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HB Counsel Client Alert – No Clear Answer on Wellness Program Incentives; Careful Planning Needed for 2019

 

No Clear Answer on Wellness Program Incentives; Careful Planning Needed for 2019

Wellness programs are increasingly popular with employers who want to encourage employees to pursue a healthier lifestyle.  Because of the rise in the number of wellness programs, regulators have developed rules to make sure participants are treated fairly and are not coerced into participation.  Employers offering wellness programs in 2019 should carefully consider the changing legal landscape in determining plan design because the legality of the EEOC’s maximum incentive amount has been successfully challenged.

 

Regulatory Background and Wellness Rules

As background, the Equal Employment Opportunity Commission (EEOC) released final wellness plan rules under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) that were effective for plans beginning on or after January 1, 2017.  The final rules listed several requirements that must be met in order for an employee’s participation in a wellness program that includes disability-related inquiries or medical examinations to be considered voluntary.

Specifically, an employer:

  • may not require any employee to participate;
  • may not deny any employee who does not participate in a wellness program access to health coverage or prohibit any employee from choosing a particular plan;
  • may not take any other adverse action or retaliate against, interfere with, coerce, intimidate, or threaten any employee who chooses not to participate in a wellness program or fails to achieve certain health outcomes;
  • in order to ensure that an employee’s participation is voluntary, an employer must provide a notice[1] that clearly explains what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure; and
  • the program may offer incentives of up to 30 percent of the total cost of self-only coverage.[2]

 

AARP Successful in Challenging Final Rules

In August 2017, the U.S. District Court for the District of Columbia ruled in AARP v. EEOC that the EEOC must reconsider its 2016 final wellness regulations implementing the requirements of the ADA and GINA—particularly the EEOC’s use of a maximum 30% incentive limit in connection with the requirement that the program be “voluntary.”

The Court agreed that the EEOC had failed to provide any evidence that the 30% limit was not coercive, and on December 20, 2017, the Court vacated the 30% maximum in the current EEOC regulations but delayed the effective date to January 1, 2019.  The Court also invited the EEOC to issue new regulations or to provide evidence showing the 30% is justified.

The EEOC filed a status report with the Court on March 30, 2018, stating that it “does not currently have plans to issue a Notice of Proposed Rulemaking addressing incentives for participation in employee wellness programs by a particular date certain, but it also has not ruled out the possibility that it may issue such a Notice in the future.”  In other words, the EEOC has not made a decision on how to proceed.

 

Impact of Judicial Challenge on Wellness Plan Incentives

Unless the EEOC issues new guidance prior to January 1, 2019, a wellness program including disability-related inquiries, (e.g. health risk assessments) or medical examinations (e.g. biometric screenings or tobacco screenings), cannot rely upon the EEOC’s maximum 30% incentive limit as evidence that the program is “voluntary” under ADA and GINA requirements.

Employers offering a wellness program requiring participants to answer disability-related inquiries or undergo medical examinations, will need to decide what level of risk they are comfortable with, as it is unlikely the EEOC will issue new guidance before the end of 2018 or provide justification to the Court for the 30% maximum.  It is also unlikely that Congress will pass legislation in 2018 to amend the ADA and GINA and to specify an allowable maximum percentage for wellness program incentives.  It is doubtful the EEOC will challenge employers who are compliant with the EEOC’s own guidance.  However, it remains possible that lawsuits could be brought by individual employees or by organizations such as the AARP.

 

HIPAA Limitations May Apply

The Affordable Care Act and HIPAA generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductibles, copayment or other cost sharing requirements based on a health factor.  However, there is an exception that allows plans to offer wellness programs.

Under HIPAA there are two types of wellness programs provided in connection with a group health plan, participatory only programs and health-contingent programs.

Health-contingent wellness programs require participants to satisfy a standard related to a health factor in order to obtain a reward.  An example is requiring participants to be tobacco free or complete a smoking cessation program in the alternative.

HIPAA requires health-contingent wellness programs to satisfy five requirements including limiting reward incentives.  The reward for tobacco cessation programs cannot exceed 50%.  The reward for all other wellness programs cannot exceed 30%.

 

2019 Wellness Plan Design

Employers offering wellness programs that provide incentives in the 2019 plan year should carefully review program terms and determine what legal limitations may apply to the incentives.

Due to the uncertainty surrounding the ADA and GINA final rule, employers may consider replacing health risk assessments and biometric screenings with activities and healthy learning opportunities, or may consider reducing or eliminating incentives, until the legal standard is clear.

We will continue to monitor the status of the AARP v. EEOC case, and the regulatory actions of the EEOC, and will provide an update if action impacting wellness program incentives occurs.

The content herein is provided for educational and informational purposes only and does not contain legal advice.  Please contact our office if you have any questions regarding your wellness plan design for 2019, and what legal limitations may apply.

[1] The EEOC provides a sample notice at https://www.eeoc.gov/laws/regulations/ada-wellness-notice.cfm.

[2] If a wellness program is open only to employees enrolled in a particular plan, then the maximum allowable incentive an employer can offer is 30 percent of the total cost for self-only coverage of the plan in which the employee is enrolled.

 

Dated:  September 24, 2018

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