Labor & Employment Law Daily EEOC finally issues proposed rules on permissible incentives in employer-sponsored wellness programs
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Tuesday, January 12, 2021

EEOC finally issues proposed rules on permissible incentives in employer-sponsored wellness programs

By Pamela Wolf, J.D.

The incentive portions of the EEOC’s earlier wellness rules were determined arbitrary and capricious in August 2017 and vacated in December 2017, with the vacatur’s effectiveness delayed to January 1, 2019.

The EEOC has forwarded to the Federal Register its notices for proposed rulemakings on employer-sponsored wellness programs under the ADA and GINA, both of which have been cleared by the Office of Management and Budget. The proposed rules address the level of incentives that employers may lawfully offer to encourage employee participation in wellness programs that require disclosure of medical information without violating the ADA or GINA. Once published in the Federal Register, there will be a 60-day comment period for both proposals.

“Voluntary” participation. Under HIPAA, as amended by the Affordable Care Act, employers are permitted to offer incentives up to 30 percent of the total cost of health insurance to encourage participation in certain types of wellness programs. However, the ADA requires that employee participation in a wellness program that includes medical questions and exams be “voluntary.” Because the ADA and GINA do not define “voluntary,” the proposed rules would provide that employers may offer no more than a de minimis incentive to encourage participation in wellness programs, with the exception of certain wellness programs that would be permitted to offer the maximum allowed incentive under the 2013 HIPAA regulations.

Long time coming. The proposals come in response to a D.C. federal court’s December 2017 vacatur (AARP v. EEOC) of parts of the EEOC’s ADA regulations describing the incentives that employers may offer as part of wellness programs that ask about employees’ health and/or ask them to undergo medical examinations, and GINA regulations describing the incentives that employers may offer to an employee whose spouse provides current or past health status information as part of a wellness program.

In its December 2017 order, the court stayed the effect of the vacatur to January 1, 2019. The court also observed that, because it had issued its summary judgment decision in August 2017 (determining that the incentive rules were arbitrary and capricious), the EEOC would have more than 16 months to come up with interim or new permanent rules by the time the vacatur took place. The court also said it would hold the Commission to its intended deadline of August 2018 for the issuance of a notice of proposed rulemaking, and that “an agency process that will not generate applicable rules until 2021 is unacceptable.” The court thus “strongly encouraged [the EEOC] to move up its deadline for issuing the notice of proposed rulemaking, and to engage in any other measures necessary to ensure that its new rules can be applied well before the current estimate of sometime in 2021.”

On December 20, 2018, the EEOC published final rules removing the incentive portions of its ADA and GINA wellness rules that had been vacated.

Employers and other stakeholders will no doubt be pleased that the EEOC has finally proposed new rules.

Wellness programs. Many employers that sponsor group health plans also offer health promotion and disease prevention activities—wellness programs—to employees and family members enrolled in health plans, which may be part of the employer’s group health plans, may themselves qualify as group health plans, or may be offered even if an employer does not offer a health plan or health insurance coverage. Many of these wellness programs include disability-related inquiries or medical examinations, such as programs that ask employees to complete a health risk assessment or undergo biometric health screenings that measure their risk factors for certain medical conditions. Other wellness programs may be offered to help employees meet health goals, such as educational classes, onsite exercise facilities, and coaching, which do not require them to provide medical information.

Some employers offer incentives to employees simply to encourage their participation in a wellness program, while others offer incentives for employees to complete an activity related to a health factor or to achieve health outcomes. These incentives may be framed as rewards or penalties; they often take the form of prizes, cash, a reduction or increase in health care premiums or cost sharing, or payroll deductions. Some employers also offer employees’ family members the chance to participate in wellness programs.

ADA protections apply. Wellness programs that do notinclude disability-related inquiriesor medical examinations would not be subject to the EEOC’s proposed ADA rule on wellness programs. However, employers must make any wellness program available to all employees, provide reasonable accommodations to employees with disabilities, and generally comply with the ADA provisions prohibiting discrimination in the terms, conditions, and privileges of employment. Employers also must protect the confidentiality of medical information that they obtain and comply with other laws enforced by the EEOC and other federal agencies, as well as laws regulating wellness programs that are part of, or qualify as, group health plans.

