Smart Benefits: EEOC Issues New Rule on Wellness Plans
Monday, May 30, 2016
On May 17, the EEOC issued a final rule to amend the Regulations implementing Title I of the ADA as they relate to employer wellness programs, says employers may provide limited financial and other incentives in exchange for an employee answering disability-related questions or taking medical exams as part of a wellness program, whether or not the program is part of a health plan.
Many wellness programs ask employees to answer questions on a health risk assessment and/or undergo biometric screenings for risk factors (such as high blood pressure or cholesterol). Title I of the ADA, which protects employees from discrimination on the basis of disability, generally restricts employers from obtaining medical information from employees but allows them to ask about employees' health or do medical exams that are part of a voluntary employee health program.
Before this final rule, EEOC's ADA regulations stated that employers may make inquiries and conduct medical exams that are part of a voluntary health program but did not define the term "voluntary" or explain what constitutes a "health program." They also didn’t say whether the ADA allows employers to offer incentives to encourage employees to participate in such programs. Key components of the rule clarify these ambiguities, including:
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• The rule applies to all wellness programs. The ADA makes no distinction between wellness programs that are part of, or outside of, a group health plan. It requires all wellness programs that obtain medical information from employees to be voluntary.
• Inquiries and exams must be reasonable. The ADA allows employers to make disability-related inquiries and require medical exams that are part of a voluntary employee health program as long as they are "reasonably designed to promote health or prevent disease," meaning a program can’t require an overly burdensome amount of time, involve unreasonably intrusive procedures, be a subterfuge for violating the ADA or other laws anti-discrimination laws, or require employees to incur significant costs.
• Employees’ participation must be voluntary. For an employee's participation in a wellness program that includes disability-related inquiries or medical examinations to be considered voluntary, an employer may not require any employee to participate; may not deny an employee who doesn’t participate access to health coverage or prohibit any employee from choosing a particular plan; and may not take any other adverse action or retaliate against, interfere with, coerce, intimidate, or threaten an employee who chooses not to participate in a wellness program or fails to achieve certain health outcomes.
• Employers must limit the allowable incentive. If a wellness program is open only to employees enrolled in a particular plan, the maximum allowable incentive an employer can offer is 30 percent of the total cost for self-only coverage of the plan in which the employee is enrolled.
• Incentive limits apply to participatory and contingent programs. HIPAA and the ACA allow wellness programs that are part of an employer-sponsored group health plan to offer incentives for "health-contingent" programs, which offer rewards to employees who perform activities or impose penalties if they don’t perform an activity or fail to achieve a particular outcome. The regulations implementing HIPAA don’t impose any incentive limits on "participatory" programs (such as programs that only ask employees to attend a smoking cessation class) as long as they are available to all similarly-situated individuals, and incentives are made available regardless of a health factor. Unlike HIPAA and the ACA, the ADA places limits on disability-related inquiries and medical examinations related to wellness programs, regardless of how the information obtained is ultimately used. Therefore, EEOC's final rule makes clear that the limit on incentives applies to any wellness program that requires employees to answer disability-related questions or undergo medical examinations (whether it is participatory or health contingent).
An employer who already provides the required information doesn’t have to create a new notice. However, if an employer doesn’t provide employees with the detailed information about what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure, an employer must create a notice to comply with this rule. The EEOC will provide a sample notice shortly.
The new notice provisions of the final rule and the limits on incentives apply only prospectively to wellness programs as of the first day of the first plan year that begins on or after January 1, 2017, for the health plan used to determine the level of incentives permitted under this rule. If the plan used to calculate the level of incentives begins on March 1, 2017, the provisions on incentives and notice requirements apply to the wellness program as of that date. The rest of the provisions of the rule apply both before and after publication of the final rule.
Rob Calise is the Managing Director, Employee Benefits. of Cornerstone|Gencorp, where he helps clients control the costs of employee benefits by focusing on consumer driven strategies and on how to best utilize the tax savings tools the government provides. Rob serves as Chairman of the Board of United Benefit Advisors, and is a board member of the Blue Cross & Blue Shield of RI Broker Advisory Board, United HealthCare of New England Broker Advisory Board and Rhode Island Business Healthcare Advisors Council. He is also a member of the National Association of Health Underwriters (NAHU), American Health Insurance Association (AHIA) and the Employers Council on Flexible Compensation (ECFC), as well as various human resource associations. Rob is a graduate of Bryant University with a BS in Finance.
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