Wellness Programs: Where are we now?
Wellness programs are governed by overlapping and, at times, maddeningly inconsistent regulations and agency guidance. Litigation challenging the wellness program rules issued by the EEOC in 2016 has added another layer of complexity for employers attempting to design and administer wellness programs in compliance with applicable law. Nevertheless, wellness programs remain extremely popular among employers of all sizes and across all industry groups. Below is a brief overview of the current state of the law governing wellness plans and a few practical recommendations to employers for navigating the evolving regulatory environment.
Currently, three sets of rules may govern wellness programs under three federal statutes. All three sets of regulations require a wellness program to be "reasonably designed to promote health or prevent disease" and establish limits on the incentives that can be offered through the wellness program to encourage employee participation or favorable health behaviors. But the regulations approach wellness programs from different perspectives:
- HIPAA - Tri-agency regulations under the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA). These regulations, which apply only to wellness programs that are part of a group health plan (or themselves constitute a group health plan), provide compliant wellness programs with an affirmative defense to a claim that the health plan is violating HIPAA by discriminating on the basis of a health factor (such as medical conditions, claims experience, or medical history).
- ADA - EEOC rules under the American with Disabilities Act (ADA). These final rules issued in 2016 apply only to wellness programs that include disability-related inquires or medical exams. The EEOC rules provide guidelines for wellness programs that seek to qualify for an exception to the ADA's general prohibition on an employer subjecting employees to a medical exam or inquiry unless it is job-related or unless the exam or inquiry is part of a "bona fide benefit plan" or a "voluntary employee health program."
- GINA - EEOC rules under the Genetic Information Nondiscrimination Act (GINA). These final rules, issued in conjunction with the ADA rules, provide a limited exception to GINA's general prohibition against an employer requesting or using genetic information concerning an employee or an employee's family. A wellness program that does not fall within the exception could be found by the EEOC to be in violation of GINA.
One of the areas in which the regulations have caused consternation among employers is in the treatment of financial incentives. Specifically, the HIPAA regulations allow incentive limits of 30% of the total cost of coverage in which an employee is enrolled, increasing to 50% if the program targets tobacco use – while the EEOC rules limit incentives to 30% of the total cost of self-only coverage plus an additional 30% for spousal participation. Because the incentives offered under a wellness program bear on whether the program will be considered "voluntary" for purposes of the EEOC rules, incentive amounts are a critical component of wellness program design.
"New" Developments – AARP v. EEOC
In October 2016, the American Association of Retired Persons (AARP) sued the EEOC seeking a preliminary injunction to stop enforcement of the EEOC rules. The AARP asked the Court to strike down the EEOC's incentive limit of 30% of the cost of self-only coverage allowed under the rules because, it alleged, the incentive limits were inconsistent with the ADA and GINA requirements that plan participation be "voluntary."
The Court rejected the AARP's request for a preliminary injunction but ultimately found that the EEOC failed to adequately support its conclusion that a 30% incentive level would render participation in a wellness program "voluntary" rather than coercive. Accordingly, the Court ordered the EEOC to reconsider the reward limits contained in the ADA and GINA rules but stopped short of vacating the rules, fearing that doing so would have disruptive consequences for health plans designed in reliance on the rules.
In a September 2017 pleading, the EEOC stated its intent to issue revised proposed regulations in August 2018, and final regulations in 2019, that would not apply until 2021. Continuing litigation regarding this timeline followed, with the AARP obtaining a court order (i) vacating the incentive rewards under ADA and GINA rules effective January 1, 2019, and (ii) directing the EEOC to issue new proposed rules by August 31, 2018. The EEOC later successfully voided the directive to issue proposed regulations in 2018 and most recently stated, in a March 30, 2018 filing, that it "does not currently have plans" to issue new rules regarding wellness incentives.
Despite the challenges brought by the AARP, the bulk of the EEOC rules remain in effect. The incentive limits will be vacated, however, effective January 1, 2019. And, based on the timetable presented by the EEOC, employers will likely face an extended period of time where there are no rules regarding the permitted incentive limits for wellness programs subject to the ADA and GINA.
Moving Forward in Compliance with the Rules
So where does this leave wellness program sponsors? First, employers that offer wellness programs as part of their group health plan remain subject to the HIPAA regulations and must continue to offer programs that comply with those regulations. For example, offering reasonable alternatives for programs that require participants to achieve a health outcome or meet a health-related standard to obtain an incentive and limiting those incentives accordingly.
Second, employers that offer wellness programs that incorporate a medical exam or inquiry – regardless of whether the program is part of its group health plan – must continue to follow the bulk of the ADA rules. This means that wellness programs subject to the ADA must still be reasonably designed to promote health or prevent disease, sponsoring employers must continue to satisfy the confidentiality requirements, and employers must continue to provide employees with a notice describing what medical info will be collected, how it will be used, how it will be protected.
Third, employers must be cognizant that the bulk of the GINA rules continue to apply and prohibit the offer of incentives for genetic information about an employee's spouse or children and require that a spouse sign an informed authorization before providing any health information.
Perhaps most importantly, employers must keep in mind that the current incentive limits under the ADA and GINA remain in effect through December 31, 2018, and plan to continue to develop programs with these incentive limits in mind. Just because the incentive limit regulations are vacated does not mean that an employer is free to increase incentives in a manner that is coercive, or is no longer permitted to offer any incentives for participation. Risk adverse employers may be tempted to eliminate all incentives, but should keep in mind that the EEOC may find it hard to engage in meaningful enforcement activity against a plan offering incentives within the bounds of its former rules and that any new ADA and GINA regulations regarding incentives may likely resemble the existing EEOC rules. Indeed, because the court orders issued in the AARP litigation challenge EEOC's procedures in issuing the regulations, rather than the substance of the regulations, the EEOC may issue revised regulations that include the same or similar incentive limits supported by improved rationale.
In summary, a complete re-write or redesign of employer wellness programs should not be necessary in response to the AARP v. EEOC litigation. Much of the regulatory framework regarding wellness programs remains intact and only the incentive limits for programs that involve a medical exam or inquiry, or request genetic information will be vacated. An employer concerned that its existing incentives for wellness programs subject to the ADA or GINA may be considered coercive should invest in design changes in response to the litigation. Otherwise, most employers should be able to stay the course, stay tuned, and hope for clearer agency guidance in the future.