EEOC proposes regulations addressing ADA compliance for wellness programs

Transcription

1 April 24, 2015 EEOC proposes regulations addressing ADA compliance for wellness programs By: Kate Ulrich Saracene and Sarah Ranni At long last, the Equal Employment Opportunity Commission ( EEOC ) has finally issued proposed regulations and interpretive guidance (collectively, the EEOC Proposed Rules ) addressing how the Americans with Disabilities Act ( ADA ) applies to employer wellness programs. For years the agency, tasked with enforcement of federal employment discrimination laws including the ADA, ignored desperate cries and pleading from employers, practitioners and others in the benefits industry for official EEOC guidance on wellness programs. This clamoring reached points of urgency in late 2014 when the EEOC, despite its failure to provide compliance guidance, began filing a series of lawsuits against employers alleging that their wellness programs violated the ADA. While the EEOC Proposed Rules provide clarifications that come as a relief to interested parties, they also raise new questions, particularly as they relate to interaction with existing wellness program rules under the Health Insurance Portability and Accountability Act ( HIPAA ) and the Affordable Care Act ( ACA ). We discussed these existing wellness program rules (and other laws that often apply to wellness programs) in our prior Benefits Alerts, Wellness Programs after the Affordable Care Act Part I and Part II. This alert will provide an overview of the EEOC Proposed Rules, and, where applicable, will identify any disconnects between the EEOC Proposed Rules and existing wellness programs rules under HIPAA and the ACA. (The reconciliation of these disconnects will hopefully be addressed when the EEOC issues final regulations and guidance). ADA, EEOC and wellness programs: background The ADA expressly prohibits an employer from making disability-related inquiries and requiring employees to undergo medical examinations, with limited exceptions. One such exception allows an employer to conduct voluntary medical examinations and make medical history inquiries which are part of a worksite Employee Health Program. In recent years, the EEOC has issued limited enforcement guidance and a few opinion letters that touch on the issue of voluntariness. The EEOC has stated that a wellness program is voluntary as long as an employer neither requires participation nor penalizes employees who do not participate, but the EEOC has repeatedly declined to take an official position on whether, and to what extent, This newsletter is intended as an information source for the clients and friends of Nixon Peabody LLP. The content should not be construed as legal advice, and readers should not act upon information in the publication without professional counsel. This material may be considered advertising under certain rules of professional conduct. Copyright 2015 Nixon Peabody LLP. All rights reserved.

2 the use of an incentive structure (for example, financial rewards and/or penalties) renders a wellness program involuntary. When the ACA increased the permissible incentives available under certain wellness programs, the need for EEOC guidance on the issue of reward and penalty use became even more critical to employers. The EEOC, which had promised that official guidance was forthcoming, in the interim commenced lawsuits against employers claiming that the incentives in their wellness programs made them involuntary, thereby violating the ADA. The EEOC Proposed Rules recognize that the EEOC has a responsibility to interpret the ADA in a manner that reflects both the ADA s goal of limiting employer access to medical information and HIPAA s and the Affordable Care Act s provisions promoting wellness programs. To that end, the EEOC Proposed Rules endeavor to define an Employee Health Program and to describe the instances when such Employee Health Program is voluntary (including whether the use of incentives impacts voluntariness). In addition, the EEOC Proposed Rules add a new employee notice requirement and address confidentiality requirements that apply to an Employee Health Program under the ADA. ADA Employee Health Program Defined Under the EEOC Proposed Rules, a wellness program that asks an employee to respond to a disability-related inquiry (e.g., the completion of a health risk assessment) or to undergo a medical examination (e.g., a biometric screening) (hereinafter, an ADA-covered wellness program ) will violate the ADA unless it meets the definition of an Employee Health Program and satisfies additional criteria, discussed below. The EEOC Proposed Rules state that an ADA-covered wellness program meets the definition of an Employee Health Program if it: (i) has a reasonable chance of improving an employee s health or preventing disease, (ii) is not overly burdensome, (iii) is not a subterfuge for violating the ADA, and (iv) is not highly suspect in the method chosen to promote health or prevent disease. Accordingly, under the EEOC Proposed Rules, if an employer collects medical data from its employees, it must offer follow-up programs to address conditions identified in the medical data or take other affirmative actions to demonstrate that the intent of the medical data collection is truly to promote health and/or prevent disease. Furthermore, the EEOC Proposed Regulations make it clear that a wellness program which requires an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or exists primarily to shift health costs from the employer to the employee based on the employee s health will not meet the Employee Health Program requirements. The ADA employer health program requirements described above are quite similar to those imposed under HIPAA and the ACA on Health-Contingent Wellness Programs (those which require an individual to satisfy a standard related to a health factor in order to obtain a reward); specifically, they are strikingly similar to the requirement that Health-Contingent Wellness Programs must be reasonably designed to promote health or prevent disease. Notably, HIPAA and the ACA do not require Participatory Wellness Programs (those which either do not provide rewards or do not require an individual to satisfy a standard related to a health factor in order to obtain a reward) to be reasonably designed to promote health or prevent disease; rather, such programs need only be made available to all similarly-situated individuals. Therefore, the EEOC Proposed Rules have effectively extended the same reasonable design requirements to Participatory Wellness Programs that are ADA-covered wellness programs (as

