On January 7, 2021, the Equal Opportunity Employment Commission (EEOC) released new Proposed Rules on wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The Proposed Rules address the level of incentives employers may lawfully offer to encourage employee and spousal participation in wellness programs that require the disclosure of medical information without violating the ADA or GINA. Regulations issued in 2016 under the ADA and GINA that addressed wellness incentives were vacated by the U.S. District Court for the District of Columbia effective January 1, 2019, leaving employers without guidance as to how to ensure compliance with these laws. If finalized in proposed form, the new framework under the ADA Proposed Rule would significantly limit the level of incentives employers can offer employees for participation in several types of wellness programs, and the GINA Proposed Rule would prohibit employers from offering any incentives above a de minimis amount for family member participation in a wellness program when the family member provides his or her own medical information. Given the significant departure from the standards set out under the EEOC's now-vacated 2016 regulations, employers who sponsor a wellness program that offers incentives for participation will need to assess whether the program meets the requirements under the Proposed Rules and whether they wish to submit comments to the EEOC before the Proposed Rules are finalized.
 

Background

Employer wellness programs are regulated by several different federal laws, each of which has a different purpose. 

  • HIPAA. The Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act, governs wellness programs that are part of a group health plan and prohibits such programs from discriminating against individuals on the basis of their health conditions. HIPAA also requires wellness programs that are part of a group health plan to comply with its privacy and breach notification rules.
     
  • ADA. Title I of the ADA prohibits discrimination against employees on the basis of disability with regard to employment, including benefits. To this end, the ADA generally prohibits an employer from requiring medical examinations or making disability-related inquiries of its employees. There are exceptions to this rule for voluntary wellness programs and with respect to information collected for underwriting and other purposes.  Wellness programs that include disability-related inquiries or medical examinations must comply with the ADA.
     
  • GINA. Title II of GINA prohibits discrimination against employees on the basis of genetic information, which includes an employee's family medical history. A family member, for this purpose, includes an employee's spouse, which means that the manifestation of a disease or disorder in a spouse is treated as the genetic information of the employee under GINA. Wellness programs that seek any genetic information—including a program offered to spouses who seek their own medical information—must comply with GINA.

Employers who sponsor a wellness program must navigate the complex regulations under each applicable law to maintain compliance. In its 2016 regulations under the ADA and GINA, the EEOC attempted to harmonize, in part, some of these compliance obligations by adopting a 30 percent incentive limit that was similar (although not identical) to the 30 percent limit applied under the HIPAA wellness regulations. However, the 2016 regulations were challenged by lawsuits almost as soon as they were published. Ruling for the plaintiffs, the U.S. District Court for the District of Columbia found that the EEOC failed to provide sufficient explanation for its decision to adopt a 30 percent incentive limit and rescinded the incentive portions of the 2016 ADA and GINA wellness regulations.

The Court's decision, coupled with the EEOC's failure to promptly issue new rules, has meant that for the last three years employers have been left to guess at the amount of incentive they can offer their employees and their spouses for their voluntary participation in a wellness program without violating federal law. The new Proposed Rules now bring some clarity, but also potentially significant changes, to many wellness programs.

 

The New Proposed Rules

ADA Proposed Rule Redefines "Voluntary"

The ADA permits an employer to make disability-related inquiries of its employees and/or request that they undergo a medical examination in the context of a voluntary wellness program. To be considered "voluntary," both existing regulations and the ADA Proposed Rule provide that the employer: (i) may not require employees to participate, (ii) may not deny coverage under its group health plans for nonparticipation or limit the extent of such coverage, and (iii) may not take any other adverse employment action against employees who decline to participate. In addition, the 2016 regulations had included a provision that any incentive offered for participation in a wellness program could not exceed 30 percent of the cost of coverage in order to be considered voluntary. That provision was vacated effective January 1, 2019.

In reconsidering the term voluntary under the ADA, the Proposed Rule provide that employers generally may offer no more than de minimis incentives to encourage employees to take part in a wellness program that includes disability-related inquiries or medical examinations. The EEOC's interpretive guidance that is published with the ADA Proposed Rule lists water bottles and gift cards of nominal value as examples of de minimis incentives. On the other hand, a $50 monthly premium penalty, a gym membership, and airline tickets are given as examples of incentives that would not be de minimis. 

Importantly, the de minimis limit on incentives does not apply to a health-contingent wellness program that is part of a group health plan and is, therefore, regulated by HIPAA. A "health-contingent wellness program" has the same meaning as under the HIPAA wellness regulations and refers to a program that requires an individual to satisfy a standard related to a health factor to obtain a reward or that requires an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward. A health-contingent wellness program can be an "activity-only wellness program" that does not require the individual to achieve a certain result (e.g., walking, dieting, or exercise programs) or an "outcome-based wellness program" that rewards individuals who are identified as low risk for certain medical conditions or meet certain health outcomes (e.g., programs that reward positive health results on a biometric screening).

The ADA Proposed Rule considers the following factors to determine whether a health-contingent wellness program is part of a group health plan:

 

  1. The program is offered only to employees who are enrolled in an employer-sponsored group health plan (whether insured or self-insured);
  2. The program ties any incentive offered 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 insurer; and
  4. The program is a term of coverage under the terms of the group health plan.

In other words, health-contingent wellness programs that are part of a group health plan—whether activity-only or outcome-based—are excepted from the de minimis incentive limit under the ADA Proposed Rule, while participatory wellness programs—programs that simply require employees to complete a health risk assessment or undergo a biometric screening, for example—are subject to the de minimis incentive limit. 

