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EEOC Finalizes Workplace Wellness Program Rules

On May 16, 2016, the U.S. Equal Employment Opportunity Commission (“EEOC”) released two final rules concerning the use of workplace wellness programs. For the most part, these final rules are in line with the two sets of proposed rules issued last year and you can read more about those proposed rules in this May 2015 Legal Update.

While the final rules provide some useful guidance regarding the percentage or amount of employer wellness incentives, they also reflect the EEOC’s general refusal to accept many common wellness practices that involve medical tests or analysis.

Employers should also remember that the EEOC only oversees certain federal laws. These new rules specifically address the application of the Americans with Disabilities Act (the “ADA”) and the Genetic Information Nondiscrimination Act (“GINA”) to workplace wellness programs. Wellness programs are also subject to other restrictions and regulations under a variety of other federal laws.

The final rules apply beginning on the first day of the plan year that starts on or after January 1, 2017.

Incentives

The final rules continue to allow employer incentives, but limit the maximum incentive to 30% of the cost of self-only coverage. The limit applies to both financial and in-kind incentives. The final GINA rules also clarify that the 30% limit applies to an employee and spouse individually.

Example: Assume that an employer offers a family plan that costs $14,000 and a self-only plan that costs $6,000. If that employer offers incentives to both the employee and spouse for participating in a wellness program, then the incentives cannot exceed $1,800 for the employee and $1,800 for the spouse. As this example demonstrates, the 30% limit on incentives is determined solely by the cost of single coverage, even if the employee and spouse are enrolled in a family plan.

Notably, the EEOC did not harmonize its regulations regarding incentives with the Affordable Care Act’s (“ACA”) regulations on smoking cessation incentives. Under ACA rules, an employer can offer an incentive of up to 50% of the cost of self-only coverage in connection with a smoking cessation program. Applying the EEOC’s regulations, however, the incentive would be capped at 30% if the smoking cessation program requires a medical examination, such as a biometric screening or other medical procedure to test for the presence of tobacco. The 30% limit would not apply to a program that merely asks employees whether or not they use tobacco. As a result, employers will have to carefully consider the design of a wellness program that incorporates a smoking cessation incentive.

Medical Tests/Inquiries

In a series of court cases, the EEOC has challenged several common welfare plan designs by arguing that those programs violate the ADA because they involve disability-related inquiries or require medical examinations. You can read more about these court cases and the EEOC’s attacks on workplace wellness programs in our prior Legal Updates: August 2014; October 2014; and January 2016.

Although courts have rejected the EEOC’s position, the final regulations show that the EEOC has no intention of changing its position any time soon.

Confidentiality

The final regulations require that participants be provided with a notice that informs the participant of the information that will be collected, how it will be used, and how it will be protected. The EEOC intends to release a model notice on its website within 30 days. Additionally, the regulations specify that employers may only receive the medical information or history of a participant in aggregate form in a manner that does not disclose, or is not reasonably likely to disclose, the identity of the participant, except as is necessary to administer the terms of the health plan.

If you have questions about your own wellness program or designing and implementing a new plan that complies with recent changes in the law, please contact Matthew Flanary at mflanary@buelowvetter.com or 262-364-0253, Brett Schnepper at bschnepper@buelowvetter.com or 262-364-0262, or your Buelow Vetter attorney.

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