Synopsis: For years, employers have struggled to understand what level of incentives in wellness programs might be considered “voluntary” under the Americans with Disabilities Act (ADA). After earlier guidelines were challenged and ultimately thrown out by a federal court, the EEOC has finally issued its long-awaited, revised guidelines under the ADA and the Genetic Information Nondiscrimination Act (GINA). As described in this alert, the newly proposed rules would generally limit incentives to “de minimis” levels for so-called “participation-only” wellness programs, while deferring to HIPAA’s guidelines for “health-contingent” wellness programs.
Brief Background on Federal Laws Governing Wellness Programs
Employers generally offer wellness programs to promote health and disease prevention within their workforce. Despite these noble intentions, a variety of federal laws govern such programs with the intent of balancing workforce health against the risks of employment discrimination on the basis of adverse health conditions or genetic information. While not an exclusive list, employer wellness programs are generally governed by some or all of the following federal laws (depending on the design of the program):
Health Insurance Portability and Accountability Act (HIPAA)
HIPAA generally breaks wellness plans/programs into two categories:
Participation-Only Wellness Programs. These include wellness programs that do not require participants to achieve a specific health outcome, but instead simply require them to take a certain action (e.g., obtain a flu shot, submit to a biometric screening, take a health risk assessment). HIPAA does not impose any requirements upon these types of programs, other than require that they be made available to similarly situated participants. These types of programs are regulated by, and the target of, new guidelines under the ADA, as described below.
Health Contingent Wellness Programs. Health contingent wellness programs are those that require participants to attain a certain outcome or meet a health standard (e.g., run a 5k, maintain a certain cholesterol level, cease smoking, maintain a certain Body Mass Index (BMI)). These types of programs are required to comply with five standards under HIPAA:
The program must be reasonably designed to promote health or prevent disease.
Any reward offered cannot exceed 30% of the cost of coverage elected by the participant (increase to 50% for programs involving a tobacco cessation component).
The full reward must be available to all similarly situated individuals unless the program offers a reasonable alternative for obtaining the reward. (Note that different requirements apply for activity-only and outcome-based programs.)
Participants must be notified of the availability of the reasonable alternative.
Participants must be given the opportunity no less frequently than annually to attain the reward.
Americans with Disability Act
The ADA applies to employer-sponsored wellness programs that include a medical exam or disability-related inquiry. Examples of the types of programs that might be subject to the ADA include health risk assessments that involve medical questions or biometric screenings. Smoking cessation programs are not necessarily subject to the ADA unless smoking status is determined based on a biometric screening (medical exam) instead of a self-certification.
The ADA generally permits employers to make medical examinations or inquiries in connection with a wellness program, but only if such program is “voluntary.” For years, employers have struggled in determining what constitutes a “voluntary” program for these purposes. In 2016, the EEOC finally issued regulations establishing certain parameters to assist employers in determining whether a program would be considered voluntary. Generally, those standards included the following:
The program is reasonably designed to promote health or prevent disease, is not overly burdensome, and is not a subterfuge for discrimination.
The program is not a “gateway plan”, requiring employees to submit to a medical exam or inquiry in order to access an enhanced benefits package.
Incentives to participate do not exceed 30% of the cost of self-only
The program offers a reasonable accommodation for persons for whom it is medically inadvisable to participate.
Participants are provided with a notice informing them of why their information is being requested, how it will be used, and how it will be protected.
Shortly after the rules were issued, the AARP challenged the EEOC’s interpretation of the voluntariness standard, arguing that they exceeded their regulatory authority in permitting incentives of up to 30% of the cost of coverage. The District Court agreed, and it struck down that portion of the rule effective as of January 1, 2019 (the rest of the rule remained in force).
The newly proposed rule (described below) is intended to address the Court’s directive that the EEOC reissue guidelines that engage in a more thorough process detailing how it determined that the incentive level met the ADA’s voluntary standard.
Genetic Information Nondiscrimination Act
GINA is generally intended to prevent employers from discriminating against employees on the basis of genetic information. The law broadly restricts employers from incentivizing employees to provide genetic information or to provide medical information about family members.
