EEOC Issues Final Rules on Wellness Plan Incentives

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By Kevin McGowan

May 16 — Employers can offer limited financial incentives to encourage employees and their spouses to participate in workplace wellness plans and remain in compliance with the Americans with Disabilities Act and Genetic Information Nondiscrimination Act, the EEOC said in two final rules issued May 16.

The agency rules amend existing GINA regulations and create new ADA regulations that detail how employers can offer inducements for wellness plan participation while ensuring they don't coerce employees or their covered spouses to submit to involuntary medical exams or to divulge genetic information, which includes family medical history.

The new rules allow employers to offer employees and their spouses inducements of up to 30 percent of the costs of self-only coverage. The inducement limits apply both to participatory and health-contingent wellness plans. In contrast, the Health Insurance Portability and Accountability Act and the Affordable Care Act and their implementing regulations limit only financial inducements for health-contingent plans and provide for up to 50 percent of a discount on employee insurance costs for tobacco-cessation programs.

The Equal Employment Opportunity Commission's final rules drew criticism from employer representatives, but even harsher reactions from civil rights advocates. Republican leaders of the relevant Senate and House committees vowed to pursue a legislative solution as well as floor action to block the final rules.

Rules Criticized on All Sides

Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-Tenn.) said the EEOC's departure from wellness plan regulations issued by other agencies under HIPAA and the ACA create the potential for great confusion.

“The EEOC is taking away authority that Congress gave the administration and overruling the actions of the Departments of Health and Human Services, Labor and Treasury,” he said in a statement May 16. “Today’s rules contradict the law and continue the confusion the agency has caused, so Congress will need to act to help employees seeking to improve their health, while bringing down their insurance costs.”

Alexander said he will push for passage of the Preserving Employee Wellness Programs Act (H.R. 1189, S. 620) to reaffirm existing law (43 PBD, 3/5/15). Alexander also may introduce resolutions of disapproval under the Congressional Review Act to overturn the EEOC rules, he said.

In a May 16 statement, a U.S. Chamber of Commerce official said the EEOC “has created rules that layer complicated, confusing and contradictory requirements over an area which is already highly regulated.”

The EEOC rules “will have a chilling effect on the development, implementation, and innovation of workplace wellness programs, which Congress intended to be used as tools to improve employees' health and to lower health care costs,” said Randy Johnson, the Chamber's senior vice president of labor, immigration and employee benefits.

The Chamber is a “staunch supporter” of the ADA and has “long championed” the adoption and expansion of workplace wellness programs, Johnson said. But the EEOC's rules are “anything but consistent with the existing laws” and fail to promote wellness programs that enjoy bipartisan support, he said.

Meanwhile, civil rights and disability rights advocates expressed disappointment about what they see as the EEOC rolling back employee protections under the ADA and GINA.

The message of both rules seems to be that employees can be compelled to pay financial penalties for asserting their statutory rights to avoid medical exams and to keep medical information private, said Jennifer Mathis of the Bazelon Center for Mental Health Law in Washington.

That's a retreat from the EEOC's prior position under past GINA regulations that said any financial penalty made involuntary an employee's surrender of protected information, Mathis told Bloomberg BNA May 16.

The EEOC's final rules “create real cause for concern” because they “undermine essential protections” against unlawful discrimination in employment and insurance, said Judith Lichtman, senior adviser for the National Partnership for Women & Families in Washington.

“These new rules take the country in the wrong direction by allowing for coercive practices, so employees have to either share private medical information with employers or pay appreciably more for health insurance,” Lichtman said in a May 16 statement.

If employers can shift costs and withhold rewards from employees with health problems, “women, workers of color, older workers and those with disabilities” will suffer, Lichtman warned.

The ACA “has been the greatest advance for women's health in a generation” and wellness plans encouraged by the ACA create avenues for employers to “educate employees” about wellness goals, Lichtman said. But under the EEOC's final rules, “a real threat” exists that some wellness programs “will be punitive and create opportunities to discriminate,” she said.

Two Democrats on the House Education and the Workforce Committee commended the EEOC for issuing the final rules, but expressed reservations about the agency's product.

“These programs work best when they are truly voluntary and workers and their families do not feel coerced into participation or face undue financial burden if they decline to participate,” said Rep. Bobby Scott (D-Va.) and Frederica Wilson (D-Fla.) “We remain steadfast in our belief that the EEOC must ensure employees provide their private health information to these programs voluntarily, and employers must put adequate safeguards in place to protect the private health information of workers who participate.”

