When the ACA increased wellness program incentives to encourage a healthier workforce, many employers in the retail industry embraced the potential long-term cost savings by amending their wellness programs to implement the maximum incentives allowed. A newly proposed wellness program rule issued by the EEOC may force employers to reduce their ACA-compliant wellness incentives and, at the very least, to update their existing wellness program designs to comply with the EEOC’s proposed rule.

On April 20, 2015, the EEOC issued proposed amendments to regulations under the Americans with Disabilities Act (“ADA”), which attempt to clarify when wellness program incentives render a health plan involuntary and, therefore, discriminatory under the ADA. Title I of the ADA explicitly restricts employers from obtaining medical information from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations. The statute, however, provides an exception to this rule for employers that “conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site.” Employee health programs include workplace wellness programs.

Previous EEOC guidance explained that a “wellness program is voluntary as long as an employer neither requires participation nor penalizes employees who do not participate,” but until the recently released proposed rule, the EEOC was silent on whether and to what extent, if any, wellness program incentives sanctioned by the ACA violate the ADA.

The Proposed Rule

The proposed rule states that an employer may offer limited incentives up to a maximum of 30 percent of the total cost of employee-only coverage, whether in the form of a reward or penalty, to promote an employee’s participation in a wellness program that includes disability-related inquiries or medical examinations as long as participation is voluntary. Under the proposed rule, “voluntary” means that an ADA covered entity does not: (1) require employees to participate, (2) deny coverage under any of its group health plans or limit the extent of such coverage to an employee who refuses to participate in a wellness program, and (3) take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who do not participate.

Further, to ensure that participation in a group-health-plan wellness program that includes disability-related inquiries or medical examinations is truly voluntary, an employer must provide an employee with a notice indicating: (1) what medical information will be obtained, (2) who will receive the medical information, (3) how the medical information will be used, (4) the restrictions on such information’s disclosure, and (5) the methods that the covered entity will employ to prevent improper disclosure.

Confidentiality of medical information also is addressed in the proposed rule. The EEOC made no changes to the current ADA confidentiality rules, but it did propose to add a new subsection that generally requires that the medical information collected though a wellness program be provided to the ADA covered entity only in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of specific individuals, except as needed to administer the plan. The proposed rule confirms that a wellness program associated with a covered entity under the Health Insurance Portability and Accountability Act (“HIPAA”) likely should comply with the new ADA confidentiality obligation by complying with the HIPAA Privacy Rule.

The proposed rule does not address whether the EEOC’s interpretation of the term “voluntary” and its interplay with wellness program incentives under the ADA cross over to similar provisions under the Genetic Information Nondiscrimination Act (“GINA”). Rather, the proposed rule states that further rulemaking on GINA and wellness programs will be forthcoming.

The Big Departure from ACA Guidance

The proposed rule’s biggest departure from current ACA wellness program guidance arguably is the 30 percent incentive limit placed on all participatory and health-contingent wellness programs that include disability-related inquiries or medical examinations, including those designed to reduce or eliminate tobacco use. The ACA does not impose limits on rewards for participatory wellness programs. Unlike health-contingent wellness programs, participatory wellness programs do not include any condition for obtaining a reward-based incentive that turns on an individual satisfying a standard related to health.

By excluding participatory incentives over 30 percent and the additional 20 percent health-contingent incentive allowed for tobacco cessation, employees lose the opportunity to lower their premiums by these additional amounts. Even more troubling is that, depending on the employee, a refusal to permit the full tobacco cessation incentive might tip an employee over the ACA’s 9.5 percent threshold for “affordability,” possibly resulting in assessable payments under the shared employer responsibility provisions.

Potentially compounding this problem is that the proposed rule requests comments on whether the EEOC should deem a wellness program with disability-related inquiries or medical exams coercive and involuntary if the incentives exceed the ACA’s 9.5 percent affordability rate. Significantly, the EEOC takes the position in the proposed rule that the measure of affordability and the impact of a 30-percent reward or penalty are based on self-only coverage.