In 2016, the EEOC issued guidelines that established parameters for how employers may collect genetic information or information about family members without running afoul of GINA guidelines. Under those rules:
Individuals must provide a knowing, voluntary, written authorization prior to disclosing such information.
Employers may not offer an incentive that exceeds 30% of the cost of self-only coverage in soliciting genetic information from the spouse of an employee.
Employers could not offer any inducement for genetic information about an employee’s child.
In the same legal challenge described above, the District Court struck down the EEOC’s 30% threshold as applied to GINA (the rest of the rule remained in force). The rule described below attempts to issue new guidelines in accordance with the Court’s directive.
Highlights of the New ADA Rule
The EEOC’s proposed rule takes a similar approach to the earlier HIPAA rule, splitting wellness programs into two categories and applying different rules to each:
Participation-Only Wellness Programs. The proposed rule targets participation-only wellness programs, limiting incentives offered in connection with such a program to a “de minimis” standard. Any incentive offered that exceeds that threshold would be considered involuntary, in violation of the ADA. The rule offers the following examples:
Permissible Incentives: water bottles or gift cards of modest value
Impermissible Incentives: a paid annual gym membership or free airline tickets
The EEOC’s proposed rule requests comments on whether additional examples would be helpful.
Health Contingent Wellness Programs. The EEOC’s proposed rule would offer a “safe harbor” for any health contingent wellness program offered as part of a group health plan. Under the safe harbor, the program would be deemed to be in compliance with the ADA if it complies with the HIPAA rules described above.
Notably, the rules also appear to eliminate the previously-required ADA notice described above. The EEOC explained that because incentives will no longer be able to exceed a de minimis threshold, no such notice would be required to ensure voluntariness.
Highlights of the New GINA Rule
Under the proposed rule, employers can offer incentives to encourage employees or their spouses to provide genetic information, but those incentives must be no more than de minimis. In a departure from the earlier rule, employers may offer incentives to encourage provision of genetic information of dependent children as well (as long as those incentives are no more than de minimis).
Timing/Effective Date of EEOC Rules
The new EEOC guidelines are in proposed form, and the EEOC is soliciting comments for 60 days following the date the rules are published in the Federal Register. The EEOC will review any comments received before issuing a final rule. Until the rules are final, the EEOC has stated that they are “simply proposals and they do not change the law or regulations.” It would be important to caveat these comments though as follows:
Regulatory Freeze. As is common in new administrations, the Biden Administration has announced it intends to implement a broad-based regulatory freeze on all pending rules upon entering office. Presumably this rule will be included, although it is unclear whether the rule will ultimately be adopted by the new administration.
Interim Interpretation of ADA’s Voluntariness Standard. Even in the absence of this rule, the ADA remains an active law, including its undefined requirement that wellness programs must be voluntary. Participants in a wellness program could challenge any form of incentive on the basis that it renders the program involuntary (and there are pending lawsuits in which plaintiffs allege a seemingly reasonable incentive renders the program involuntary). There is some risk that a plaintiff could seize upon this proposed rule to argue that any incentive that exceeds a de minimis threshold is involuntary. To be clear, the current rule is only in proposed form and, as noted, the EEOC has made clear it is not “law.” But, employers should keep this proposal in mind as they implement new or review current wellness plans.
Considerations for Employers in Designing Wellness Programs
If finalized, this rule could lead to some employers to either scale back their participation-only wellness programs or to gravitate toward health-contingent wellness programs. Under these rules (and the HIPAA guidelines), employers would have far greater flexibility to incentivize behavior under health-contingent programs.
Similarly, the regulatory agencies have indicated in prior, non-binding guidance that a participation-only wellness program might be considered a health contingent wellness program if it only targets participants based on health status (e.g., if only diabetics have to take a biometric screening). Employers might consider offering more targeted programs based on health status in the hopes of avoiding the more restrictive ADA “de minimis” standard. Under this approach, the wellness program would need to comply with the other HIPAA requirements as discussed above.
Finally, we understand that many employers are considering whether and to what extent to incorporate a mandatory or incentivized COVID vaccination program into their current wellness design. These rules have the potential to impact any such design. Click here for more on vaccine-related wellness considerations.