American Benefits Council
Benefits Byte


April 16, 2015

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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EEOC Issues Long-Awaited Regulations Governing Wellness Programs

In the wake of recent litigation challenging the legality of certain workplace wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA) – as well as related congressional hearings – the Equal Employment Opportunity Commission (EEOC) has released long-awaited proposed rules that amend ADA regulations and interpretive guidance relating to employer wellness programs. Along with the proposed rules, the EEOC also issued a questions-and-answers document and a fact sheet for small businesses.

The proposed rules provide guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations. The ADA restricts employers from obtaining medical information from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations. The statute includes an exception, however, for “voluntary” medical examinations or medical histories which are part of an employee health program available to employees, including workplace wellness programs.

As explained in the Supplementary Information section of the proposed regulations, previous EEOC guidance stated that a wellness program is “voluntary” if an employer neither requires participation by employees nor penalizes employees who do not participate. However, neither the statute nor the EEOC’s existing regulations or other guidance addressed the extent to which incentives may affect the voluntary nature of a wellness program.

As the Council testified in hearings before the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee and the House of Representatives Education and Workforce Subcommittee, the lack of clear guidance from the EEOC regarding the application of the ADA and GINA to employer-sponsored wellness programs has contributed to the sense of legal and regulatory uncertainty for such programs, particularly as the EEOC began to pursue litigation against wellness plan sponsors in late 2014.

The proposed rules explain:

  • what an employee health program is.
  • what it means for an employee health program to be voluntary.
  • what incentives employers may offer as part of a voluntary employee health program.
  • what requirements apply concerning notice and confidentiality of medical information obtained as part of voluntary employee health programs.

The proposed regulations list several requirements that must be satisfied to meet the “voluntary” standard. Specifically, an employer may not require employees to participate, may not deny access to health coverage or limit coverage under its health plans for non-participation and may not take adverse action or retaliate against or take similar actions against employees. In addition, if a health program is part of a group health plan, an employer must provide notice clearly explaining what medical information will be obtained, how it will be used, who will receive it and the restrictions on when such information may be disclosed.

The document also states that “the Commission believes that it has a responsibility to interpret the ADA in a manner that reflects both the ADA’s goal of limiting employer access to medical information and HIPAA’s and the [Patient Protection and] Affordable Care Act’s provisions promoting wellness programs.” Under the proposed regulations, with respect to wellness programs that ask an employee to respond to a disability-related inquiry or undergo a medical examination, an employer may offer limited incentives up to a maximum of 30 percent of the total cost of employee-only coverage (whether in the form of a reward or penalty) to promote an employee’s participation in the wellness program.

Although the Supplementary Information section appears to refer to 30 percent of the total cost of employee-only coverage as “the maximum allowable incentive available under HIPAA and the Affordable Care Act for health-contingent wellness programs,” this appears to be an incorrect characterization of HIPAA and PPACA, which permit incentives of up to 30 percent of the total cost of coverage enrolled in by the employee. Thus, for example, when an individual and his or her spouse are enrolled in family versus self-only coverage, HIPAA and the ACA permit an incentive of up to 30% of the total cost of the family coverage (versus only self-only coverage). Whether the EEOC final rules will clarify that the HIPAA rules apply in this regard apply remains to be seen.

Additionally, PPACA gave the secretaries of Labor, Health and Human Services, and the Treasury authority to increase the reward available up to 50 percent of the cost of coverage if the secretaries determine that such an increase is appropriate. The EEOC proposed rule does not adopt this same flexibility.

The proposed rules also note that compliance with rules concerning voluntary employee health programs does not ensure compliance with all the antidiscrimination laws enforced by the EEOC (such as federal laws prohibiting discrimination based on sex, race or religion, for example). The Supplementary Information section of the proposed regulations also includes a footnote regarding the ADA’s “safe harbor” provision applicable to insurance, which was applied by the court in Seff v. Broward County to find the county’s wellness program ADA-compliant. Specifically, the Supplementary Information section states that the EEOC does not believe that this safe harbor is the “proper basis for finding wellness program incentives permissible.”

The proposed regulations do not address GINA, including whether the use of incentives with respect to spousal health risk assessments (HRAs) or other inquiries regarding the spouse’s medical information implicate GINA. The Supplementary Information section states, however, that a future EEOC rule will address the extent to which Title II of GINA affects an employer’s ability to condition incentives on a family member’s participation in a wellness program.

The EEOC notes that “while employers do not have to comply with the proposed rule, they may certainly do so. It is unlikely that a court or the EEOC would find that an employer violated the ADA if the employer complied with the NPRM until a final rule is issued.” However, the Council understands that EEOC divisional offices may plan to continue to investigate claims of alleged ADA violations regarding employer-sponsored plans, and such offices may rely, in part, on these proposed regulations as part of their investigation and in determining their enforcement posture with respect to a given wellness program.

