EEOC's Proposal on Wellness Plans and ADA Has Employers Cautiously Optimistic

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By Kevin McGowan

May 22 — The Equal Employment Opportunity Commission's proposed rule regarding the Americans with Disabilities Act's effects on employer-sponsored wellness programs is a “step in the right direction” toward easing employers' concerns the EEOC will find ADA violations if they offer employees financial incentives to participate, according to management lawyers interviewed by Bloomberg BNA.

But the EEOC's proposal (RIN 3046-AB01), published in the Federal Register April 20, also raises concerns to the extent it differs from existing regulations implementing the Affordable Care Act and potentially imposes additional administrative burdens on employers that offer wellness programs as part of their group health-care plans, the lawyers said.

“We're pretty happy” with the EEOC's proposal if “we can get certain issues fixed,” said Adam Solander of Epstein Becker Green in Washington, who represents employers that offer wellness programs.

Meanwhile, a disability rights advocate expressed disappointment that the EEOC has said a wellness plan that includes medical exams and inquiries can be “voluntary” under the ADA even if an employer financially penalizes employees that decline to participate and disclose their medical information.

That approach seems directly at odds with the EEOC's 2010 final regulations under the Genetic Information Nondiscrimination Act, in which the agency said an employer can't offer financial inducements for an individual's genetic information and still fit within a GINA exception for “voluntary” disclosure, according to Jennifer Mathis, director of programs at the Bazelon Center for Mental Health in Washington.

The introduction to the EEOC proposal states an interest in conforming its ADA regulations with the Affordable Care Act, but the agency's proposed rule is inconsistent both with the ACA and the EEOC's own GINA regulations, Mathis told Bloomberg BNA May 8.

Public comments on the EEOC's proposal are due June 19.

Disparity in Incentives of Concern 

Lawyers representing employers that offer wellness plans said they are pleased that the EEOC has said financial incentives don't render a group health wellness plan involuntary under the ADA.

But the EEOC proposal also caps the maximum allowable incentive at 30 percent of the cost of employee-only coverage, which doesn't jibe with the financial incentives permitted under the ACA and its implementing regulations, the management lawyers said.

Under the ACA, an employer can offer incentives up to 30 percent of an employee's total health insurance costs, including premiums for family coverage. Also, the ACA limits apply only to health-contingent wellness programs, not to participatory wellness programs, so there's no limit on the incentives employers can offer for participatory programs that don't track individuals' health outcomes.

But the EEOC's 30 percent incentive limit applies to health-contingent and participatory wellness programs, if the program includes medical exams or inquiries. And the EEOC proposal doesn't include a separate 50 percent incentive permitted by the ACA regulations for an employee's enrollment in a tobacco cessation program.

The “good news” is the EEOC allies itself with the existing regulations under the ACA issued by the departments of Labor, Treasury and Health and Human Services, according to Gretchen Young, general counsel with the ERISA Industry Committee in Washington.


How to Calculate Incentive?

But the “key ambiguity” in the EEOC's proposal is how to calculate the incentive, Young told Bloomberg BNA May 4.

The ACA tri-agency regulations allow employers to offer more generous monetary incentives for participation in wellness programs, including 30 percent off an employee's cost for family coverage if an employee's family members also can participate in the wellness program, said Mark Girouard of Nilan Johnson Lewis in Minneapolis.

If the EEOC proposal is finalized without significant changes, employers offering wellness programs would be subject to “different standards” under the EEOC and tri-agency regulations, Girouard told Bloomberg BNA May 22.

The EEOC's proposed 30 percent maximum incentive is “a far smaller amount” than an employer currently can offer under the ACA regulations, said Solander of Epstein Becker.

It's also troubling that the EEOC proposal doesn't include the tobacco cessation incentive provision, Solander told Bloomberg BNA April 29. Presumably the EEOC instead would wrap any incentives for smoking cessation into the overall 30 percent limit, he said.

Under the EEOC proposal, there's a danger “the ‘incentive' becomes so small it may not act as an incentive” for employees to participate in wellness programs, said Frank Morris, also with Epstein Becker in Washington.

Multiple Notices Potential ‘Headache.'

The EEOC's proposal includes a written notice requirement stating that the employer must clearly explain to employees offered a wellness program what medical information will be obtained, how the information will be used, the restrictions on its disclosure and the methods the employer will use to prevent improper disclosure.

The EEOC's proposed rule permits disclosure to employers of medical information obtained by wellness programs “only in aggregate form,” except as necessary to administer the health plan.

To the extent that the EEOC would require employers to provide notice “separate and above” that already required by the Health Insurance Portability and Accountability Act, it could cause administrative “headaches” that create a “disincentive” to offer wellness programs, Girouard said.

Solander also expressed misgivings about the EEOC's notice provision. Under the ACA's tri-agency regulations, an employer already must provide participants with notice of “alternative pathways” to achieve a wellness plan's health objectives, he said.

The EEOC notice is “going to be duplicative” and “could raise problems” in getting employees to sign acknowledgments that they've received, read and understood the notice, Solander said. It's already “very difficult” to get employees to return signed notices, so the EEOC proposal could “really hinder” wellness plan participation, he said.

