Time for a Checkup: New EEOC Rules Significantly Alter the Legal Landscape for Employer Wellness Programs

Defense Digest, Vol. 22, No. 4, December 2016

By David J. Oberly, Esq.*

Earlier this year, two controversial rules were finalized and published by the United States Equal Opportunity Commission regarding requirements that employers must adhere to in connection with their employee wellness programs. The new rules amend existing GINA regulations, create new ADA regulations, and provide guidance to employers regarding how workplace wellness programs can comply with the ADA and GINA. Both the ADA and GINA final rules apply to employer wellness programs as of the first day of the first year plan that begins on or after January 1, 2017.

The New ADA and GINA Rules on Wellness Programs

Many companies offer wellness programs that are aimed at encouraging and incentivizing employees to pursue healthier lifestyles. The ADA and GINA generally prohibit employers from obtaining and using information about employees’ own health conditions or about the health conditions of their family members, including spouses. Both laws, however, allow employers to ask health-related questions and conduct medical examinations if the employer is providing health or genetic services as part of a voluntary wellness program.

The new rules place significant new restrictions on incentives and penalties for employee wellness programs. In particular, under the new rules, wellness programs that are part of a group health plan and that ask questions about employees’ or their spouses’ health, or include medical examinations, may offer incentives of no more than 30% of the total cost of individual, self-only coverage.

Importantly, the new rules’ limitations on incentives applies to any wellness program that requires workers to answer disability-related questions or undergo medical examinations. In addition, the limitations on incentives provided by the new rule also pertain to both financial and in-kind incentives, such as reductions in insurance premiums, cash, prizes and even “trinket” gifts.

The new ADA rule also targets incentives pertaining specifically to tobacco cessation programs. For programs that merely make general tobacco-related inquiries, employers can offer incentives up to 50% of the cost of self-only coverage. Conversely, where tobacco-related biometric screening or other medical testing is mandated, the new 30% cap on incentives is applicable under the new rule.

In addition, under the new ADA rule, all wellness programs must be “voluntary.” In this respect, employers are barred from mandating employee participation or denying or limiting coverage or particular benefits for non-participation. Moreover, employers are also barred from imposing adverse consequences on employees for their failure to participate or achieve certain health outcomes. Significantly, the new rules outlaw what has grown to be a fairly common practice among employers—requiring workers to complete health risk assessments or biometric screening as a prerequisite for eligibility for major medical health benefit options.

Furthermore, the rules also impose new burdens on employers to provide notice to their workers informing them what information will be collected as part of the program, with whom it will be shared and for what purpose, the limitations on disclosure of such information, and how the employer will ensure the confidentiality of the information. Any employer who fails to provide notice will run afoul of the new voluntariness requirements of the ADA rule.

The new rules also curtail the allowable scope and breadth that employer wellness programs can take. Importantly, the new ADA rule requires that all employee health programs—including any disability-related inquiries or medical examinations that are part of such a program—must be “reasonably designed to promote health or prevent disease.” The EEOC provides that in order to comply with this requirement, a program cannot require an overly burdensome amount of time for participation, involve unreasonably intrusive procedures, be a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or require employees to incur significant costs for medical examinations.

Finally, employers were dealt a significant blow in connection with the new ADA rule providing that the Act’s insurance “safe harbor” provision does not apply to employer wellness programs, even if they are part of an employer’s health plan.

Takeaways For Employers

With the issuance of these new significant rules, employers should take a close look at their current wellness programs to identify what, if any, modifications are required in order to bring existing programs in line with the new ADA and GINA rules. In particular, employers should review the incentive amounts that are currently being offered to ensure that their programs are not providing inducements beyond the new 30% cap. In addition, employers should evaluate the value of in-kind rewards that are offered for program participation, which are also subject to the 30% cap.

At the same time, employers should also assess their programs to evaluate compliance with the new “reasonable design” mandate. In this respect, companies should verify that the information that is sought and the testing that is required pursuant to their wellness plans do not surpass what is allowable under the new rules. Companies should be especially careful to steer clear of three significant “reasonable design” violations: (1) overly burdensome participation time requirements; (2) unreasonably intrusive procedure requirements; and (3) the imposition of unreasonably high costs in connection with medical examinations.

Lastly, employers should also review their wellness programs to ensure that they fall in line with the new rules’ voluntariness requirements. In particular, employers should verify that existing plans—and communications and literature—conform with the new rules’ expanded notice requirements.

*Dave is an associate in our Cincinnati, Ohio office and can be reached at 513.372.6817 or djoberly@mdwcg.com.

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_{Defense Digest, Vol. 22, No. 4, December 2016. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2016 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}