3 they often are), even though such requirements are not imposed on those programs under HIPAA and the ACA. When is a wellness program voluntary? The EEOC Proposed Regulations reiterate that ADA-covered wellness programs must also be voluntary. An ADA-covered wellness program will be voluntary if: (i) the employer does not require participation, (ii) the employer does not deny coverage under any of its group health plans or limit benefits or benefit packages for employees who do not participate (except in the context of permitted incentives, discussed below), (iii) does not take any adverse employment action (including retaliation, coercion, interference and other actions prohibited by the ADA) against an employee who refuses to participate, and (iv) provides a notice to employees regarding the wellness program if such wellness program is part of the employer s group health plan (also discussed below). Permitted wellness program incentives under the ADA The EEOC Proposed Rules cap the amount of incentives offered under a wellness program if the ADA-covered wellness program is part of an employer s group health plan. Specifically, the EEOC Proposed Rules state that incentives under such a wellness program (including rewards and penalties, whether financial or in-kind) cannot exceed 30% of the total cost (employer cost-share plus employee cost-share) of employee-only coverage under the employer s group health plan. Notably, the EEOC did not address whether a wellness program offered to all employees regardless of enrollment in the employer s major medical plan (for example, as part of an employer s employee assistance program which is itself a group health plan) will be subject to these incentive limits, or whether such incentive limits will apply to the cost of that group health plan (rather than the cost of the employer s major medical plan). Spouses and Dependents. While the preamble to the EEOC Proposed Rules and a related EEOC question-and-answer document suggest that the EEOC attempted to ensure consistency between the ADA incentive limit and the incentive limits under HIPAA/ACA, they materially deviate in a few respects. First, the EEOC Proposed Rules appear to limit incentives to 30% of the total cost of employee-only coverage, regardless of whether a wellness program allows an employee s spouse and/or dependents to participate (in fact, the EEOC Proposed Rules do not contemplate a wellness program which covers spouses or dependents). In contrast, the HIPAA/ACA wellness program rules state that if a wellness program permits spouse or dependent participation, the incentive limit percentage (30%, or 50% for smoking cessation programs, described below) is applied against the total cost of employee plus one or family coverage. We think one could reasonably infer that the EEOC has no intent to limit incentives or otherwise address family participation in wellness programs, since the EEOC s jurisdiction is limited to employers and employees. We expect, however, that the EEOC will clarify this issue in the context of final regulations, if not sooner. Health Risk Assessments, Gym Memberships, and Participatory Wellness Program benefits. In addition, the ADA s incentive limits generally apply to all ADA-covered wellness programs that are part of a group health plan. This is in contrast to the HIPAA/ACA wellness program rules, which exempt Participatory Wellness Programs from the incentive limits that apply to Health- Contingent Wellness Programs. As a result, for example, a cash reward which is offered in exchange for completion of a health risk assessment will be capped at 30% of the total cost of employee-only coverage under the EEOC Proposed Rules, although no such cap would apply under the HIPAA/ACA wellness program rules. The EEOC Proposed Rules would also cap the total financial incentives for both Participatory and Health-Contingent Wellness Programs to a combined

