In May 2016, the Equal Employment Opportunity Commission released long-awaited final regulations clarifying what employers must do so that their wellness plans comply with the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act, commonly known as GINA.1
The EEOC’s two rules explain how employers can use incentives and penalties to encourage employees and their spouses to participate in wellness programs without violating the ADA or GINA.
Why are these EEOC rules important for employers? Mainly because they clarify confusion between different sets of wellness rules. The EEOC’s past interpretations of what was a compliant wellness plan under the ADA and GINA had confused employers for years. More recently, the Department of Health and Human Services’ wellness plan rules under HIPAA, which were amended by the ACA, added even more compliance requirements (we’ll refer to these more recent rules as the “HIPAA/ACA rules”). With these different sets of rules, it became difficult to develop a wellness plan with carrot-and-stick incentives that followed both the HIPAA/ACA rules and the EEOC rules.
When it came to using incentives, employers needed to get it right because there was a lot at stake. Prior to releasing proposed regulations on ADA-compliant wellness plans in April 2016, the EEOC filed lawsuits against employers over wellness plans it considered to be out of compliance with the ADA.2
Then, after the EEOC released proposed regulations under both the ADA3 and GINA4 in 2015, there were still several areas in which these proposed rules did not align with the HIPAA/ACA wellness rules.5 This confusion left employers questioning how to incent wellness plans in a way that wouldn’t expose them to fines and penalties.
What Has Changed?
While the final rules closely resemble the proposed regulations released in 2015, they clarified several areas where there was considerable confusion.
As a general rule, the ADA restricts employers from making disability-related inquiries (e.g., health risk assessments) and medical examinations (e.g., blood tests and biometric screenings) unless the exams and inquiries are job-related and consistent with business necessity. However, such exams and inquiries are permitted under the ADA if they are a part of a voluntary employee health program, including a voluntary wellness program.6
The final ADA regulation clarifies that a wellness plan will be considered voluntary if:
- There is no requirement to participate
- There is no retaliation or other adverse employment action for not participating
- There is no denial or limitation of coverage under any group health plan for not participating, and
- It complies with certain notice, confidentiality and incentive requirements
Another notable clarification in the final ADA regulation pertains to what’s called the bona fide benefit plan safe harbor, which was a safe harbor developed by the courts. Specifically, courts have held that another exception to the above-referenced general rule under the ADA about medical exams and disability-related inquiries is that such exams and inquiries are permitted if they are a part of a bona fide benefit plan’s risk assessment procedures. This means that the wellness plan’s biometric screening or other exam is used for underwriting risks, classifying risks, or administering such risks for a health plan.7 This bona fide benefit plan safe harbor allows employers to require biometric screenings in a wellness program as a condition to enrollment in their group health plan.
In both the proposed and final ADA regulations, the EEOC strongly opposed the courts’ application of this safe harbor to employer-sponsored wellness plans. Specifically, the final ADA regulation reaffirmed the earlier position in the proposed regulation. This was despite the fact that in December 2015, between the release of the proposed and final ADA regulation, a federal district court in Wisconsin ruled in favor of the application of the safe harbor in connection with a wellness plan.8
Another notable, and much-welcomed clarification, is that the final rules rejected a proposed rule that would have required employees to sign a prior, written authorization of their understanding of the voluntary nature of the wellness plan.9 While this authorization requirement was rejected, there are still substantial notice and confidentiality requirements in the final regulation that employers must follow. Fortunately, the EEOC released a helpful Sample Notice that can be used by employers as a model notice for complying with the ADA’s notice requirements.10
Under GINA, an employer’s wellness plan cannot provide inducements to solicit genetic information. The term, “genetic information,” is defined very broadly under GINA, and includes information about an individual’s current or past health status and family medical information, including a spouses’ medical information.
The new final GINA regulation clarified the terms of an applicable exception. The final regulations clarified that, under Title II of GINA, employer-sponsored wellness plans can use incentives and penalties to obtain current and past health information about employees’ spouses;11 this health information is referred to as a manifestation of a disease or disorder.12
The exception requires wellness plans to be reasonably designed, be voluntary, and meet certain confidentiality, notice, disclosure and incentive requirements. One requirement reaffirmed in the final regulation is that the spouse disclosing health information must provide prior, written authorization on a form that clearly explains the type of information that will be obtained, the general purposes for which it will be used, and the restrictions on its disclosure.13
Another clarification applies to the inclusion of children in wellness plans. The new final GINA regulations clarified that incentives and penalties are not permitted in exchange for health information about an employee’s child, regardless of the child’s age.14
Incentive Clarifications (Under Both ADA and GINA)
The final regulations clarified many questions about the application of wellness incentives to both employees and spouses, as well as to different types of plan designs.
The new incentive rules apply only to wellness plans that contain disability-related questions or medical examinations.
They’ve addressed four scenarios:
- If an employer requires employees to be enrolled in a particular health plan in order to participate in the wellness program, the maximum incentive amount is 30% of the total cost of self-only coverage under that plan.
- If an employer offers only one health plan, but employees do not have to be enrolled in the plan to participate in the wellness program, then the incentive limit is 30% of the cost of self-only coverage under the employer’s plan.
- However, if an employer offers more than one health plan, but does not require enrollment in a particular health plan as a condition of participating in the wellness plan, the limit is 30% of the employer’s lowest-cost self-only major medical coverage.
