Since 1996, when Congress passed the Health Insurance Portability and Accountability Act (HIPAA), employers have been struggling with whether and to what extent they could offer incentives to employees to participate in certain “wellness programs.” The Equal Employment Opportunity Commission’s (EEOC) position on these programs has been a significant driver of those struggles, primarily due to concerns about whether such programs are “voluntary.”

On January 7, the EEOC proposed a new approach that may provide employers some certainty, particularly as many employers are wondering about incentives to encourage employees to receive a COVID-19 vaccine. The agency proposed regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) which, for those interested, provides a brief history of wellness programs, and EEOC’s evolving position concerning same.

A (Very) Brief History

In short, the EEOC stated its position on voluntariness in 2000, in its Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act: a wellness program is “voluntary” as long as an employer “neither requires participation nor penalizes employees who do not participate.” See Q/A 22.

During that time and moving forward, however, other federal agencies which regulated group health plans (Health and Human Services, Department of Labor, and Internal Revenue Service) provided a regulatory path for employers to incentivize employees to participate in certain wellness programs. A version of those rules were codified in the Affordable Care Act (referred to herein as the “ACA/HIPAA rules”), evidencing Congress’ intent to permit such incentives, albeit subject to other federal laws, such as ADA and GINA. The EEOC’s initial attempt to harmonize by regulation its position on wellness programs with the ACA/HIPAA rules failed when its regulations addressing incentives were judicially vacated. These new proposed regulations take a different approach.

The Proposed Regulations.

The EEOC proposed two sets of regulations – one under the ADA and one under GINA:

ADA.

Under the ADA proposed rule, a wellness program is a program of health promotion or disease prevention that includes disability-related inquiries or medical examinations. Disability-related inquiries, such as health risk assessments and biometric screenings, generally include a series of questions “likely to elicit information about a disability,” while medical examinations are procedures or tests that seek information about an individual’s physical or mental impairments or health. Programs that do not include disability-related inquiries or medical examinations (e.g., rewarding employees for attending a smoking cessation class) would not be subject to the ADA proposed rule. The rule also would incorporate essentially the same subcategories of wellness programs as under the ACA/HIPAA rules – participatory and health contingent.

The ADA proposed rule maintains the spirit of the EEOC’s basic position on voluntariness – allowing too high an incentive would make employees feel coerced to disclose protected medical information. But, by modifying an earlier position on the ADA “safe harbor,” the EEOC proposes to more closely harmonize its position with the ACA/HIPAA rules.

The proposed general rule on voluntary wellness programs – only de minimis incentive permitted. The general rule for covered wellness programs under the ADA proposed rule is that employers may offer no more than de minimis incentives to encourage employees to participate.  Such programs also may not

  • require employees to participate,
  • deny employees access to health coverage under any of their group health plans,
  • limit coverage under their group health plans for such employees except as otherwise permitted, or
  • take any other adverse action against employees who choose not to participate in the wellness program.

Medical information collected in connection with such programs concerning an employee also must be maintained separately as a confidential medical record, although the EEOC eliminates in the proposed rule the confidentiality notice requirement under the 2016 regulations. And, of course, satisfying the requirements in the proposed rule would not relieve compliance with other laws, such as Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, and the Age Discrimination in Employment Act of 1967.

But what is a de minimis incentive, according to the EEOC?

The agency provides two examples: a water bottle or gift card of modest value. It observed that charging an employee $50 per month more for health insurance (or, the “carrot” approach, offering a $50 per month reduction in the charge for health insurance, either way totaling $600 per year), would be too great an incentive and violate the ADA. Also considered more than de minimis would be paying for an employee’s annual gym membership or rewarding an employee with airline tickets, although these days the price of some water bottles might be more than the cost of an airline ticket.

The “safe-harbor” exception to the de minimis rule. Changing course from its earlier regulations in 2016, the ADA proposed rule would interpret the ADA’s statutory safe harbor provision to provide an exception to the proposed de minimis incentive rule. More specifically, health-contingent wellness programs that (i) are part of, or qualify as, group health plans and (ii) are subject to and comply with the applicable provisions of the ACA/HIPAA wellness rule may provide incentives that are more than de minimis, provided they are not greater than what is permitted under the ACA/HIPAA wellness rules. This exception does not extend to the ADA’s other requirements for voluntariness summarized above, only the maximum incentive level.

Notably, the EEOC did not extend this exception to participatory wellness programs; that is, for example, a wellness program that simply uses a health risk assessment that relies on self-reporting or one that requires employees to undergo biometric screening without tracking their results or requiring them to achieve health goals in order to earn a reward or avoid a penalty. Such programs may not give employers an accurate picture of a particular’s employee’s health or the health of the workforce and, therefore, may not provide the type of quantifiable data needed to classify or administer risks, functions covered by the safe harbor.

Determining whether a health-contingent wellness program is part of, or qualifies as, a group health plan, according to the proposed rule, is based on certain factors, including whether the program:

  • is offered only to employees who are enrolled in an employer-sponsored group health plan;
  • ties any incentive offered to cost-sharing or premium reductions (or increases) under the group health plan;
  • is offered by a vendor that has contracted with the group health plan or insurer; and
  • is a term of coverage under the terms of a group health plan.

GINA.

In general, GINA prohibits employers from collecting “genetic information” from employees, subject to very limited exceptions. While a detailed discussion of GINA and the definition of genetic information is beyond the scope of this post, a feature of some wellness programs involving family members raises an interesting wrinkle under GINA. Specifically, some programs provide incentives to employee when his or her family member provides information about the family member’s own manifestation of disease or disorder. Under GINA, such information is considered genetic information of the employee, i.e., the employee’s family medical history.

For similar reasons as those referenced above concerning the ADA wellness regulations being vacated, the EEOC’s 2016 GINA regulations that permitted certain incentives to employees for the collection of the employee’s spouse’s manifestation of disease or disorder also were vacated. In tandem with the ADA proposed regulations discussed above, the agency also proposes a revised approach to incentives under GINA.

The GINA proposed rule would permit an employer to provide an incentive to employees in return for their family members’ providing information about the family members’ manifestation of diseases or disorders, provided that:

  • the incentive is de minimis (see discussion of ADA proposed rules), and
  • the other rules for offering health or genetic services are satisfied, including satisfying the authorization requirement.

This approach substantially reduces the incentive permitted under the EEOC’s 2016 GINA regulations. However, the proposed rule would expand to application of the incentive beyond spouses to all family members. Of course, other rules continue to apply. For example, the GINA proposed rule does not allow incentives in return for family members providing their own genetic information, including the results of genetic tests. It also does not alter the absolute prohibition against the use of genetic information in making employment decisions.

 

There is still work to be done before we will have a final rule, including the EEOC’s consideration of public comments it may receive concerning the proposed rules. Until then, employers should continue to review their current wellness programs for compliance with existing guidance.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.