA. If you sponsor a wellness program that provides incentives to participate, we encourage you to review the proposed EEOC rules and determine what changes may need to be implemented, if any, to comply with the proposed regulations in addition to the existing HIPAA nondiscrimination rules. This summary is provided as an information service to our clients and friends. This summary is not intended, and should not be used, as legal advice or opinion.
27777 FRANKLIN ROAD SUITE 2500 SOUTHFIELD, MICHIGAN 48034 PHONE: 248.351.3000 FAX: 248.351.3082 SOUTHFIELD DETROIT ANN ARBOR NAPLES www.jaffelaw.com Key Differences June, 2015 HIPAA/PPACA EEOC Participatory Wellness Programs No limit on incentive Incentive cap of 30% of total cost of employee-only coverage (even if family can participate) IF the program has the employee provide medical information Reasonable Accommodations Provided Health-Contingent Programs Participatory and Health-Contingent Programs Health-Contingent Wellness Programs 30% of total cost of employee-only coverage, or total cost of family coverage if family eligible to participate Tobacco-Related Incentives Another 20% (for a total of 50%) of total cost of coverage incentive for wellness programs that are designed to reduce tobacco use. Voluntary May require employees to participate in wellness program that administers health risk assessment or a physical exam before eligible to participate in group health plan or a particular benefit option under the plan Required Notice Must disclose the availability of a reasonable alternative standard to qualify for the incentive (and, if applicable, the possibility of waiver of the otherwise applicable standard) in all plan materials describing the terms of a healthcontingent wellness program (both activity-only and outcome-based wellness programs) and a statement that recommendations of an individual s personal physician will be accommodated Incentive cap of 30% of total cost of employee-only coverage (even if family can participate) Incentive cap can be as high as 50% IF there is not nicotine testing involved, otherwise cap of 30% Employer may not require health risk assessment or physical exam to participate in group health plan Additional notice must explain: What medical info will be obtained Who will receive info How info will be used Restrictions on disclosure How confidentiality will be maintained