EEOC Guidance on Incentives to Encourage Employees to Participate in Wellness Programs

26 Jul

The Equal Employment Opportunity Commission (EEOC or Commission) is issuing its final rule to amend the regulations and interpretive guidance implementing Title I of the Americans with Disabilities Act (ADA) to provide guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that ask them to respond to disability-related inquiries and/or undergo medical examinations. This rule applies to all wellness programs that include disability-related inquiries and/or medical examinations whether they are offered only to employees enrolled in an employer sponsored group health plan, offered to all employees regardless of whether they are enrolled in such a plan, or offered as a benefit of employment by employers that do not sponsor a group health plan or group health insurance.

Title I of the ADA prohibits discrimination against individuals on the basis of disability in regard to employment compensation and other terms, conditions, and privileges of employment, including ‘‘fringe benefits available by virtue of employment, whether or not administered by the covered entity.’’ The ADA also restricts the medical information employers may obtain from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations. The statute, however, provides an exception to this rule for voluntary employee health programs, which include many workplace wellness programs.

Additionally, the ADA requires employers to provide reasonable accommodations (modifications or adjustments) to enable individuals with disabilities to have equal access to fringe benefits, such as general health and educational wellness programs, offered to individuals without disabilities. Employers also must comply with other laws the EEOC enforces that prohibit discrimination based on race, color, national origin, sex (including pregnancy, gender identity, transgender status, and sexual orientation), religion, compensation, age, or genetic information.

HIPAA’s nondiscrimination provisions, as amended by the Affordable Care Act, generally prohibit group health plans and health insurance issuers providing group health insurance in connection with a group health plan from discriminating against participants and beneficiaries in premiums, benefits, or eligibility based on a health factor. An exception to the general rule allows premium discounts, or rebates or modification to otherwise applicable cost sharing (including copayments, deductibles, or coinsurance), in return for adherence to certain programs of health promotion and disease prevention.

The 2013 final tri-Department regulations to implement HIPAA’s nondiscrimination provisions discuss two types of wellness programs: ‘‘participatory’’ and ‘‘health contingent.’’ Participatory wellness programs either do not provide a reward or do not include any condition for obtaining a reward that is based on an individual satisfying a standard related to a health factor. Examples of participatory wellness programs include programs that ask employees only to complete a HRA or attend a smoking cessation program. The tri-Department regulations do not impose any incentive limits on ‘‘participatory’’ wellness programs and state that they are permissible as long as they are made available to all similarly situated individuals.

Health-contingent wellness programs, which may be either activity-only or outcome-based, require individuals to satisfy a standard related to a health factor to obtain a reward. Examples of health-contingent wellness programs include a program that requires employees to walk or do a certain amount of exercise weekly (an activity based program) or to reduce their blood pressure or cholesterol level (an outcome-based program) in order to earn an incentive. Incentives offered in connection with health-contingent wellness programs generally must not exceed 30 percent of the total cost of self-only health coverage where only an employee, not the employee’s dependents, is eligible for the wellness program.

There are five requirements for health-contingent wellness programs under PHS Act section 2705 and the 2013 final regulations. Generally, health-contingent wellness programs must be available to all similarly situated individuals and must:

  1. Give eligible individuals an opportunity to qualify for a reward at least once per year;
  2. limit the size of the reward to no more than 30 percent of the total cost of coverage (or, 50 percent to the extent that the wellness program is designed to prevent or reduce tobacco use)
  3. provide a reasonable alternative standard (or waiver) to qualify for a reward;
  4. be reasonably designed to promote health or prevent disease and not be overly burdensome; and,
  5. disclose the availability of a reasonable alternative standard to qualify for the reward in plan materials that provide details regarding the wellness program.

Finally, the 2013 final regulations recognize that compliance with HIPAA’s nondiscrimination rules (as amended by the Affordable Care Act), including the wellness program requirements, is not determinative of compliance with any other provision of any other state or federal law, including, but not limited to, the ADA, Title VII, and GINA.

Published in the Federal Register, the EEOC also issued a final rule to amend the regulations implementing Title II of the Genetic Information Nondiscrimination Act (GINA) that addresses the extent to which employers may offer incentives for an employee’s spouse to participate in a wellness program.

DATES: Effective date: This rule is effective July 18, 2016.

Applicability date: This rule is applicable beginning on January 1, 2017.

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