- If an employer does not offer a health plan at all, the incentive limit is 30% of the total cost to a 40-year-old non-smoker purchasing self-only coverage under the second-lowest-cost plan at the metal-tier coverage level of “Silver” on the Exchange in the location of the employer’s principal place of business.15
The final GINA rules apply these same ADA incentive standards to spouses who provide health information to a wellness plan.16
While employers were relieved by these clarifications, and while both the EEOC and IRS released clarifying guidance later in 2016,17 there are still several questions that were not discussed in the regulations or guidance.
For example, questions remain about large and hard-to-quantify incentives. Consider the scenario where raffle tickets for a big prize, like a Mediterranean cruise vacation, are given out to all employees as the incentive (the more points earned, the more tickets), but only one employee can actually win the cruise. How should the employer value this incentive? Should the employer count the value of the prize that is actually earned, the value of the prize that could be earned if each employee could win, or perhaps something in between? For example, the total value of the cruise vacation divided by the number of employees competing to win it? Additionally, other incentives, like a paid day off from work, are also very hard to quantify. If the CEO of a large company is eligible for this wellness incentive, and the valuation of this incentive is based on his/her income, then this incentive could easily exceed the incentive cap.
Employers should approach each of these areas with caution. When calculating incentives, if at least one wellness plan contains either a medical examination or disability-related inquiry, then the employer should generally calculate the total value of all incentives in all wellness plans toward that maximum 30% incentive limit.
When Did These Rules Go Into Effect?
The notice requirements and incentive limits of these final rules—for both the ADA and GINA rules—are applicable to all employer wellness programs on the first day of the plan year that began on or after January 1, 2017. All other provisions of the EEOC’s final regulations are already in effect.
What Should Employers Do Next?
Employers should review their current wellness plan’s notice requirements and incentive/penalty structures with their attorneys, benefits consultants and other advisors to ensure that their plan aligns with the new rules before they go into effect in their 2017 plan year.
If any parts of the wellness plan are out of compliance, employers should amend their wellness policies contained in plan documents, SPDs, benefits guidebooks, employee handbooks, collective bargaining agreements and other employment and benefits policies.
1 Federal Register, “Final Rule, Regulations Under the Americans with Disabilities Act,” 81 Fed. Reg. 31125 (May 17, 2016); Final Rule, “Regulations under the Genetic Information Nondiscrimination Act,” 81 Fed. Reg. 31143 (May 17, 2016).
2 See, e.g., Petition for a Temporary Restraining Order and Preliminary Injunction, EEOC v. Honeywell Int’l Inc., No. 0:14-cv-04517 (D. Minn. Oct. 27, 2014).
3 Proposed Rule, Amendments to Regulations under the Americans with Disabilities Act, 80 Fed. Reg. 21659 (April 20, 2015).
4 Proposed Rule, Genetic Information Nondiscrimination Act of 2008, 80 Fed. Reg. 66853 (Oct. 30, 2015).
5 Compare Final Rule, Incentives for Nondiscriminatory Wellness Programs in Group Health Plans, 78 Fed. Reg. 33158 (June 3, 2013) with 80 Fed. Reg. 21659 and 80 Fed. Reg. 66853.
6 42 U.S.C. § 12112(d)(4)(B); EEOC Enforcement Guidance: “Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act,” (July 27, 2000), Q&A #22
7 See, e.g., EEOC v. Flambeau, Inc., 131 F. Supp. 3d 849, 2015 WL 9593632 (W.D. Wis. 2015); Seff v. Broward Cnty., 691 F.3d 1221 (11th Cir. 2012).
8 EEOC v. Flambeau, Inc., 2015 WL 9593632 at *6. Consistent with the proposed rules, the preamble to the final ADA regulation states that the Flambeau decision applied the safe harbor far too expansively in connection with wellness programs. 81 Fed. Reg. 31125, at 31131.
9 80 Fed. Reg. 21659, at 21664.
10 EEOC, “Sample Notice for Employer-Sponsored Wellness Programs,” (last visited Aug. 22, 2016).
11Final Rule, Regulations under the Genetic Information Nondiscrimination Act, 81 Fed. Reg. 31143 (May 17, 2016); EEOC Reg. §1635.8(b)(2).
12 Code § 9832(d)(7)(A) (defining a “manifestation of a disease or disorder”); ERISA § 733(d)(6)(A) (same); PHSA § 2791(d)(16)(A) (same).
13 81 Fed. Reg. 31143, at 31154-55; EEOC Reg. § 1635.8(b)(2).
14 EEOC Reg. § 1635.8(b)(2)(iii).
15 29 CFR § 1630.14(d)(3).
16 EEOC Reg. § 1635.8(b)(2)(iii)(A)-(D).
17 EEOC “ADA and GINA: Calculating Incentive Limits for Employer Wellness Programs,” July 1, 2016, last visited Feb. 14, 2017; “Tax Treatment of Wellness Program Benefits and Employer Reimbursement of Premiums Provided Pre-tax Under a Section 125 Cafeteria Plan,” IRS Memorandum 201622031, May 27, 2016, last visited Feb. 14, 2017.
- Video: Final Regulations on ADA and GINA Compliant Wellness Plans | July 7, 2016
- Video: Final Summary of Benefits Coverage & Uniform Glossary for 2017 | June 30, 2016
- Video: IRS Clarifies ACA Rules on Disability Periods | May 5, 2016
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