Employment Law Update

The Equal Employment Opportunity Commission (EEOC) issued final regulations on May 16, 2016, that describe how employers offering workplace wellness programs can comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The final EEOC regulations are largely consistent with proposed regulations issued by the EEOC last year, and take effect January 1, 2017.

ADA Rules

The ADA generally restricts employers from making disability-related inquiries or from requiring employees to submit to a medical examination. An exception to the restriction applies to voluntary employee health programs, including wellness programs. The regulations set forth a number of factors necessary to demonstrate that a wellness program is voluntary, taking the position that employer incentives (or penalties) that encourage employees to participate in a wellness program can render a plan "involuntary" if they are too high.

The EEOC final regulations provide that incentives (such as reducing the amount an employee is required to pay for employer-provided medical coverage) or penalties (such as imposing an additional charge on the employee for coverage) are acceptable as long as the incentive (or penalty) does not exceed an amount equal to 30% of the total cost (both employer and employee portions) for employee-only coverage. Special rules apply to determine the applicable cost if an employee offers multiple health plans or no health plan.

GINA Rules

The EEOC also issued final regulations under GINA, which impose limitations on wellness programs that offer an incentive/penalty for a participant's spouse to provide medical history through a health risk assessment or through other means. The maximum incentive/penalty is 30% of the total cost for employee-only coverage (with special rules if an employee offers multiple health plans or no health plan). Thus, the maximum combined total incentive/penalty for the participation of an employee and spouse in a wellness program cannot exceed two times 30% (60%) of the total cost for employee-only coverage. No incentive or penalty can be utilized to encourage the provision of information about an employee's child.

HIPAA/ACA Rules

In addition to complying with the EEOC wellness regulations, employers must also comply with existing regulations issued under the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA). The HIPAA/ACA rules categorize wellness programs into two types:

1. Participatory programs (such as programs involving completion of a health risk assessment or attending a smoking cessation class) that do not require an individual to satisfy any goal relating to a health factor, and
2. Health-contingent wellness programs, i.e., programs that offer rewards to or impose penalties on employees who satisfy a goal relating to a health factor (e.g., exercise programs, lowering cholesterol, discounts for nonsmokers).

The HIPAA/ACA rules limit the maximum incentive/penalty that can be offered under a health-contingent wellness program to an amount equal to 30% of the total cost for employee-only coverage (50% for tobacco-related programs). They do not impose restrictions on participatory wellness programs.

Interplay Between the Different Rules

Unlike the HIPAA/ACA rules, the EEOC regulations do not distinguish between wellness programs that are participatory or health-contingent. Rather, the EEOC regulations apply to all wellness programs that request health information or impose a medical examination, including participatory wellness programs. Thus, the EEOC regulations impose a 30% incentive/penalty limitation on a program that reduces the employee's cost of purchasing employer-provided medical coverage if the employee completes a health risk assessment, whereas the HIPAA/ACA rules do not impose any limitations on such an arrangement.

Another significant difference between the EEOC regulations and the HIPAA/ACA rules relates to tobacco-related wellness programs. As noted above, the HIPAA/ACA rules allow an employer to offer a 50% incentive/penalty to participate in a tobacco-related, health-contingent wellness program. In contrast, the EEOC regulations generally limit incentives/penalties under wellness programs (including tobacco-related programs) to 30%.

However, the EEOC regulations only apply if the tobacco-related program asks disability-related questions or requires a medical examination (such as a nicotine test). The EEOC's position is that a program that merely asks employees whether or not they smoke or whether they stopped smoking upon completion of a smoking cessation program does not involve a disability-related question or medical examination.

How a tobacco-related wellness program is structured is critical to determining whether the EEOC and/or HIPAA/ACA restrictions apply. For example, a wellness program that reduces the amount an employee must pay for employer-provided medical coverage if the employee certifies he or she does not smoke is not subject to the EEOC regulations. In that case, the HIPAA/ACA rules limiting the incentive/penalty to an amount equal to 50% of the total cost for employee-only coverage apply.

A different result applies if the employee is required to take a test to confirm non-smoker status. Because a test confirming non-smoker status is a medical examination under the ADA, the more restrictive EEOC regulations limit the incentive/penalty to an amount equal to 30% of the total cost for employee-only coverage.

In addition to imposing limits on incentives and penalties, the EEOC regulations address other elements of what constitutes a voluntary wellness program, including confidentiality requirements and participant notice provisions. The EEOC has indicated that a model notice will be posted on its website by mid-June 2016.

If you have any questions about compliance with these new EEOC regulations, please contact Charles R. Bacharach or Robert C. Kellner.

Charles R. Bacharach
410-576-4169 • cbacharach@gfrlaw.com

Robert C. Kellner
410-576-4239 • rkellner@gfrlaw.com