Employer Wellness Programs: Finally (or at Least Potentially) Some Clarity

27 April 2015 Labor & Employment Law Perspectives Blog

Late last week, the U.S. Equal Employment Opportunity Commission (EEOC) issued its long-anticipated proposed regulations regarding the application of the Americans with Disabilities Act (ADA) to employer-sponsored wellness programs for employees, and the news for employers is not all bad. In fact, while the guidance only comes in the form of proposed rules (meaning there is now a mandatory 60-day public comment period after which the agency will issue its final rules), its clarity on how employers can use financial incentives to encourage workers to participate in wellness programs without violating federal law is welcome news for employers.

Under the ADA, employee wellness programs that include medical exams must be voluntary programs so they do not violate the law’s prohibition on making improper medical inquiries into employee health information. To many, this seemed inapposite in light of the Health Insurance Portability and Accountability Act’s (HIPAA) stated goal of encouraging employers to offer incentives to participate in wellness programs. The proposed regulations, however, appear to reconcile these two seemingly opposite policies by allowing companies to cover up to 30 percent of the total cost of employee-only coverage in connection with wellness programs, maximum allowable incentive available under HIPAA and the Affordable Care Act for “health-contingent wellness programs.” The proposed rules also clarify that, for a program to be considered “voluntary” so as not to violate the ADA, employers must provide a written notice describing any information that will be collected as part of the wellness program. Employers must also notify employees how the information gathered will be used and how its confidentiality will be ensured.

Employers may be wise to incentivize their employees to lead health and active lives, to know their health risks, and to take hold of their long-term well-being; all of this results in a more productive workforce and can cut down on healthcare costs. Other laws, such as the Affordable Care Act and HIPAA encourage this, despite the ADA’s cautionary tone toward wellness programs. Thankfully, the EEOC appears to have taken a fairly reasoned approach in its rules by allowing wellness programs to stay, so long as any disability-related questions or medical examinations that are part of such a program are designed to promote health or stave off disease, rather than as a method for an employer to gather health or disability information about its employees.

Employers should nevertheless take care in implementing their wellness programs, particularly if they come with an incentive. The EEOC just last year sued one employer when it required its employee, who refused to participate in the employer-sponsored wellness program, to pay the entirety of the premium for her health benefits. This “incentive” obviously went too far for the EEOC, which determined the program was simply not voluntary, and otherwise improperly sought disability-related information from its employees by forcing them to pay for benefits if they refused participation in the program. Employers should thus beware in implementing their “incentives” for employee wellness programs, and start following the guidance issued by the EEOC last week. Legal counsel can help clear up uncertainties around implementing these programs, and help strategize about healthy alternatives.

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