EEOC Final Rules on Wellness Programs and the ADA – Worth the Wait?

On May 16, 2016, the EEOC issued final rules that explain how the Americans with Disabilities Act (“ADA”) applies to employer sponsored wellness programs.   Although some may welcome the guidance, others may be frustrated because the rules are somewhat inconsistent with the rules under HIPAA, inconsistent with the court decisions under Seff v. Broward County, 691 F.3d 1221 (11^th Cir. 2012) and EEOC v. Flambeau, Inc., 131 F. Supp. 3d 849 (W.D. Wis. 2015), and do not ensure compliance with other federal nondiscrimination laws (e.g., Title II of GINA or other Sections of Title I of the ADA).

The final rules apply to “employee health programs,” which include any disability-related inquiries or medical examinations that are part of such programs.   An employee health program must be reasonably designed to promote health or prevent disease.  Additionally, it must satisfy the ADA’s voluntary standard, and contrary to Seff and Flambeau, may not rely on the ADA’s safe harbor, as discussed in more detail in our April 11, 2016 blog post.

The EEOC will consider a wellness program voluntary if it:

1. Does not require employees to participate;
2. Does not deny coverage under any of its group health plans (including benefit packages) for non-participation, or limit the extent of benefits (with limited exceptions) for employees who do not participate;
3. Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of ADA section 503; and
4. Provides employees with a notice (sample notice available here) that generally explains what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential.

An employer may offer financial or in-kind incentives (in the form of rewards or penalties) for employees who participate in a wellness program if the incentive does not exceed 30% of the total cost of self-only coverage. The definition of “self-only coverage” varies and depends on whether the wellness program is limited to employees who enroll in an employer’s group health plan, and how many, if any, group health plans the employer offers.

Finally, unless it is necessary to administer the wellness program, an employer may only receive medical information collected by the wellness program in the aggregate and the employer may not require the employee to agree to sell, exchange, share, transfer or disclose medical information, or waive any confidentiality protections to participate in the wellness program, or receive an incentive thereunder.

The final rules are generally effective July 18, 2016, except for the notice requirement and financial incentive limit which apply on the first day of the first plan year that begins on or after January 1, 2017.

Given the EEOC’s recent guidance, employers may wish to take an additional look at their employer sponsored wellness programs to ensure compliance with the ADA as well as other federal and state laws including but not limited to HIPAA, ERISA, GINA and the various taxation issues under the Internal Revenue Code.   We note that shortly after the EEOC issued these rules, IRS Memorandum 201622031 clarified that if, pursuant to a wellness program, an employee earns a cash reward or other benefit that is not otherwise excludible from an employee’s income (e.g., a gym membership fees) or a reimbursement for all or a portion of premiums paid by a salary reduction, the benefit is not excludible from income or employment taxes.