GINA protections also apply. When a wellness program collects medical information from an employee’s family members, GINA is implicated because information about the manifestation of diseases and disorders in family members is considered the “genetic information” of the employee under that statute. Wellness programs also must comply with other laws enforced by the EEOC and other federal agencies and laws regulating group health plans when such programs are part of, or qualify as, group health plans.

Amendments to ADA regulations. The proposed ADA wellness rule would amend provisions in two sections of the EEOC’s ADA regulations: 29 CFR 1630.14(d), medical examinations and inquiries specifically permitted, and 1630.16(f), health insurance, life insurance, and other benefit plans (known as the “safe harbor”), as well as to the interpretive guidance accompanying these sections. The proposed revisions would explain how the ADA’s voluntary requirement and safe harbor provisions apply when determining the extent to which employers may offer incentives for employees to participate in wellness programs that obtain medical information.

Voluntariness. The issue of voluntariness can be viewed differently. Under one view, the court in EEOC v. Orion Energy Systems, Inc., 208 F. Supp. 3d 989 (2016), concluded that voluntariness and incentives are separate issues and that “even a strong incentive is still no more than an incentive.” Under this analysis, deciding whether to forego an award or be penalized for not providing health information is a choice. Another view is that the voluntariness of a wellness program must be determined, at least in part, by deciding what level of incentives offered to employees for their health information fails to give them a meaningful choice.

The proposed rule adopts the view that permitting too great of an incentive would make employees feel coerced to disclose protected medical information to receive a reward or avoid a penalty. The proposal thus states that most wellness programs that include disability-related inquiries and/or medical examinations may offer no more than de minimis incentives to encourage employees to participate.

Safe harbor. In contrast to the EEOC’s 2016 ADA wellness final rule, this proposed rule would apply the ADA’s statutory safe harbor provision to a subset of wellness programs, and thus, health-contingent wellness programs that are part of, or qualify as, group health plans to which the Departments of Labor, Treasury, and Health and Human Services wellness regulations apply are an exception to the de minimis standard. As a result, the proposed rule interprets the safe harbor as permitting health-contingent wellness programs that are part of, or qualify as, group health plans to offer the maximum permitted incentive under the 2013 HIPAA regulations—currently 30 percent of the total cost of coverage or 50 percent to the extent the wellness program is designed to prevent or reduce tobacco use—so long as they comply with the five HIPAA requirements for such plans.

Amendments to GINA regulations. The EEOC also proposes a new rule on incentive levels based solely on its obligation to interpret the substantive provisions of Title II of GINA. The proposal addresses the concerns that the AARP court identified in its ruling that the EEOC’s 2016 GINA wellness final rule came up short under the Administrative Procedure Act; it also proposes other adjustments to the regulations for clarity and consistency. The proposed rule addresses the extent to which an employer may offer incentives to an employee in exchange for the employee’s spouse—or other family member participating in the wellness program—providing information about that family member’s manifestation of disease or disorder and/or for that family member to achieve health outcomes as part of an employer-sponsored wellness program. Notably, information about a family member’s manifestation of disease or disorder is one a type of genetic information about the employee (family medical history) that is not genetic information about the family member for purposes of Title II of GINA.

Keeping in mind. The Commission said that it is mindful of the court’s concern that in its 2016 wellness rule, the EEOC neither adopted standards identical to the HIPAA incentive provisions nor did it consider whether a 30 percent incentive level would result in employees with lower incomes feeling coerced to participate in wellness programs. The Commission also is mindful that another existing federal law—the nondiscrimination rules adopted under HIPAA, as amended by the Affordable Care Act—applies to offering incentives for health-contingent wellness programs that are part of or qualify as group health plans.

