On Monday, May 16, the Equal Employment Opportunity Commission (EEOC) released its final rule to amend regulations under Title I of the Americans with Disabilities Act (ADA). This final rule provides guidance about the extent to which employers may pay incentives or provide rewards to encourage employees to participate in a wellness program that involves a disability-related inquiry (like a health risks assessment (HRA) or a medical examination (like a biometric screening)). The final rule is effective prospectively as of the first day of the first plan year beginning on or after January 1, 2017, for the health plan used to determine the wellness program incentives.
In April 2015, the EEOC published a Notice of Proposed Rulemaking, giving industry stakeholders their first look at how the EEOC might address the ADA’s voluntary requirement for wellness programs, and whether that guidance would be consistent with HIPAA’s wellness regulations and incentive limits. The final rule made few changes to the big-ticket items addressed in the Notice of Proposed Rulemaking.
Keep in mind that the final rule applies to “employee health programs” – in other words, all wellness programs that include disability-related inquiries or medical examinations, regardless of whether the wellness program is connected to an existing group health plan. Not all wellness programs include disability-related inquiries or medical examinations. For example, lunch-and-learn programs or seminars on nutrition or weight loss, or activity-based programs that require employees to exercise or walk, may be exempt from the final rule depending on the program’s design.
We’ve listed the five important changes for wellness programs below.
- No Gateway Plans: The EEOC is aware of a trend in the marketplace used by some employers to base eligibility for a particular plan or cost-sharing structure on the completion of an HRA or participation in a biometric screening. The EEOC made clear that the ADA prohibits “the outright denial of access to a benefit available by virtue of employment” and concluded that such plan designs discriminate against the employee in violation of 42 U.S.C. 12112(d)(4). Employers that currently utilize gateway plans should prepare to align their wellness program structure with the requirements of the final rule.
- New Notice Requirement: For a wellness program to be considered voluntary, employers must meet certain conditions. One of these conditions is a new notice requirement. Employees participating in wellness programs that involve disability-related inquiries or medical examinations must be given a notice that describes (a) the type of information to be collected, (b) the purpose for which the information will be used, (c)the restrictions on disclosure of the information, (d) any employer representatives or other parties with whom the information will be shared, and (e) the methods used to ensure the information will not be improperly disclosed. To the extent employers already provide communication pieces to employees that include the required information, an employer may continue to do so. If the required information is not provided in existing communications, the employer must revise current communications or develop a new communication that addresses the required information. The EEOC plans to publish a sample notice on its website in the next 30 days.
- Incentive Limitations – Not Tobacco Related: The final rule retains the 30% cap on incentives from the Notice of Proposed Rulemaking, but clarifies how the limitation must be calculated. The limitation is based on the cost of self-only coverage. The calculation methods in the final rule address four scenarios: (1) incentives provided to employees when participation in the wellness program is limited to employees enrolled in the plan; (2) incentives provided to employees when the employer offers only one group health plan and participation in the wellness program is offered to all employees regardless of enrollment; (3) incentives provided to employees when the employer offers more than one group health plan and participation in the wellness program is offered to all employees regardless of enrollment; and (4) incentives provided to employees when the employer does not offer a group health plan. Employers with wellness programs that involve an HRA or biometric screening are encouraged to consult with legal counsel or their benefits adviser to determine which calculation method applies and whether the incentive or penalty currently offered is consistent.
- Incentive Limitations – Tobacco Related: The 30% incentive limitation referenced above applies to programs that offer both a non-tobacco related incentive and a tobacco related incentive. This is a significant difference between the HIPAA nondiscrimination regulations for wellness programs and the EEOC final rule. Under HIPAA, employers may provide an incentive of up to 50% of the cost of coverage for participation in a program designed to prevent or reduce tobacco use. However, under the EEOC final rule, such a program would be subject to a total incentive cap of up to 30% of the cost of self-only coverage. This limitation applies if the program involves a medical examination, like a cotinine test administered as part of a biometric screening or on a stand-alone basis. A wellness program that merely asks an employee whether or not they use tobacco is not subject to the lower 30% limitation, as the EEOC clarifies that such a program does not involve a disability-related inquiry or medical examination. Employers with programs designed to prevent or reduce tobacco use should evaluate the design of the tobacco component of their to determine the appropriate incentive limitation.
- Confidentiality: The final rule reiterates the ADA’s confidentiality protections for medical records. Generally, wellness programs that are connected to a group health plan or wellness programs that meet the definition of a group health plan are subject to HIPAA’s privacy and security protections. The EEOC’s interpretive guidance states that it is likely wellness programs that must comply with HIPAA’s Privacy Rule will also be compliant with the ADA’s confidentiality protections. However, for wellness programs that are not subject the HIPAA, the EEOC’s final rule clarifies the confidentiality protections that apply to such a program. Under these protections, employers offering wellness programs subject to this final rule are only permitted to receive information collected as part of the wellness program in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals except as necessary to administer the plan or as permitted by the regulations. The ADA’s confidentiality protections also prohibit employers from requiring an employee to waive the ADA’s confidentiality protections, or agree to the sale, transfer, or other disclosure of their medical information as a condition for participating in the wellness program or receiving an incentive for participation. The publication of this final rule, together with Phase 2 of the HIPAA Audit Program, indicate a renewed focus on compliance with the confidentiality, privacy, and security measures designed to protect employee medical records and other health information.
So what does this mean for employer wellness programs? Employers with wellness programs involving health risks assessments, medical questionnaires, or biometric screenings should familiarize themselves with the requirements under the rule. Employers with calendar year plans are encouraged to act quickly to work with their legal counsel and benefits consultant, as the work necessary to renew the plan and handle both Form W-2 and Form 1094-C and 1095-C reporting by the end of January 2017 will make for a busy third and fourth quarter of 2016. For more information, see the EEOC’s fact sheet and FAQ on the final rule. We will address the EEOC’s final rule amending Title II of the Genetic Information Nondiscrimination Act (GINA) as it relates to wellness programs in a separate post.