[Updated] EEOC Releases Proposed Rules on Employer-Provided Wellness Program Incentives

UPDATE: On February 12, 2021, the EEOC withdrew the two proposed rules on wellness program incentives. As a result, employers are again left with no clear guidance on what incentives, if any, they can offer their employees. The EEOC acknowledged that they will work to fill this regulatory gap, which has left employers guessing on permitted incentives since the prior 2016 rules were vacated.

On January 7, 2021, the Equal Employment Commission (EEOC) released two proposed rules (“Proposed Rules”) that outline what incentives employers can provide to encourage employee participation in wellness programs while complying with federal anti-discrimination workplace laws.

The Proposed Rules replace and expand upon provisions that were removed from the prior 2016 EEOC rules after they were invalidated by a federal court in AARP v. EEOC. The Proposed Rules are welcome, as employers have been left with no clear guidance on permitted wellness incentives since the 2016 rules were vacated.

Compliance Snapshot

The Proposed Rules provide the following:

• For wellness programs that include disability-related inquires and/or medical examinations (protected under the ADA):
  • Employers are only permitted to offer “de minimis” incentives to encourage participation unless the program is a health-contingent wellness program.
  • For health-contingent wellness programs that qualifies as, or are part of, a group health plan, employers can offer incentives up to 30% of the total cost of coverage (or up to 50% if related to tobacco cessation), as long as they comply with certain HIPAA requirements.
  • Employers are no longer required to provide an ADA-notice that describes, among other things, the type of information that will be obtained and the purposes for which the information will be used.
• For wellness programs that include genetic-related inquiries (protected under GINA), employers cannot provide any incentives in exchange for an employee providing genetic-related information, though “de minimis” incentives can be provided if an employee’s family members are enrolled in a wellness program and the family members provide information on their genetic-related information.

How We Got Here

Wellness programs must comply with several federal workplace anti-discrimination laws, including the Americans with Disability Act (ADA) and Genetic Information Non-Discrimination Act (GINA). Generally, ADA and GINA prohibit employers from asking their employees disability or genetic-related health questions and from performing medical examinations on their employees, except as a part of a voluntary employee health or wellness program.

2016 EEOC Rules: Before 2016, federal regulatory agencies released patchwork (and sometimes conflicting) guidance on how employers could meet this “voluntary” requirement, and whether employers were permitted to offer incentives to encourage participation in wellness programs. In 2016, the EEOC released a final rule, which attempted to offer cohesive guidance on employer incentives permitted under the ADA and GINA (“2016 Rule”).

Among other things, the 2016 Rule provided that employers could provide incentives of up to 30% of self-only coverage for wellness programs that included disability-related inquiries and/or medical examinations (activities protected under the ADA). This incentive limit applied to both participatory programs (those that provide a reward without any required results) and health-contingent wellness programs (those that that provide rewards for completion of a health-related activity or based on a health factor, e.g., reduction in premiums if the employee has a certain BMI).

For wellness programs that included genetic-related inquiries (information protected under GINA), employers could provide incentives of up to 30% of self-only coverage to an employee whose spouse is permitted to participate in a wellness program and, as a part of that program, provides information about the spouse’s manifestation of diseases or disorders. The 2016 Rule prohibited employers from providing incentives in exchange for an employee disclosing his or her own genetic information.

AARP v. EEOC: Soon after the 2016 Rule was issued, the American Association of Retired Persons (AARP) challenged the 2016 Rules, alleging that the 30% incentive amounted to a penalty on employees who refused to disclose medical information to their employers. AARP argued that the incentive was so high that it would make employees feel coerced to complete health risk assessments or undergo biometric screenings and thus, violated the “voluntary” requirement under ADA and GINA.

In December 2017, a federal court found that the EEOC did not provide enough justification as to the incentive limit adopted under the 2016 Rules. Accordingly, the court vacated the incentive section of the 2016 Rules, effective as of January 1, 2019.

In response to the AARP case, the EEOC released two Proposed Rules, one offering guidance on how wellness programs could comply with the ADA and the other offering guidance on GINA compliance, as discussed below.

Proposed ADA Rule

The Proposed Rule on the ADA addresses wellness programs (programs of health promotion or disease prevention) that include disability-related inquiries and/or medical examinations. Wellness programs that do not include disability-related inquiries or medical examinations (e.g., general health and educational information or an employee reward for attending a nutrition class) are not subject to the incentive regulations discussed herein.

The Proposed Rule addresses the “voluntary” requirement under the ADA, the permitted incentives, and notice and confidentiality requirements.

Voluntary Requirement

Under the ADA, employers are prohibited from making disability-related inquiries unless they are conducted as a part of a voluntary wellness program. The Proposed Rule provides that a wellness program is voluntary as long as an employer:

• Does not require employees to participate in the wellness program;
• Does not deny coverage under its group health plans (or benefit packages within a plan) for non-participation;
• Does not take adverse employment action or retaliate against or coerce employees who do not participate; and
• Does not offer more than a “de minimis” incentive in exchange for participation in the wellness program (unless the program is health-contingent and falls within the safe harbor discussed below).

The Proposed Rule also eliminates the requirement for employers to provide an ADA notice that describes, among other things, the type of information that will be obtained and the purposes for which the information will be used.

De Minimis Incentives

The Proposed Rule recognizes that allowing too high an incentive would make employees feel coerced to disclose protected medical information to receive a reward or avoid a penalty. Therefore, under the Proposed Rules, employers can only provide “de minimis” incentives for wellness programs that include disability-related inquiries and/or medical examinations. The Proposed Rule does not define “de minimis” but provides examples of a water bottle or “modest” gift card as de minimis incentives. The Proposed Rule requests public comments on the types of incentives that should and should not be considered de minimis. Additional guidance would be welcome, as the definition of “de minimis” will be key in determining the real-world impact that the Proposed Rule will have on employer wellness programs.

