EEOC’s Proposed Rule Upholds Wellness Plan Incentives


By Karen A. Whitley

The Equal Employment Opportunity Commission (“EEOC”) is updating its regulations under the Americans with Disabilities Act (“ADA”) to provide guidance to employers who offer corporate wellness programs. The EEOC has estimated that nearly 600,000 employers offer some form of wellness program, and that approximately one-third to one-half of those employers ask employees to complete a health risk assessment that likely includes disability-related questions.

The EEOC enforces the ADA, which prohibits employment discrimination against qualified individuals with disabilities. Under the ADA, employers cannot require employees to undergo medical examinations or ask employees whether and to what extent they are disabled, unless the examination or inquiry is job­related and consistent with business necessity. 42 U.S.C. § 12112(d)(4)(A). However, the ADA expressly allows employers to conduct “voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site.” 42 U.S.C. 12112(d)(4)(B).

The crux of the issue is whether a wellness program is truly “voluntary” if an employer rewards or penalizes employees when they do (or do not) participate in the program, or when they meet (or fail to meet) their goals under the program. The EEOC is also concerned about an employer’s ability to discriminate against employees who provide information about a disability in connection with a wellness program.

In 2010, the Patient Protection and Affordable Care Act (“ACA”) approved the use of financial incentives by employers to promote healthy workplaces and therefore lower healthcare costs. In fact, the ACA allowed employers to reward employees up to 30 percent of the cost of coverage for certain wellness programs and as much as 50 percent of the cost of coverage for smoking cessation programs. However, following the implementation of the ACA, the EEOC challenged several employers on the grounds that their wellness plans appeared to be “mandatory,” rather than “voluntary,” because of their incentive or penalty structure, or appeared to constitute an unlawful medical examination or overly-intrusive inquiry into an employee’s disability. The EEOC filed litigation in several jurisdictions, causing employers to wonder how they could take advantage of the programs endorsed by the ACA without running afoul of the ADA.

On April 20, 2015, the EEOC published a Notice of Proposed Rulemaking to clarify its position on the wellness plan incentives that were a feature of the ACA.

The EEOC’s proposed rule seeks to balance the ADA’s goal of limiting employer access to medical information and the ACA’s promotion of wellness programs. The proposed rule would amend the ADA regulations (as well as an EEOC interpretive guidance) to help employers understand the extent to which they may use incentives to encourage employees to participate in wellness programs. The proposed rule includes examples of appropriate wellness programs, as well as a description of permissible incentives that may comply with the ADA and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The EEOC will issue a separate rule about how to ensure that wellness programs comply with the Genetic Information Nondiscrimination Act.

In summary, the proposed rule, which applies only to wellness programs that are part of a group health plan, confirms that:

  • Employers may offer “participatory” wellness programs which do not provide rewards or do not include any conditions for obtaining a reward (such as reimbursement towards a gym membership) as long as those programs are made available to all similarly situated employees.
  • Employers may offer “health-contingent wellness programs,” which may either require an employee to engage in a certain activity or obtain a certain health outcome in order to earn an award.
  • Wellness programs may include health risk assessments and biometric screenings that measure an employee’s health risk factors, such as body weight, cholesterol, blood glucose, and blood pressure levels, so long as the programs are reasonably designed to promote health or prevent disease.
  • Wellness programs must be voluntary, meaning that an employer:
    • may not require an employee to participate in the program;
    • may not deny or limit coverage under any of its group health plans or take other adverse action against employees who do not participate in the program or fail to achieve certain health outcomes;
    • may not retaliate against, interfere with, coerce, intimidate, or threaten employees in connection with their participation, or refusal to participate, in a wellness program;
    • must provide a clear notice explaining what medical information will be required, how it will be used, who will receive it, and how it will be disclosed and protected; and
    • Importantly, a wellness program will not be considered to be “involuntary” if it offers incentives, in the form or a reward or a penalty, not to exceed 30 percent of the total cost of employee-only coverage.
  • Medical information obtained as part of a wellness program must be kept confidential. In particular, medical information gathered as part of an employee’s participation in a wellness program may only be provided to an employer in an aggregate form that does not identify specific employees.
  • Employers must provide reasonable accommodations to enable employees with disabilities to participate and to earn whatever incentives the employer offers.
  • Wellness programs must not discriminate on the basis of genetic information, age, or any other characteristic protected by law.

Public comments on the proposed rule may be submitted through June 19, 2015. As it prepares its final rule, the EEOC is particularly interested in receiving comments on issues related to the “voluntariness” of wellness programs in various situations. In the meantime, employers are encouraged to evaluate whether their corporate wellness programs would satisfy the definition of “voluntary” as stated in the proposed rule, and to ensure that appropriate protections are in place to safeguard and isolate medical information that may be provided as a result of an employee’s participation in a corporate wellness program. Employers are encouraged as well to keep an eye on legislation pending before the United States Congress, entitled the “Preserving Employee Wellness Programs Act.” The legislation emphasizes the strong support for wellness programs as a means of limiting health care costs, and would confirm that it is lawful both to award incentives and to collect medical information about employees’ family members involved in corporate wellness programs. Stay tuned.

* * *

Karen A. Whitley is a shareholder at Sheehan Phinney Bass & Green.

This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.

ADVERTISEMENT – This electronic publication is labeled advertisement in compliance with Federal Law and may be considered advertising under the ethical rules of certain jurisdictions.