Wellness Programs Pose Compliance Challenges for Employers

Wellness programs are all the rage as employers look for ways to attract and retain talent while also reducing medical costs. On the surface, wellness plans appear to have only an upside for the employers who sponsor them; however, compliance issues can pose challenges for employers that didn’t consider such issues when setting up their programs.

Recently, regulations have been issued related to employer-sponsored wellness programs by the Equal Employment Opportunity Commission (“EEOC”) intending to address issues under the Americans with Disabilities Act (“ADA”) and the Genetic Information Non-Discrimination Act (“GINA”). Many employers are familiar with the wellness regulations provided by the Affordable Care Act that permit employee incentives for certain health-contingent programs, such as biometric screenings and tobacco cessation programs. These programs are attractive to employers, since in some cases they allow incentives that reduce premiums by as much as 50%. But some of the same wellness incentives permissible under the ACA raise issues under the ADA and GINA. The EEOC tried to address some of those issues through regulation but wound up losing in court against the AARP (formerly the American Association of Retired Persons) which challenged the EEOC’s methods for developing the regulations. So, this leaves employers in an uncomfortable spot, wondering what to do with wellness programs that are permissible with the ACA regulations, but may not be consistent with rules under the ADA or GINA.

What’s the problem with regard to the ADA? In general, the ADA prohibits employers from subjecting employees to disability-related inquiries or medical examinations. One exception from this rule occurs when the inquiry or examination is part of a voluntary health program. However, the EEOC had not formally defined the term “voluntary” or explained what constitutes a “health program.” Thus, it had been unclear whether employers could offer incentives to encourage employees to participate in programs that involved such inquiries or examinations, something the ACA clearly permitted. The EEOC finally issued regulations to permit certain incentives for employees to answer disability-related questions or undergo medical examinations that would not cause the program to be involuntary.

In late 2018, in response to the AARP decision, the EEOC revised its regulations to remove the incentives that had been permitted. What remains in the regulations presently is that a health program that includes disability-related inquiries or medical examinations (such as a health risk assessment or biometric screening) is voluntary as long as the program meets certain requirements:

  • Employees may not be required to participate;
  • The employer may not deny coverage or limit the extent of benefits under any of its group health plans or package options for employees who do not participate;
  • The employer does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees; and
  • The employer provides employees with a confidentiality notice that: (i) is understandable; (ii) explains the type of medical information that will be obtained and the specific purposes for which the medical information will be used; and (iii) describes the restrictions on the disclosure of the employee’s medical information, the employer representatives or other parties with whom the information will be shared, and the methods that the covered entity will use to ensure that medical information is not improperly disclosed (including whether it complies with the HIPAA privacy and security regulations).

What remains unclear is whether offering an incentive to an employee to participate in a disability-related inquiry or medical examination as part of an otherwise compliant program would be viewed by the EEOC to be impermissible. Notably, prior to issuing its wellness program regulations, the EEOC had sued employers over the design of their health plans, including in cases where the programs appeared to be more consistent with typical program offerings and incentives.

Employers should review their wellness programs carefully, and not just those that are tied to their group health plans, to see whether they are compliant with the ADA and GINA.

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