EEOC Issues Proposed Rules on Wellness Programs

Author: Marta Moakley, XpertHR Legal Editor

April 20, 2015

The Equal Employment Opportunity Commission (EEOC) has released a Notice of Proposed Rulemaking (NPRM) that elaborates on how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs. In addition to setting limits on incentives under wellness programs to ensure the voluntariness of the programs, the NPRM also includes guidance on employee notice requirements, the collection and use of medical information, and information on best practices with respect to ensuring the confidentiality of employee medical information. The EEOC invites employers and other interested parties to submit comments by June 19, 2015 in a variety of formats specified in the NPRM.

EEOC Chair Jenny R. Yang stated in a press release that:

The EEOC worked closely with the Departments of Labor, Health and Human Services, and Treasury in developing this NPRM to harmonize the ADA's requirements that medical inquiries and exams that are part of an employee health program must be voluntary, with [the Health Insurance Portability and Accountability Act's, or HIPAA's], goal of allowing incentives to encourage participation in wellness programs.

This close coordination among agencies becomes necessary because a number of labor laws and regulations address wellness program requirements, including the Employee Retirement Income Security Act (ERISA) and the Age Discrimination in Employment Act (ADEA). However, the EEOC's proposals do not fully harmonize the employer requirements of this "complex web of federal rules," according to Garrett A. Fenton, a Member at Miller & Chevalier who practices in the area of employee benefits.

For example, the EEOC NPRM does not fully follow the ACA's rules, particularly with respect to regulating incentives. According to Fenton, under certain scenarios the EEOC is more flexible in its requirements (e.g., a tobacco-related questionnaire may not rise to the level of a disability-related inquiry and therefore EEOC regulations under the ADA would not apply), while under others the ACA is more flexible (e.g., ACA incentives limits do not apply to a wellness program that is participatory, but not health-contingent or outcome-based).

Wellness programs have garnered increased attention from employers and regulators alike following the ACA's passage. The EEOC has filed a number of lawsuits emphasizing the voluntariness of a wellness program, and has confirmed that it will continue to focus on emerging and developing issues in equal employment law, including those involving the ADA, as part of its Strategic Enforcement Plan.

Despite this increased regulatory focus, Fenton describes wellness programs as a "no-lose proposition for employers." Fenton, who frequently counsels clients on health and welfare benefits and health care reform (ACA) implementation, maintains that a properly implemented wellness program can "reduce bottom-line costs, and, as a practical matter, reduce overall absenteeism with a healthier workforce."

However, Fenton warns employers to focus on employee communications when implementing a health-contingent wellness program. Programs that are outcome-based, and not participation-only, have an "optics issue" that could result in a blow to employee morale if handled ineffectively. Although programs that define something as a surcharge rather than a credit are regulated in the same manner, Fenton cautions that ineffective messaging can have detrimental effects on the state of employee relations.