The U.S. Departments of Health and Human Services, Labor and the Treasury also issued guidance on wellness programs on April 16.

The EEOC is soliciting comments on the proposed regulations through June 19. The EEOC is requesting specific comment on several issues, including whether additional protections for low-income employees are needed; whether to be voluntary under the ADA, the incentives provided in a wellness program “may not be so large as to render the health insurance coverage unaffordable” under PPACA; and whether proposed notice requirements should also include a requirement that employees provide “prior, written, knowing confirmation” that their participation is voluntary.

The Council will schedule a webinar to discuss the proposed regulations in further detail. For further information or to provide input for a Council comment letter, contact Katy Spangler, senior vice president, health policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Departments Issue Clarifying Guidance Regarding Employer Wellness Programs

The U.S. departments of Health and Human Services, Labor and the Treasury have issued “frequently asked question” (FAQ) guidance on a range of issues related to wellness programs. This guidance is in addition to proposed wellness plan regulations also issued on April 16 by the Equal Employment Opportunity Commission (EEOC) on wellness programs.

The agency guidance includes:

Tri-agency Frequently Asked Questions about the Affordable Care Act (Part XXV) address what it means for a health-contingent wellness to be “reasonably designed to promote health or prevent disease,” as required by Public Health Service (PHS) Act Section 2705 – as added by the Patient Protection and Affordable Care Act (PPACA) – and related provisions of ERISA and the Internal Revenue Code that address requirements for wellness programs provided in connection with group health coverage.

According to this FAQ, “a program complies with this requirement if it (1) has a reasonable chance of improving the health of, or preventing disease in, participating individuals; (2) is not overly burdensome; (3) is not a subterfuge for discrimination based on a health factor; and (4) is not highly suspect in the method chosen to promote health or prevent disease.”

The FAQ further explains that a determination is made based on all relevant facts and circumstances and that the “wellness plan regulations are intended to allow experimentation in diverse and innovative ways for promoting wellness. The FAQ also includes examples of programs that would not be considered reasonably designed, or would be scrutinized and possibly subject to agency enforcement action. These include wellness programs “designed to dissuade or discourage enrollment in the plan or program by individuals who are sick or potentially have high claims experience. The FAQ also states that “A program that collects a substantial level of sensitive personal health information without assisting individuals to make behavioral changes such as stopping smoking, managing diabetes, or losing weight, may fail to meet the requirement that the wellness program must have a reasonable chance of improving the health of, or preventing disease in, participating individuals. Programs that require unreasonable time commitments or travel may be considered overly burdensome.”

A second question and answer cautions that compliance with the three departments’ wellness program regulations is not determinative of compliance with other laws, including the tax code, ERISA (including COBRA) or any other state or federal law, such as the Americans with Disabilities Act (ADA) or HIPPA privacy and security requirements.

HHS Center for Medicare and Medicaid Services (CMS) Frequently Asked Questions on Health Insurance Market Reforms and Wellness Programs clarify that (1) an issuer may not limit its offering of a wellness program in connection with a particular health insurance product to only certain employer groups enrolling in that product, (2) rating rules do not prevent an issuer from offering premium discounts, rebates or other incentives for wellness programs other than those designed to prevent or reduce tobacco use, and (3) an issuer may not take into account the penalties or rewards expected to be provided under a wellness program (whether health-contingent or participatory) when establishing the index rate and plan-level adjustments under the single risk pool provision.

HHS Office of Civil Rights Frequently Asked Questions address the application of HIPAA privacy, security and breach notification rules to workplace wellness programs. The guidance describes the circumstances under which the HIPAA rules apply to workplace wellness programs and describes the protections provided by HIPAA, where applicable. According to this document, “where a workplace wellness program is offered as part of a group health plan, the individually identifiable health information collected from or created about participants in the wellness program is [protected health information] and protected by the HIPAA Rules.” The FAQ further states that “Where a workplace wellness program is offered by an employer directly and not as part of a group health plan, the health information that is collected from employees by the employer is not protected by the HIPAA Rules.” Where a workplace wellness program is offered through a group health plan, a second question and answer discusses the protections that are in place under HIPAA with respect to access by the employer as plan sponsor to individually identifiable information of program participants.

The three departments issued final regulations in May 2013 implementing provisions of the Patient Protection and Affordable Care Act (PPACA) related to nondiscriminatory wellness programs (see the May 29, 2013, Benefits Byte for details).

For more information on wellness matters, contact Katy Spangler, senior vice president, health policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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