Managing Your Wellness Plan Compliance for 2019
Effective January 1, 2019, the federal wellness program regulations previously issued by the Equal Employment Opportunity Commissions (“EEOC”) have been withdrawn in part leaving many employers wondering what changes, if any, should be made to their wellness programs. The EEOC has indicated that it will provide new guidance, but this guidance will not likely be available until at least 2021. Employers who have previously implemented wellness programs relying on the EEOC guidance now have some decisions to make regarding their design and compliance strategy for 2019 and beyond.
As background, in May 2016, the EEOC released final rules addressing wellness programs subject to the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). Generally, the ADA prohibits discrimination based on a disability, and GINA regulates the collection and use of genetic information. Accordingly, wellness programs that include biometric screenings or other medical exams and inquiries (e.g. a health risk assessment (HRA)) are subject to the ADA, and wellness programs that request genetic information (e.g. the employee’s family medical history, including the medical history of a spouse) are subject to GINA. As such, the EEOC’s regulations required that wellness programs with these features must be, among other things, “voluntary”.
The final rules went on to find that such programs are only voluntary if the maximum allowable incentive (or penalty) provided through the program does not exceed 30 percent of group health plan premiums for the plan in which the employee is enrolled. If the employee is not enrolled in the group health plan, the rules provided that the 30 percent is calculated based on premiums for self-only coverage under the lowest cost group health plan, and, if the employer does not offer a group health plan, it is calculated by reference to the premium cost for self-only coverage in the second lowest cost Silver Plan on the state or Federal health care Exchange where the employer is located. Remember, the EEOC rules under the ADA and GINA only apply to a subset of wellness programs and are in addition to the general nondiscrimination rules that apply to all wellness programs under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
The final EEOC rules were to be effective on January 1, 2017, but they were blocked by a federal court as the result of a lawsuit filed by the AARP. The AARP argued that a 30 percent incentive (or penalty) was so great as to force employees to participate in the wellness programs, thereby making participation involuntary. A federal court in Washington, D.C. agreed with the AARP and vacated the incentive limits established by the EEOC effective January 1, 2019. The court did not find that incentives were impermissible, but instead found that the EEOC did not adequately substantiate why 30 percent should be considered voluntary.
Although the HIPAA rules, as amended by the Affordable Care Act (ACA), generally allow incentives up to 30 percent of the total premium cost (50 percent in the case of tobacco cessation), it is now questionable to what extent incentives are allowed with respect to those wellness programs that are also regulated under the ADA or GINA final rules. The judge ordered the EEOC to propose new rules by August 2018, and the EEOC responded that it expected to have new rules by 2021. Pursuant to the court’s order, the EEOC released final rules vacating the incentive limits on December 20, 2018. Although the incentive limits were vacated, the other requirements of the EEOC regulations, including notice and consent requirements continue to apply.
Three General Options for Compliance
Until the EEOC proposes a new rule, there are three basic approaches for employers to consider as follows:
- Status Quo: Some employers are choosing to leave in place the incentive limits and program designs that comply with both the HIPAA rules and the withdrawn regulations under ADA and GINA. This is the most aggressive approach since it is unclear whether the EEOC will be able to substantiate that incentives up to 30 percent as determined under the final rules are not so excessive as to make the wellness program involuntary. Accordingly, this approach has risks because the EEOC may determine that only smaller incentives are permissible. While it is unlikely the new rules will be applied retroactively, employers who are offering the larger incentives for ADA and GINA governed programs may be at risk for participant or EEOC enforcement actions.
Keeping wellness program incentives of 30 percent or less also reflects how most employers complied with incentive limits prior to the issuance of the EEOC vacated rules. Before the EEOC issued the vacated rules, employers largely relied on the incentive limits imposed under HIPAA. As previously mentioned, the HIPAA rules impose a 30 percent maximum incentive limit (50 percent for tobacco cessation programs) on “health-contingent” wellness programs, which require participants to satisfy a standard related to a health factor to earn a reward (e.g. participation in diet and exercise programs, obtain a BMI below 30, and quitting tobacco use). Employers choosing to rely on the HIPAA rules should work with their advisors to understand the risks and exposure of noncompliance under the ADA or GINA.
- Review and revisit wellness programs: For more cautious employers, a more conservative approach may be to ensure lower incentive limits are in place. Many wellness program incentives do not come close to 30 percent of the cost of self-only coverage, and employers may want to continue to offer an incentive (or penalty) while simultaneously hedging their compliance risk. A review, and perhaps revision, of wellness programs may help. For example, if the incentives (or penalties) offered are close to 30 percent, employers may want to decrease the amount of the incentive (or penalty) since doing so could decrease the risk that the EEOC would later challenge the incentive amount.
However, even if the EEOC does not take issue with a wellness program’s incentive (or penalty) scheme, employees or organizations may pursue legal challenges against an organization if they believe it violates federal law. In general, those lawsuits have not been successful unless they were challenging a particularly aggressive incentive (such as a program that prevented an employee from enrolling in coverage until health information was provided), but it remains a consideration when reviewing programs.
- Offer No Wellness Incentive or Penalty for Programs Subject to the ADA or to GINA: Ceasing to offer any incentives for wellness program components subject to the ADA or GINA rules is, of course, the most conservative course of action and ensures compliance with the “voluntary” requirement. However, rewards for participation in biometric screenings and health risk assessments are some of the more commonly relied upon wellness programs offered by employers. Employers who choose to eliminate incentives for programs subject to the ADA and GINA should consult with their advisors on alternative strategies for incorporating effective wellness programs and incentives.
Given the lack of clear guidance for how to comply with the ADA and GINA in the wellness context, employers should stay tuned for updates and regularly consult with their advisor on current best practices.
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