Exception to De-Minimis Limit for Health-Contingent Wellness Programs

The Proposed Rule provides an exception to the de minimis incentive limit for “health-contingent” wellness programs. This exception would apply to programs with disability-related inquiries and/or medical examinations that are a part of, or qualify as, a group health plan. Health contingent programs are those that require individuals to satisfy a standard related to a health factor to earn a reward or avoid a penalty. These standards can either be activity-based (e.g. programs that reward employees for walking or exercising) or outcome-based (e.g. programs that reward employees with low risk based on cholesterol, blood pressure, blood glucose).

These health-contingent programs can be offered by an employer as a part of their group health plan or be considered a group health plan in and of themselves (standalone programs that directly or indirectly provide or pay for employee’s healthcare, e.g. biometric screenings, physical examinations, flu shots, or counseling by trained professionals). To determine whether a wellness program is a part of a group health plan, the Proposed Rules provide that employers should review whether the program:

• Is offered only to employees who are enrolled in an employer-sponsored health plan;
• Ties any incentive to cost-sharing or premium reductions under the group health plan;
• Is offered by a vendor contracted with the group health plan or issuer; and
• Is a term of coverage under the group health plan.

For these health-contingent programs, employers can offer incentives permitted under the 2013 Health Insurance Portability and Accountability Act (HIPAA) regulations. The HIPAA regulations permit incentives of up to 30% of the total cost of employee-only coverage under the plan (or up to 50% for programs related to tobacco cessation) in which the employee is enrolled. If an employee’s dependents (such as spouses and dependent children) can participate in the health-contingent wellness program, the HIPAA regulations permit incentives of up to 30% (or 50% if related to tobacco) of the total cost of the coverage in which the employee and the dependents are enrolled (e.g. family coverage or employee plus one coverage).

In addition, in order to offer the incentive, the plan must also comply with the following additional HIPAA nondiscrimination requirements:

1. Individuals must be given the opportunity to qualify for a reward at least once per year;
2. The program must be reasonably designed to promote health or prevent disease;
3. The reward must be available to similarly situated employees (unless the program allows a modified standard for individuals who cannot satisfy a standard because of a medical condition); and
4. The plan must disclose the availability of a reasonable alternative standard to qualify for the reward in relevant plan materials.

Health contingent wellness programs that do not meet the HIPAA requirements cannot offer more than de minimis incentives.

Confidentiality

The Proposed Rule retains all the confidentiality protections provided under the 2016 Rule, including but not limited to, the requirement that any information collected through a wellness program and provided to an employer must be in aggregate terms that do not disclose the identity of employees. The Proposed Rule emphasizes that wellness programs that are a part of a group health plan must treat individually identifiable information collected from participants as protected health information (PHI) protected under HIPAA.

Proposed GINA Rule

The Proposed Rule on the GINA addresses wellness programs that include genetic-related inquiries. The Proposed Rule on GINA addresses when employers can lawfully request genetic information and provide incentives as a part of a wellness program.

Voluntary Standard

The Proposed Rule provides that employers can lawfully request genetic information from an employee as a part of a wellness program if the employee provides prior knowing, voluntary, and written authorization (which can be provided electronically). The Proposed Rules require the authorization to be written so the individual from whom the genetic information is being obtained is reasonably likely to understand it, to describe the type of genetic information that will be obtained and how it will be used, and to describe the restrictions on the disclosure of genetic information.

Incentive Limit

Generally, GINA prohibits employers from providing incentives in return for genetic information. The 2016 Rule previously permitted employers to provide up to a 30% incentive to an employee if his or her spouse provided information about the spouse’s manifestation of a disease or disorder to a wellness program.

The Proposed Rule eliminates the 30% incentive and instead now only permits a “de minimis” incentive to an employee if their family members are enrolled in a wellness program and the family members (not just an employee’s spouse) provide information about the family members’ manifestation of diseases or disorders to the wellness program. Similar to the ADA Proposed Rules, a “de minimis” incentive is currently defined as a water bottle or modest gift card.

Incentives for Health Risk Assessments with Certain Requirements: The Proposed Rule does permit employers to offer incentives for the completion of a health risk assessment that includes questions about family medical history or genetic information only if the employer makes clear that the incentive will be provided regardless of whether the individual answers questions related to genetic information. The Proposed Rule provides the following example:

• An employer offers employees $150 to complete a health assessment with 100 questions. Of the 100 questions, 20 request family history and other genetic information. If the employer makes it clear in the assessment’s instructions that employees will receive the $150 if they complete the 80 questions unrelated to genetic information and regardless of whether they complete the 20 questions requesting genetic information, then the $150 incentive would not violate GINA.

Comparison of Incentives Under the 2016 Rules and The Proposed Rules

Next Steps

The Proposed Rules are still not final. They must undergo a 60-day comment period and the EEOC may adjust the rules after considering the comments. It is also important to note that the enaction of the rules may be delayed due to a change to the Biden administration. If the Proposed Rules are finalized and do not undergo legal challenges, employers should review the final rules to ensure that any incentives they offer as a part of their wellness programs are permitted.

Additional Resources

• Proposed Rule: Amendments to Regulations under the Americans with Disabilities Act
• Proposed Rule: Amendments to Regulations under the Genetic Information Non-Discrimination Act
• Sequoia Blog: The EEOC Advances Proposed Regulations on Wellness Program Incentives

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.