Although the final rules improved the EEOC's proposed rules, “we believe that these changes fall short of achieving these goals,” Scott and Wilson wrote. Scott is ranking Democrat on the full committee, while Wilson is the ranking Democrat on the Workforce Protections Subcommittee.

New Rules Apply Beginning 2017

Both the ADA and GINA final rules take effect on the first day of the first employer health plan year that begins on or after Jan. 1, 2017.

That means if the health plan used to calculate the permissible incentives starts Jan. 1, then the rule begins to apply for that employer that day. But if an employer's health plan year begins later than Jan. 1, then the ADA final rule applies on that later date in 2017 when the new health plan kicks in, the EEOC said.

Employer representatives told Bloomberg BNA that since health-care plan design begins well before open season for enrollment, employers soon will begin to tweak their plans to comply. The EEOC grace period is appreciated, but another year for compliance would have been even better, Mark Wilson of the HR Policy Association in Washington said May 16.

The final ADA rule (RIN:3046-AB01) provides that wellness programs that ask questions about employees' health or include medical examinations may provide participation incentives of up to 30 percent of the total cost for self-only insurance coverage. The final GINA rule (RIN:3046-AB02) similarly provides that the maximum incentive offered for an employee spouse's participation may not exceed 30 percent of the total cost of self-only coverage.

Those amounts conflict with the larger inducements that employers can offer under HIPAA and the ACA, as interpreted in 2013 regulations issued by the departments of Labor, Treasury and Health and Human Services (104 PBD, 5/30/13).

Employer representatives also expressed dismay that the EEOC limits incentives for tobacco cessation programs to the same 30 percent, rather than the 50 percent of employee insurance costs that's allowed under HIPAA and ACA regulations.

The EEOC's final rules under the ADA apply to all employer-sponsored wellness programs that include disability-related inquiries and medical exams, not just those programs offered as part of a group health plan. Similarly, the GINA rule applies to all health plans that offer wellness programs including spousal coverage.

The EEOC “worked to harmonize HIPAA's goal of allowing incentives to encourage participation in wellness programs with ADA and GINA provisions that require that participation in certain types of wellness programs is voluntary,” EEOC Chair Jenny Yang said in a May 16 statement. “These rules make clear that the ADA and GINA provide important safeguards to employees to protect against discrimination.”

The EEOC issued its proposed rule under the ADA in April 2015 (74 PBD, 4/17/15).

The agency subsequently received nearly 2,750 public comments on the proposal (127 PBD, 7/2/15).

The EEOC issued the proposed GINA rule last October (210 PBD 210, 10/30/15). That proposal drew more than 90 public comments (26 PBD, 2/9/16).

No ADA ‘Safe Harbor,' EEOC Says

The ADA final rule adds a new provision explicitly stating that the act's insurance “safe harbor” provision doesn't apply to wellness programs even if they are part of an employer's health plan.

The U.S. Court of Appeals for the Eleventh Circuit has reached the opposite conclusion and a federal district court in Wisconsin in January rejected the EEOC's interpretation of the safe harbor provision (03 PBD, 1/6/16). The EEOC has appealed that ruling in EEOC v. Flambeau Inc. to the Seventh Circuit).

The final ADA rule retains a provision in the proposed rule that wellness plans that include disability-related inquiries or medical exams must be “reasonably designed” to “promote health or prevent disease.” That provision had drawn criticism from employer representatives who said the EEOC lacks authority to evaluate wellness plan design.

But the EEOC final rule says a wellness program can't require an overly burdensome amount of time for participation, involve unreasonably intrusive procedures, be a subterfuge for unlawful discrimination under the ADA or other anti-bias laws, or require employees to incur significant costs for medical exams.

To ensure a program is voluntary under the ADA, an employer must provide covered employees with a notice that clearly explains what medical information will be obtained, how that information will be used and the restrictions on disclosure. The employer may have to create a new notice to comply with the ADA rules if its brochure or e-mail describing the wellness program doesn't already include this information, the EEOC said.

The final rule doesn't change the ADA proposal's language regarding confidentiality, but it adds two new requirements, the EEOC said.

An employer may only receive information collected by a wellness program in aggregate form that doesn't disclose and isn't reasonably likely to disclose specific individuals' identities except when such individual data is necessary to administer a health plan. Second, an employer generally can't require employees to agree to the sale, exchange, sharing, transfer or other disclosure of their medical information or to waive confidentiality protections as a condition of wellness plan participation or to receive an incentive.

The rules are scheduled to be published in the Federal Register May 17.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

Text of the final ADA rule is at http://src.bna.com/e0x and of the final GINA rule is at http://src.bna.com/e0y.