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In May, 2016, the Equal Employment Opportunity Commission (“EEOC”) published final rules outlining how employer sponsored wellness programs can comply with the Americans with Disabilities Act (“ADA”), the Genetic Information Nondiscrimination Act (“GINA”), and the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Affordable Care Act (“ACA”). The rules were published in the Federal Register and are available here as to the ADA and here as to GINA.

The EEOC’s rules address wellness programs offered as part of an employer’s group health plan, including, for example, nutrition classes, onsite exercise facilities, and weight loss and smoking cessation programs. Enrollment in these programs by the employee and/or the employee’s spouse often requires completion of health risk assessments and biometric screenings that measure risk factors, such as body weight, cholesterol, and blood pressure levels. These programs are problematic, in the EEOC’s view, to the extent employees and their spouses receive a financial incentive to participate in the programs, because tying such an incentive to health and disability related questions has the potential to run afoul of the ADA and GINA.

The ADA prohibits medical exams that are not job-related and consistent with business necessity. Such inquiries or exams are permitted only if they are truly voluntary and part of an employee health program. The EEOC has taken the position, however, that providing an incentive for participation is tantamount to penalizing those who do not participate, in that non-participants are not eligible for the financial incentive, thus making wellness programs “involuntary.” Similarly, GINA makes it unlawful for an employer to use genetic information regarding employees or members of their family to make decisions about the terms and conditions of an individual’s employment, including employee health insurance benefits. In recent years, the EEOC filed several lawsuits alleging that the financial incentive (or penalty) portion of an employer sponsored wellness program violated the ADA and GINA.

The provisions of the ACA encourage employers to offer wellness programs to promote the health of employees and permit financial incentives. The finalized rules, the EEOC said, seek to “harmonize [the ACA’s] goal of allowing incentives to encourage participation in wellness programs with ADA and GINA provisions that require that participation in certain types of wellness programs is voluntary” and provide anti-discrimination safeguards.

Limitations on Financial Incentives or Penalties for Wellness Program Participation

The rules clarify the maximum financial incentive an employer can provide to encourage enrollment in a “participatory program” that requires employees to answer disability-related questions or undergo medical examinations, or in a “health-contingent program” that requires participants to satisfy a standard related to a health factor. Employers may offer an incentive of no more than 30% of the total cost of the employer’s employee-only group medical coverage. For example, if the total cost of an employer’s medical plan is $5,000 per year for employee-only coverage, of which the employees have annual contributions of $2,500 each, the maximum incentives or penalties in the wellness program cannot exceed $1,500. This is true regardless of whether the employee has individual or family coverage. For spouses, the cap is also 30% of the cost of a single employee coverage plan. In regard to rewards and penalties related to tobacco use, the 30% cap applies if the employee is tested for tobacco, but not if the employee self-reports tobacco use, in which case the cap is 50%. Because whether a spouse uses tobacco is not genetic information implicating GINA, any incentive or penalty related to such use does not count towards the 30% cap. No incentives are permitted in exchange for information regarding an employee’s children or for specific genetic information such as family medical history.

Wellness Program Requirements

The rules also define a bona fide “wellness” program as a program that is “reasonably designed to promote health or prevent disease.” A wellness program must also be “voluntary,” meaning that the employer:

• Does not require an employee to participate in such a program;
• Does not deny coverage under any of its group health plans or deny particular benefits packages within a group health plan or limit the extent of such coverage, except for allowed incentives; and
• Does not take any other adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who choose not to participate in a wellness program or who fail to achieve certain health goals.

Protections for Confidentiality and Mandatory Notices

Finally, the rules state that employers can only access medical information collected through an employee wellness program in the aggregate and in terms that do not disclose the identity of specific individuals taking part in the program, except as necessary to administer the health plan. To further ensure that employers abide by provisions of the ADA and GINA regarding confidentiality, the rules require that employers provide participating employees and their spouses with a “plain language” notice that describes:

• The type of medical information that will be obtained and the specific purposes for which the medical information will be used; and
• The restrictions on the disclosure of the employee or spouse’s medical information, the employer representative or other parties with whom the information will be shared, as well as the measures that will be taken to ensure that medical information is not improperly disclosed.

The EEOC has promised to publish a model notice for employees (but not for spouses) by mid-June 2016.

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The EEOC’s rules regarding the cap on financial incentives and penalties, as well as the confidentiality notice requirements, apply to all plans beginning January 1, 2017. The balance of the rules, however, are considered clarification of existing law and therefore employers should assess their wellness programs immediately to ensure full compliance.