How Low Must You Go? The EEOC Reveals New Proposed Rules on Employer Wellness Programs

On January 7, 2021, the U.S. Equal Employment Opportunity Commission (EEOC) issued proposed rules on the incentives employers are permitted to offer to encourage employee participation in company wellness programs. The Biden Administration has withdrawn the proposed rules from publication in the Federal Register through a regulatory freeze pending the Administration’s review. While the proposed rules ultimately may be revised before being finalized, they provide insight into the EEOC's perspective on defining incentives under a participatory wellness program in order for those incentives to be considered voluntary. Below are some of the key provisions of the proposed rules.

Background

The EEOC’s prior final rule on employer wellness programs was called into question in 2017 by the U.S. District Court for the District of Columbia. That rule provided that employer wellness program incentives of up to 30% of the cost of the employer’s health plan self-only coverage would render a program voluntary and thus permissible under the requirements of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act of 2008 (GINA). The U.S. District Court found that the EEOC had failed to provide adequate support that its 30% incentive level was voluntary in accordance with ADA and GINA requirements. Therefore, the U.S. District Court vacated the incentive sections of both the ADA and GINA rules, effective January 1, 2019.

Quick Refresher on Defining a Wellness Program

There are two types of wellness programs categorized as employee health programs under the Affordable Care Act: participatory programs and health-contingent programs. A participatory wellness program is one in which none of the conditions for obtaining a reward are based on an individual satisfying a standard related to a health factor (examples of participatory wellness programs could include attending a health education class or completing a health risk assessment or a biometric screening). A health-contingent wellness program is a program that requires an individual to satisfy a standard related to a health factor to obtain the reward. A health-contingent wellness program may be an activity-only program (e.g., a walking program) or an outcome-based program (e.g., such as not smoking or attaining certain results on biometric screenings).

Proposed Wellness Plan Rules

The proposed rules provide guidance on the extent to which an employer may offer employees incentives in connection with a wellness program without violating GINA or ADA. 

GINA Rule

Under the proposed rule for GINA, an employer may offer incentives for individuals to provide genetic information, including about family medical history, only in limited situations, including:

• An incentive to complete a health risk assessment that includes some questions about family medical history or other genetic information, as long as it is clear that the incentive will be provided whether or not the questions regarding the genetic information are answered.
• A de minimis incentive (such as a water bottle or a gift card of modest value for each participating family member) to an employee whose family member provides information about the family member’s medical history.

If individuals have provided genetic information that indicate they are at increased risk of acquiring a health condition in the future, the proposed GINA rule also would allow an employer to provide an incentive (such as ones allowed under the ADA rule, below), to participate in disease management, healthy lifestyle or similar programs, provided the programs also are offered to individuals with current health conditions or whose lifestyle choices put them at increased health risk.   

ADA Rule

A wellness program that includes disability-related inquiries or medical examinations is subject to the proposed ADA rule. Under the proposed ADA rule, an employer generally is only permitted to offer de minimis incentives (same as under the proposed GINA rule) for an employee to participate in such a wellness program. However, under the ADA Safe Harbor provision described below, certain health-contingent wellness plans that are part of a group health plan may provide much higher levels of incentives.

The proposed ADA rule provides four factors to help determine when a wellness program is part of a group health plan:

1. The program is only offered to employees who are enrolled in an employer-sponsored health plan;
2. Any incentive offered is tied to cost-sharing or premium reductions (or increases) under the group health plan;
3. The program is offered by a vendor that has contracted with the group health plan or issuer; and
4. Participation in the program is required in order to be covered under the group health plan.

ADA Safe Harbor Exception

Health-contingent wellness programs that are part of, or qualify as, group health plans are permitted to offer the maximum allowed incentive under HIPAA regulations (currently 30% of the total cost of coverage or 50% to the extent the wellness program is designed to prevent or reduce tobacco use), as long as they comply with other HIPAA requirements for such plans. These include the following four HIPAA requirements:

1. Individuals must have an opportunity to qualify for the reward at least once a year;
2. The program must be reasonably designed to promote health or prevent disease;
3. The full reward must be available to all similarly situated individuals; and
4. The program must disclose, in any materials describing the terms of the program, the availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of a waiver of the otherwise applicable standard), including contact information for obtaining such reasonable alternative standard and a statement that recommendations of an individual’s personal physician will be accommodated.

If the health-contingent program does not comply with the HIPAA requirements, it does not fall within the ADA safe harbor, and the program may only offer de minimis incentives. It is important to note that any incentive offered in exchange for genetic information is always subject to the de minimis limitation under the GINA rules, even if the program otherwise falls within the ADA safe harbor exception.

Examples of Wellness Programs That Would Be Subject to and Comply With the De Minimis Standard

Offering employees a $15 gift card for completing a health risk assessment would comply with the proposed rule, as would offering a T-shirt or tote bag for completing a biometric screening.

What About COVID-19 Vaccine Programs?

Vaccination programs would be classified as participatory programs for purposes of the proposed rules, but the EEOC has previously indicated that the administration of a vaccine, in and of itself, does not constitute a medical examination that triggers ADA requirements. However, the general health questions that almost always accompany the administration of a vaccine could involve a medical examination. For example, suppose an employer wanted to offer extra paid-time off for employees who get vaccinated. The value of extra paid-time off would go beyond a de minimis threshold, so if the vaccine is offered by the employer directly, such as in an on-site clinic, it could violate the proposed ADA rule. If, instead, the employer offers a limited vaccine incentive program that only requires the employee to confirm receiving the vaccine from an outside provider, then the employer would not be administering a medical examination and such a program would not seem to be subject to the de minimis rule. Since the analysis would be heavily fact-based, outside counsel should be consulted.

What Happens Now?

It is unknown at this time whether the proposed rules will go into effect as drafted or whether material changes will be made. It is likely, however, that the incentives permitted to be offered to participatory wellness programs subject to the ADA and the GINA will be quite limited. Calfee will continue to monitor the proposed rules as they continue through the administrative regulatory review and rulemaking process.