4 maximum of 30% of the cost of employee-only coverage. Participatory Wellness Programs that do not include disability-related inquiries or medical examinations, such as those that reimburse gym memberships or provide education programs, remain exempt from these limits. Smoking Cessation. Finally, the EEOC Proposed Rules reduce the incentive limit that would apply to certain smoking cessation programs under the HIPAA/ACA wellness program rules from 50% to 30%. Specifically, if a smoking cessation program is an ADA-covered wellness program (for example, requires a blood test to detect nicotine), any reward offered thereunder must be capped at 30% of the total cost of employee-only coverage (absent this, the HIPAA/ACA 50% cap would apply). In this context, the EEOC Proposed Rules reiterate that the ADA incentive limits do not apply to wellness programs that are free of disability-related inquiries and medical examinations and as such, a tobacco cessation program which merely asks an employee to self-certify regarding tobacco use would not be subject to the ADA s 30% cap (rather, the HIPAA/ACA 50% cap would apply). Reasonable Accommodation. While the ADA incentive limits do not apply to wellness programs that are not ADA-covered wellness programs, the EEOC did make a point to remind employers that they must provide reasonable accommodations to enable any disabled employee to earn incentives under a wellness program. While this requirement appears to dovetail with the HIPAA/ACA requirement to offer a reasonable alternative standard in relation to Health-Contingent Wellness Programs, the EEOC clarified that the ADA obligation to provide reasonable accommodations extends to Participatory Wellness Programs as well (which are not subject to HIPAA/ACA reasonable alternative standard requirements). Required notice to employees regarding wellness program If an ADA-covered wellness program is part of an employer s group health plan, the EEOC Proposed Rules also impose a new notice requirement, requiring the employer to provide a notice to employees eligible for the wellness program which describes: (i) the restrictions on the disclosure of the employee s medical information, (ii) the employer representatives and other parties with whom the medical information will be shared, and (iii) the methods that the employer will use to ensure that the medical information is not improperly disclosed (including any compliance with HIPAA s privacy and security rules). The EEOC Proposed Rules require that the notice be written in employee-friendly language, but does not otherwise purport to regulate the format, delivery method, or delivery frequency of the notice. Moreover, the EEOC Proposed Rules do not address whether such notice can be combined with the wellness program notice required under HIPAA (which applies to Health-Contingent Wellness Programs only), nor did the EEOC state whether a model notice would be provided. ADA confidentiality requirements The ADA confidentiality requirements generally mandate that employers maintain any employee medical information in a file separate from the employee s general employment file and treat such separate file confidentially, disclosing such medical information only as specifically permitted under the ADA (for example, as needed for emergency treatment or to respond to a government request). The EEOC Proposed Regulations more specifically state that unless the employer is required to disclose the information as permitted under the ADA (as described above) or needs such medical information to administer its group health plan, any medical information that is provided to the

5 employer in relation to an ADA-covered wellness program must be in a format that is aggregated and contains no individually identifiable information. If a wellness program is, or is part of, a group health plan, HIPAA s privacy rule will generally apply to limit disclosure of an employee s medical information by such group health plan (and its sponsoring employer). The EEOC recognized that compliance with HIPAA s privacy rule will generally satisfy compliance with the ADA confidentiality rules described above, but was quick to point out that certain disclosures permitted under the ADA confidentiality rules may not be permitted under HIPAA s privacy rule (absent an authorization from the employee). The EEOC Proposed Regulations also suggested best practices for employers in handling information collected as part of a wellness program. In particular, the regulations suggest that individuals who collect medical information should not be those who make employment decisions regarding participants of the program. Action items and next steps for employers It is important to remember that the EEOC Proposed Regulations are, in fact, only proposed, and as drafted only apply to wellness programs that include disability-related inquiries and/or medical examinations (except as identified above with respect to reasonable accommodations, generally). As such, employers are not required to comply with the EEOC Proposed Regulations, and we do not necessarily recommend that employers make sweeping changes to wellness program designs until after the EEOC rules are finalized. However, the EEOC noted in its question-and-answer document that an employer s compliance with the EEOC Proposed Regulations may insulate it from lawsuits commenced by the EEOC and/or private parties. In addition, the EEOC stated that a wellness program which requires participation and/or denies health insurance to employees who don t participate should be modified immediately to comply to the extent such terms violate current ADA laws. The EEOC has also invited comments on a number of open issues, such as whether a financial incentive would become involuntary if it would cause the employee s share of the premiums to be deemed unaffordable under the ACA. If an employer wishes to comment on the EEOC Proposed Rules, it must do so as instructed in the preamble to the EEOC Proposed Rules no later than June 19, In light of these developments, now is a good time for a wellness plan checkup, not only to see how your program stacks up against the EEOC Proposed Rules, but also the myriad other compliance issues described in Wellness Programs after the Affordable Care Act Part I and Part II. In particular, employers should consider: Modifying any wellness programs which require participation and/or deny health insurance to employees who don t participate Check the amount of incentives currently being provided against the EEOC Proposed Regulation limits Review or develop the content of notices to be provided to employees Consider whether any changes to confidentiality procedures may be needed Employers who wish to be heard by the EEOC and advance their innovative ideas on wellness should also act quickly to get their comments to the EEOC by June 19, 2015.

6 For more information on the content of this alert, please contact your Nixon Peabody attorney or: Kate Ulrich Saracene at or (585) Sarah Ranni at or (716) Yelena Fertman Gray at or (312) Stacie B. Collier at or (401) Darcie Falsioni at or (585)