If an employer can't offer one “blanket notice” that would satisfy its ADA, ACA and HIPAA obligations, it's “likely to chill the willingness to offer” employee wellness plans as part of group health coverage, Girouard said.

Affordability, Plan Design Could Be Problems 

The EEOC also is seeking comment on whether additional protections for low-income employees may be needed to ensure their participation in a covered wellness program truly is voluntary under the ADA.

That suggests that the EEOC may require employers to test the “affordability” of health care coverage for each of its plans for each employee, Girouard said.

“If that suggestion becomes the rule, then the same wellness plan incentives could be voluntary for some employees, and non-voluntary for others, which would obviously create significant administrative headaches,” he said.

Another “potential problem area” is the EEOC's discussion and request for comments on the “reasonable design” of wellness plans, Morris said. Under HIPAA and the ACA, wellness plans must be reasonably designed to achieve positive health outcomes.

The tri-agency regulations under the ACA give employers “a fair amount of leeway” on setting up their wellness programs, Morris said. But the EEOC's proposal threatens to make the agency an “arbiter” of how such programs are designed, he said. Morris expressed doubt the EEOC really is authorized to do so under the ADA.

Disfavoring Wellness Programs?

The EEOC's proposal in some respects is “a death by a thousand cuts” regarding wellness programs, Solander said. The agency's proposal could be seen as “disfavoring” wellness programs, he added.

Although the EEOC says consistency with the ACA and the tri-agency regulations is important, it's striking how much the EEOC proposal veers away from the health care law and its implementing regulations, Morris said.

Morris emphasized that wherever the EEOC lands with its final rule, the agency must give employers plenty of lead time to modify wellness programs. An employer can't just “turn around” its group health plan provisions except during the plan's open season, he said.

The effective date of an EEOC final rule has to be “somewhat realistic,” Morris said. He suggested a final rule effective for plan years that begin Jan. 1, 2017, or later, for example, would provide appropriate lead time for employers. An EEOC rule that took effect “immediately” or within 30 days would be a problem, Morris said.

The EEOC's proposal diminishes the prospects for congressional action on Republican-backed legislation (H.R. 1189, S. 620) addressing wellness programs, said Young of the ERISA Industry Committee. Employers also are relieved the EEOC apparently will refrain from suing employers under the ADA regarding wellness programs while its proposed rule is pending, she said.

“My employers will comply with just about anything” provided they know the rules, Young said. The EEOC proposal has eased employers' anxieties about whether federal law permits financial incentives for participation in wellness plans encouraged by the ACA, she said.

Disability Rights Advocate Disappointed

The EEOC's proposal allowing financial penalties or incentives is “not a surprise,” but it's disappointing from the perspective of disability rights groups to see the agency apparently “walk back” the ADA's protections, said Mathis of the Bazelon Center.

The EEOC's rationale “seems a little perplexing” as the agency says it needs to conform ADA regulations with separate health care laws—the ACA and HIPAA—that have different purposes and can coexist with the ADA, Mathis said.

This is “exactly the same set of concerns” the EEOC faced in developing its GINA rules, but the agency then decided “voluntary” in the GINA context meant an employer couldn't impose financial penalties or offer inducements for disclosure of an individual's genetic information, Mathis said.

The EEOC should reach the same conclusion regarding medical exams and inquiries under the ADA exception for “voluntary” health programs, she said.

In its introduction to the proposed ADA regulations, the EEOC says “it's a plausible interpretation” that the act precludes employers from imposing financial penalties for an individual's declining to submit to medical inquiries or exams, Mathis said. But then for reasons that aren't entirely clear, except to move the ADA regulations closer to those under the ACA, the EEOC abandons that position, she said.

No Conflict Between ADA and ACA

There isn't a conflict between the ADA and the ACA, which is a separate health-care law with purposes entirely distinct from federal anti-discrimination law, Mathis said.

Instead of producing a financial incentive regimen under the ADA that is inconsistent with both the ACA and its own GINA regulations, the EEOC should say no financial penalties can be levied on an employee who refuses to answer medical questions or submit to a medical exam, Mathis said.

Employers still could sponsor wellness programs that include health risk assessments or questionnaires but could flag the questions that are medical inquiries, Mathis said. Many of the questions on such assessments involve lifestyle inquiries that don't trigger the ADA, she said. The EEOC should say employers then must make clear an employee declining to answer the medical questions can't be financially penalized or otherwise disadvantaged regarding employee benefits, Mathis said.

The EEOC proposal does include “some small protections” for employees, such as the notice provision requiring employers to inform workers in advance what information is being sought and how it will be used and protected from disclosure, Mathis said.

But overall, the EEOC leaves employees faced with “a Hobson's choice” of surrendering their medical information or refusing and having to pay hundreds or even thousands of dollars in penalty, Mathis said. “That doesn't solve the problem” of the potential for coercive disclosure of information the ADA is meant to protect, she said.

The EEOC later this year plans to issue a proposed GINA rule regarding employer financial incentives for family members participating in wellness plans. Given the agency's ADA proposal, Mathis said she fears the EEOC is poised to redefine “voluntary” in the GINA context as well.

To contact the reporter on this story: Kevin McGowan in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at


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