Are Employee Wellness Programs OK Under the ADA? EEOC Says Yes, But...

Until recently, businesses looking to make sure that their employee wellness programs comply with the ADA were without much help from the EEOC — besides a series of surprisingly unhelpful opinion letters and a one-sentence answer in an online Q&A stating that voluntary wellness programs must not “require participation, nor penalize employees who do not participate,” the EEOC has not made entirely clear how the ADA does or does not restrict such programs. On April 20, however, the EEOC took an initial step towards clarity when it issued proposed ADA rules regarding these cost-saving measures — weight loss programs, smoking cessation efforts, health risk assessments, and so on.

While the April 20 announcement was merely of a proposed rule (accompanied by a Q&A and a small-business fact sheet), the EEOC states that, for now, “[i]t is unlikely that a court or the EEOC would find that an employer violated the ADA if the employer complied with [this rule] until a final rule is issued.” Thus, employers should take note, if not of the intricacies of the new guidance, at least of where the EEOC appears to be headed.  On that point, a few of the EEOC’s choices are worth noting.

• The EEOC has indicated that any wellness program that provides for an incentive of more than 30% of the total cost of employee-only coverage will not be considered “voluntary.” This new 30% rule — up from the 20% cap that had been suggested in the EEOC’s prior opinion letters — corresponds with the similar 30% cap imposed by the Affordable Care Act (ACA) and HIPAA. (See below for an explanation of how those laws apply.) For example, say an employer imposes a $1,500 insurance surcharge for employees who do not demonstrate good cardiovascular health. If employees’ total annual premium is $4,500, that 33% incentive would be impermissible; if the employer decreases the surcharge to $900, that 20% penalty is fine.
• The EEOC will require any employer who creates an employee wellness program to issue a detailed notice to employees intended to ensure that participation “is truly voluntary.” The notice must explain what medical information will be obtained, who will receive the information, how the information will be used, what restrictions exist on disclosure, and what security methods will be used.
• The EEOC will only permit employers to receive employee health information gathered through a wellness program in the aggregate — no individual employee’s information or identity can be discernible from the information provided to the employer. Further, in order to be a permissible wellness program under the ADA, the employer must actually do something with information gathered; this can be either in the form of aggregate assessment (e.g., using evidence that a significant number of employees have diabetes to design a specific health program) or through individual feedback (through a physician, of course).

Once again, these are merely proposed rules, and the EEOC’s final position will not be known for several more months. At the same time, employers with their fingers on the pulse will know that similar wellness program requirements were imposed by the ACA, and those rules certainly need to be considered as well.  (The reason that the EEOC’s guidance is necessary, in addition to the ACA rules, is that while the ACA is intended to ensure that wellness programs are fairly administered, in general, the ADA rules are intended to prohibit unlawful medical inquiries made as part of those programs. This is a subtle but important difference when it comes to things like annual health risk assessments—sure, the medical examination may be uniformly available, but does it make intrusive inquiries into employees’ potential disabilities? And if so, what does it do with that information? That’s where the ADA comes in.)

Notably, the EEOC’s proposed rule lists a number of questions for which it seeks comment: Should entities that offer incentives for undergoing medical examinations be required to allow employees to alternately provide a letter from their personal physician? Should incentives be further limited to ensure that they do not make health insurance “unaffordable”? Should employers be required to obtain written consent from employees when imposing wellness programs? The answers to all of these questions remain to be seen. For now, employers should keep the EEOC’s proposed rules in mind, especially if designing a wellness program at the current time. Hinshaw attorneys are prepared to assist, and will continue to track developments on this issue. With questions, contact Ambrose McCall of Hinshaw's Peoria office.