On January 7, 2021, the EEOC proposed two rules, under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), designed to clarify what incentives employers may offer employees and their family members for joining employer-sponsored wellness programs. In the 2017 case AARP v. EEOC, the then-existing regulations on employer-sponsored wellness programs were revoked. Since then, employers have lacked guidance on how to structure wellness programs without violating the requirements of both the ADA and GINA that individuals’ disclosures of health information be voluntary. The EEOC’s new rules seek to balance the competing interests. However, given the Biden Administration’s recently issued freeze on proposed rules that have not yet been enacted, employers should not act on the EEOC’s proposed rules yet.
Under the ADA, employers cannot require employees to disclose medical information that might enable employers to discriminate against them. Similarly, under GINA, the disclosure of the health information of a family member of an employee must also be voluntary. In 2016, the EEOC finalized rules that outlined how employers could incentivize employees and their family members to participate in wellness programs that required the disclosure of health information without violating the ADA or GINA. Under the 2016 rules, an employer could offer an incentive of up to 30 percent of the total cost of self-coverage without the wellness program running afoul of the ADA and GINA. However, in AARP v. EEOC, the United States District Court for the District of Columbia held that the EEOC had failed to provide a reasoned explanation for its 30 percent incentive limit, and as a result, the EEOC removed the incentive sections from the ADA and GINA regulations.
New EEOC proposed rules
The new proposed rules are significantly more restrictive than the 2016 regulations. Under the proposed rules, an employer may not offer more than a de minimis incentive (such as a water bottle or gift card of modest value) to encourage an employee or an employee’s family member to participate in a wellness program. However, the ADA rule includes a safe harbor that permits an employer to offer more than a de minimis incentive in limited circumstances. GINA does not include such a safe harbor.
Under the ADA, an employer may offer more than a de minimis incentive to encourage employee participation in wellness programs if the following conditions are met:
- The wellness program is health-contingent. A health-contingent program “requires an individual to satisfy a standard related to a health factor to obtain a reward (or require an individual to undertake more than a similarly situated individual to obtain the same reward).”
- The health-contingent wellness program must be part of, or qualify as, a group health plan.
- The health-contingent wellness program must meet the following HIPAA requirements:
- Eligible individuals must be given an opportunity to qualify for a reward at least once per year;
- A reasonable alternative standard (or waiver) to qualify for a reward must be given to any individual for whom it is unreasonably difficult or medically inadvisable to satisfy the standard due to a medical condition;
- The program must be reasonably designed to promote heath or prevent disease;
- The program must not be overly burdensome, a subterfuge for discriminating based on a health factor, or highly suspect in the method chosen to promote health or prevent disease; and
- The program must disclose a reasonable alternative standard to qualify for the reward in plan materials, and in the case of an outcome-based program, in any disclosure that an individual did not satisfy an initial outcome-based standard.
4. The health-contingent wellness plan must comply with other federal nondiscrimination laws, such as HIPAA.
5. The health-contingent wellness plan must be otherwise voluntary. A wellness plan is otherwise voluntary if:
- The employer does not require employees to participate;
- The employer does not deny coverage under any of its group health plans or particular benefits packages with a group health plan;
- The employer does not limit the extent of such coverage; and
- The employer does not take any other adverse action against employees who decline to participate in an employee health program or fail to achieve certain health outcomes.
Impact of the Biden administration
On January 20, 2021, President Biden froze regulations issued by the Trump Administration that had not yet taken effect, including the EEOC’s proposed rules on wellness programs. Though President Biden has appointed a new EEOC Chair, Charlotte Burrows, the Republicans will hold a 3-2 majority in the EEOC until at least July 2022. Because President Biden was involved in establishing the less-restrictive 2016 regulations, he may choose to maintain the freeze until the Democrats can establish a majority on the EEOC and propose less restrictive rules. In sum, given the Biden Administration’s current freeze, employers should wait to enact wellness programs based on the proposed rules.
Employers should consult their counsel to ensure any wellness program that is part of their benefits plans is compliant with the Employee Retirement Income Security Act (ERISA). If you have any questions about the EEOC’s proposed rules or how it affects your company, Reed Smith’s experienced Labor & Employment Group is ready to speak with you.