The ADA Proposed Rule also eliminates the current requirement for employers to provide a unique ADA notice to employees describing the type of medical information that will be obtained and for what purpose. The EEOC believes that the de minimis limitation on incentives with respect to wellness programs (other than health-contingent wellness programs discussed above) renders this requirement unnecessary. Of course, health-contingent wellness programs that are exempt from the de minimis incentive limit are separately subject to HIPAA's notice rules.

GINA Proposed Rule Significantly Limits Incentives for Spouse (and Other Family Member) Participation

As with the ADA Proposed Rule, the GINA Proposed Rule is intended to address the Court's decision to vacate the 30 percent incentive limit, this time with respect to a spouse's participation in a wellness program when the spouse provides his or her own medical information. As noted above, a spouse's manifestation of a disease or disorder is treated as the genetic information of an employee under GINA's statutory terms. 

GINA includes strict prohibitions on an employer's ability to collect the genetic information of an employee. Under a limited exception, GINA permits an employer to request genetic information as part of a wellness program if specific requirements are met. Existing regulations make clear that a wellness program cannot condition incentives to employees on the provision of genetic information. Because a spouse's disclosure of his or her own medical conditions under a wellness program discloses genetic information of the employee, providing an incentive to an employee for the spouse's participation in a wellness program could violate GINA. The now-vacated 2016 regulations sought to address this concern by allowing a 30 percent incentive with respect to the spouse's own participation.  

The GINA Proposed Rule offers a similar framework to that under the ADA Proposed Rule. It permits employers to offer no more than a de minimis incentive to an employee in return for the employee's family members providing information about the family member's manifestation of diseases or disorders under a wellness program. While the GINA Proposed Rule slightly expands an employer's ability to incent participation in a wellness program by extending participation to any family member (not just spouses), it also sharply restricts an employer's ability to incent participation in a wellness program by limiting any such incentives to the same de minimis level outlined in the ADA Proposed Rule. Unlike with respect to the ADA Proposed Rule, however, there is no exception to the de minimis rule for a health-contingent wellness program. Rather, all incentives provided to an employee in exchange for his or her family members' voluntary disclosure of their own medical conditions under a wellness program must be limited to small rewards of nominal value.

The GINA Proposed Rule does not alter the general prohibition on offering incentives in return for any other type of genetic information or in any other circumstance (e.g., family medical history questions posed to an employee are still not permitted to be tied to any incentive).

 

Employer Considerations

As employers consider (or reconsider) their wellness program designs under the proposed framework for ADA and GINA compliance, they will need to focus on the level of incentive, the type of program (participatory vs. health-contingent), and the individuals eligible.

 

  • Incentive levels. If a wellness program offers incentives, incentives that exceed the de minimis threshold are not permitted unless offered under: (i) a health-contingent wellness program that is part of a group health plan or (ii) a wellness program that is not  governed by either the ADA (because it does not make disability-related inquiries of its employees and/or request that they undergo a medical examination) or GINA (because it does not ask family members to disclose their own medical conditions). Many employers provide incentives to employees who agree to complete a health risk assessment or get a physical exam or biometric screening, both of which are subject to the ADA (and GINA if family members can participate). These incentives may need to be scaled back significantly under the new rules.
     
  • Menu approach. If a wellness program gives employees several alternate options to earn the reward, and some components are participatory while others are health-contingent, the design should be carefully evaluated to determine whether the participatory components can continue to be included when the reward is greater than de minimis. Since this is a common approach employers use to satisfy HIPAA's reasonable alternative standards, it would be helpful if the EEOC addressed it in the final rule.
     
  • Form of incentive. If larger incentives are offered under a health-contingent wellness program, the incentives may still need to be restructured to relate solely to cost sharing or premiums under the employer's group health plan. Employer contributions to health savings accounts or health reimbursement arrangements, while very popular, are not specifically permitted under the ADA Proposed Rule. Clarification from the EEOC on this would be helpful.
     
  • Family participation. If an employer wants to incent spouses (or other family members) to participate under a wellness program, those incentives must be limited to the de minimis level in all circumstances when medical information is collected. It may still be possible to offer larger incentives to employees whose family members engage in an activity-only health contingent wellness program such as a walking or exercise program, provided the program is carefully reviewed to avoid any collection of medical information related to the family member.
     
  • Taxation. Remember incentives that are not excluded from taxable income under the Internal Revenue Code (e.g., premium discounts, HSA/HRA contributions, and other cost sharing reductions) are generally taxable to the employee if the value can be determined and accounting for the item is administratively feasible. The tax exclusion for de minimis fringe benefits is very narrow and should not be confused with the de minimis incentives discussed here. For example, a gift card would be taxable to the employee, regardless of the amount.

 

Conclusion

Employers are not required to comply with the provisions of the Proposed Rules until after they are made final. The EEOC may make additional changes in response to comments from stakeholders, and changes under the incoming administration could also impact the proposed approach. However, in the absence of any other guidance in effect on wellness incentive limits under the ADA and GINA, the Proposed Rules reflect the current interpretation of the EEOC with respect to these laws and indicate the criteria the EEOC would consider in deciding whether to bring a lawsuit against an employer with respect to its wellness program. Because the Proposed Rules have the potential to significantly alter the design of many current wellness programs, employers and other plan sponsors interested in maintaining aspects of their programs should seriously consider submitting comments to the EEOC on the Proposed Rules. The EEOC specifically invited comments on a number of topics, including its strict limitation on incentives for family members to submit their own health information and whether something more than a de minimis amount should be allowed. The EEOC will accept comments from interested parties that are received on or before 60 days following the publication of the Proposed Rules in the Federal Register. 

Originally Published by Ice Miller, January 2021

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