In recent years several employers offering wellness programs have raised the ire of the Equal Employment Opportunity Commission (EEOC) by offering wellness programs containing financial incentives, which the EEOC claimed eliminated the voluntary character of the programs. Ironically when the EEOC began challenging these employer programs, they did so despite having never committed to what it considered voluntary, let alone issued any formal guidance on the matter. Finally, now the EEOC has done just that.

On May 16, 2016, the EEOC issued two final rules which provide guidance to employers on how they may offer voluntary wellness programs to employees that are compliant with GINA and the ADA, and also consistent with the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA). The ACA amended rules under HIPAA permit employers to offer up to 30% of the cost of health plan coverage as an incentive to participate in a wellness program.

[Image credit: Department of Justice]
EEOC Commissioner Jenny R. Yang
[Image credit: Department of Justice]

According to the rules, which become formally effective on January 1, 2017, an employer may offer up to 30% of the total cost of self-only health plan coverage to an employee as an incentive to participate in a wellness program. If the employer offers more than one plan, the 30% applies to the lowest cost plan. For now then, the incentive standard is essentially the same under GINA, the ADA, and HIPAA, as amended by the ACA. Per the GINA rule, a spouse may also be offered an incentive of 30%.

The rules do impose some additional restrictions with respect to use of information. Specifically, an employer:

May only receive information collected by a wellness program in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of any specific individual except as necessary to administer the plan
May not require an employee to agree to the sale, exchange, transfer, or other disclosure of medical information or to waive confidentiality protections under the ADA in exchange for an incentive or as a condition for participating in a wellness program, except to the extent permitted by the ADA to carry out specific activities related to the wellness program
The EEOC’s ADA rule dictates that employees receive notice of the information which will be collected for the wellness program, with whom it will be shared and for what purpose, the limits on disclosure, and the way which information will be kept confidential. Similarly, the GINA rule specifies that notice to, and consent from, employees and family members be obtained for any health and genetic services provided.

The EEOC’s ADA rule also authorizes an incentive of 50% for a smoking cessation program so long as the employee is only asked if they smoke and is not tested for nicotine use. If the employer incorporates testing into the program the incentive limit becomes 30%. Under the ADA itself and its implementing regulations, the limit is 50%, regardless of whether there is testing, meaning the EEOC’s ADA rule creates greater restrictions than the statute itself.

The EEOC’s ADA rule additionally states that “absent undue hardship” to the employer, “the ADA requires employers to make all wellness programs, even those that do not obtain medical information, available to all employees [and] to provide reasonable accommodations (adjustments or modifications) to employees with disabilities to earn whatever financial incentive an employer or other covered entity offers.” There is no definition of “undue hardship” in the rule.

Because in some respects the EEOC rules are more strict than the rules and regulations pertaining to the ADA itself, the safe approach for employers is to abide by these more stringent EEOC rules. Bottom line, most of the time, voluntary means a 30% incentive. In addition, there should be no penalty for employees who choose not to participate as that would likely render the program involuntary in the eyes of the EEOC.

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

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Gregory Snell

Gregory Snell

Gregory D. “Greg” Snell is of counsel and a commercial litigation attorney with Foley & Lardner LLP.