The EEOC Issues New Proposed Wellness Guidance – Is It The Cure We Have Been Waiting For?

These Proposed Rules have not yet been published in the Federal Register. Given the transition to the Biden administration, the Proposed Rules may be withdrawn and submitted to the Biden administration for review prior to publication in the Federal Register. In that instance, it is possible that the Biden administration may revise the Proposed Rules summarized in this alert.

On January 7, 2021, the Equal Employment Opportunity Commission (EEOC) released two new proposed rules on wellness programs (the Proposed Rules). This guidance is in response to a series of court decisions challenging the EEOC’s previous wellness guidance as to what level of incentives offered by a wellness program violates the Genetic Information Nondiscrimination Act (GINA) and the Americans with Disabilities Act (ADA).

Back in 2017, we issued an alert that described the ongoing wellness program litigation, and the controversy over the EEOC’s previously issued wellness incentive guidance.

The Proposed Rules attempt to address the incentive issue, while loosening the rules on certain types of wellness programs. Spoiler alert, the 30%/50% incentive remains intact for health-contingent wellness programs, but participatory wellness program incentives have been reduced to a de minimis amount. In addition, the Proposed Rules limit incentives for wellness programs that request information about a family member’s manifestation of disease or disorder to de minimis amounts.

Participatory vs. Contingent Wellness Programs

The Proposed Rules maintain the distinction that there are two types of wellness programs, participatory wellness programs (i.e., programs that do not require any particular health outcome or activity in order to receive an incentive), and health-contingent programs (i.e., programs that provide incentives for achieving specific health outcomes or engaging in specific types of activities).

Participatory Wellness Programs 

The Proposed Rules require that employers may offer no more than a de minimis incentive to encourage participation in participatory wellness programs. Examples of de minimis incentives are a water bottle or gift card of modest value. In addition, employers are no longer required to issue a unique ADA notice associated with a participatory wellness program; however, the EEOC is requesting guidance from the public as to whether or not the notice should be eliminated.

Contingent Wellness Programs

Health-contingent wellness programs may continue to offer incentives as long as they are consistent with the current incentive limit rules allowed under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA, as amended by the Affordable Care Act, permits a 30% incentive based on the total cost of self-only coverage to employees that answer disability-related health questions or undergo medical examinations as part of their participation in a wellness program, or a 50% incentive to the extent the wellness program is designed to prevent or reduce tobacco use.

In addition, health-contingent wellness programs must be part of, or qualify as, a group health plan and comply with the five non-discrimination requirements under HIPAA (although the five factors have now been reduced to four). The EEOC has provided the following “helpful” factors in determining when a wellness program is part of a group health plan for purposes of the ADA wellness rule:

1. The program is only offered to employees who are enrolled in an employer-sponsored health plan;
2. Any incentive offered is tied to cost-sharing or premium reductions (or increases) under the group health plan;
3. The program is offered by a vendor that has contracted with the group health plan or issuer; and
4. The program is a term of coverage under the group health plan.

The five non-discrimination requirements under HIPAA still apply; however, the Proposed Rules have eliminated one of the requirements. The five requirements were:

1. The reward may not exceed 30% of the cost of coverage and up to 50% for tobacco cessation programs;
2. The program must be reasonably designed to promote health or prevent disease;
3. The program must give eligible individuals the opportunity to qualify for the reward at least once a year;
4. The reward must be made available to all similarly situated individuals (including making available a reasonable alternative standard); and
5. The program must disclose in all program materials describing the terms of the program the availability of other means of qualifying for the reward or the possibility of waiver of the otherwise applicable standard.

Requirement number two above has been eliminated in the Proposed Rules because the EEOC considers this requirement unnecessary, given the imposition of a de minimis incentive standard.

Winston Takeaway: Other than the reduction in the participatory wellness program incentive amounts, nothing in these new proposed rules appears to be a big change to how wellness programs have been designed and administered in the past. Based on the reduction in the participatory wellness program incentive amounts, we anticipate seeing a greater shift towards the health-contingent wellness program design.

Wellness Programs Requesting Certain Genetic Information

The Proposed Rules create additional requirements and restrictions for wellness programs that request information about a family member’s manifestation of a disease or disorder. Similar to participatory wellness programs, employers may offer no more than a de minimis incentive to employees whose family member provides information about the family member’s manifestation of a disease or disorder to the wellness program. While limiting the permitted incentive from the prior rule, the Proposed Rules expand who is allowed to provide this type of genetic information to the wellness program to include all family members. Similar to the above, the GINA provisions of the Proposed Rules also remove the requirement that a wellness program requesting this information must be “reasonably designed to promote health or prevent disease.”

In addition, similar to the prior rule, the Proposed Rules explicitly prohibit an employer from requiring family members of an employee to provide information about their manifestation of a disease or disorder to the employer’s wellness program. An employer may not terminate or take other adverse or retaliatory action against an employee because of a family member’s refusal to provide this information to the wellness program.