Inquiry into actual practices. In the proposed rule, the EEOC also asks several questions as to actual practices and evidence about customary incentive levels to encourage the use of wellness progress as Congress intended. This evidence and comment will inform final decisions about incentive levels going forward.

Incentives to family members. Under the proposed rule, the general prohibition on providing incentives in return for genetic information adopted in the 2010 rule would remain. However, the exception first created in the 2016 wellness rule permitting limited incentives to spouses who provide information about their manifestation of diseases or disorders to wellness programs would be altered significantly. Here, the proposed rule would limit wellness programs to offer a de minimis incentive to all family members, not just spouses, in exchange for family members providing information about their manifestation of diseases or disorders.

What is de minimis? The proposed rule cites some de minimis examples: a water bottle or a gift card of modest value for each participating family member. But a practice such as imposing a substantial surcharge on any employee whose family member does not provide information about their manifested diseases or disorders (i.e., genetic information about the employee) or withholding a reward from an employee whose family members do not provide genetic information about the employee would amount to actions that discriminate in an employee’s terms, conditions, or privileges of employment, insofar as the employee would receive less compensation than similarly situated employees whose family members provided their health information.

Employee’s genetic information. The proposed rule would not alter the prohibition on providing incentives in return for genetic information of an employee in any circumstance other than where an employee’s family member provides information about their manifestation of diseases or disorders and/or achieves health outcomes as part of an employer-sponsored wellness program. Thus, for example, the GINA regulations would continue to prohibit any incentives in exchange for inquiries directed to an employee about the employee’s family medical history or other genetic information.

Comments on under the ADA proposal. In its proposed ADA wellness rule, the EEOC is specifically soliciting comments on the types of incentives that should and should not be considered de minimis:

  • Should de minimis incentives include additional examples other than a water bottle and a gift card of modest value?
  • Would it be helpful to provide examples of incentives other than those given in the interpretive guidance (e.g., a paid annual gym membership or free airline tickets) that would violate the de minimis limit?

Safe harbor. The EEOC also inviting comments from employers, insurance providers, and venders as to how employers use the information from participatory programs that simply require employees to complete a health risk assessment or undergo biometric screening—without requiring employees to achieve any particular health outcomes. The Commission is also interested in comments about the type of information employers obtain from health risk assessments and biometric screenings, and how they actually use the aggregate data they collect.

Invited comments under GINA proposed rule. Under the GINA wellness proposal, the Commission is specifically inviting comments on current practices of employer-provided wellness programs that offer incentives to employees in return for their family members’ provision of information about the family members’ manifestation of disease or disorder, including:

  • Whether employers are offering the maximum allowable incentive established by the 2013 HIPAA regulations for health-contingent wellness programs that are part of or qualify as group health plans in return for family members’ provision of information about their manifestations of diseases or disorders to wellness programs;
  • Whether there are research-based articles, studies, or surveys about the frequency with which employer-provided wellness programs are giving incentives to employees in return for their family members providing information about the family members’ manifestation of disease or disorder, as well as the specific level of those incentives;
  • The impact, if any, that the adoption of a de minimis incentive level under Title II of GINA would have on employer-provided wellness programs that currently use a higher incentive and the relevance of such impact; and
  • Whether additional examples of incentives beyond the examples of a water bottle and a gift card of modest value should be provided to illustrate what would or would not be considered de minimis.

Incentive level. The EEOC is also looking for comments on its rationale for interpreting Title II of GINA to limit employers to providing no more than a de minimis incentive to an employee in return for a family member providing information about their manifestation of disease or disorder to a wellness program. Given the AARP court’s determination that the need to harmonize the incentive levels adopted under Title II of GINA with those allowed under the 2013 HIPAA regulations alone is insufficient to justify the adoption of an incentive level as high as that currently allowed under the 2013 HIPAA regulations, comments are invited on:

  • Possible justifications under Title II of GINA for adoption of a higher than de minimis incentive level for health-contingent wellness programs that are part of or qualify as a group health plan;
  • The maximum amount of such an incentive.

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