Voluntary or Not

The ACA's rules about wellness programs limit incentives to 30% of the cost of the health coverage, or up to 50% in the case of tobacco cessation programs.

Honeywell's incentives were within those limits. But the EEOC argued that the Honeywell program's biometric screening was in violation of the ADA's prohibition against requiring medical tests not related to an employee's job. The ADA has an exception for “voluntary wellness programs,” but the EEOC argued that the financial penalties imposed on Honeywell employees that didn't agree to the screening meant that it wasn't voluntary.

In addition, the EEOC said Honeywell's requirement that employees' spouses covered by the company be tested violated the Genetic Information Nondiscrimination Act.

“It's really hard for employers,” said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, which represents large employers on benefits issues. “Here you have Honeywell, with a mainstream wellness program in full compliance with the ACA, being told it violated the ADA. You can't protect yourself from that sort of thing.”

EEOC's Proposed Rules

The EEOC's proposed rules won't be made public until they're approved by OMB. Brian Marcotte, president and CEO of the National Business Group on Health, which represents the views of large employers on health policy issues, said the best-case scenario for employers would be rules that said a company that complies with the wellness provisions of the ACA and HIPAA is also in compliance with the ADA and GINA, in line with the proposed legislation.

“The fact the EEOC has finally reached the point where they are going to take the regulatory route rather than attempting to sue companies is a good sign,” said Marcotte, pictured at left.

The EEOC “did vote on a bipartisan basis to move the rules forward, so we're hoping they'll be more in line with the Affordable Care Act,” he added.

“The proposed rule will be helpful in limiting some of the risk once employers have a better sense of what are the rules of play,” said Seth Perretta, a principal with the Groom Law Group. “But it is quite possible that the EEOC's rules may become a ceiling on wellness programs that is lower than the ceiling otherwise allowed by HIPAA and the ACA.”

The ACA's 30% limit on incentives applies to activity-only and outcome-based programs, and there is currently no limit on the incentive that companies can provide for participation-only programs, such as completing a health risk assessment or a biometric screening, he explained.

Perretta noted that with respect to participation-only programs, the Senate legislation would provide the ADA relief only if such programs comply with the 30% limit the ACA applies to activity-only and outcome-based programs.

“I can see the EEOC moving in that direction,” he said, noting that the EEOC expressed concerns about this issue at a 2013 hearing on wellness programs. “I would think the proposed regulation might include some ceiling on participation-only programs that is not otherwise imposed, but this is obviously merely conjecture until the rules are made public and we can see what the commission has proposed.”

There's no guarantee the EEOC will come out with final rules any time soon. Once the OMB approves the proposed rules, the EEOC will provide a public comment period, review the comments it receives and put out a final rule.

“You are talking about in an optimistic world probably a minimum of 120 days, but conceivably a much longer period before the final rulemaking,” said Frank Morris Jr., who heads the labor and employment practice in the Washington office of Epstein Becker & Green.

Meanwhile, there's legislation on Capitol Hill, the Preserving Employee Wellness Programs Act, was introduced by Sen. Lamar Alexander (R-Tenn.) and Rep. John Kline (R-Minn.).

Marcotte described the legislation as a “backup” in case the EEOC gets bogged down in approving its regulations.

He acknowledged that Congress often has a hard time passing legislation, but said he thought this issue had bipartisan support.

Perretta argued that since the EEOC has proposed rules, legislators are likely to wait and see what the rules look like and how providers and employers respond to the rules.

Gradual Adoption

Perretta pointed to an array of risks posed by wellness programs, from reputation risk to employee relations risk and legal risk.

Given those risks, employers should take a long-term view and adopt wellness measures gradually, he said. “Layering it all on in one year expecting massive returns, that's the scenario that creates the greatest amount of risk.”

Morris, pictured at right, noted “a lot of concern” among employers, given “the uncertainty caused by the EEOC's litigation and the absence until now of EEOC rulemaking,” and suggested some steps companies can take in the meantime.

Employers should ensure that wellness programs comply with the ADA's rules about reasonable accommodation and provide alternative ways to qualify for an incentive for employees who aren't able to meet a program's requirements the regular way, Morris said.

“We also suggest [companies] strongly emphasize that any medical information that's disclosed in the context of a [health risk assessment] or biometric screening is never available to supervisors or managers who are making employment decisions,” he said, adding that companies should also ensure that such medical information is “maintained separately and securely.”

Morris said companies might also consider integrating their wellness program as part of their health plan, noting a decision from the Court of Appeals for the Eleventh Circuit, Seff v. Broward County, that suggested making a wellness program part of the company's health plan could provide some protection.

“The key part is the court reached the conclusion that you don't have to engage in the inquiry about voluntary or involuntary if the wellness program is part of the employer's health benefit program because then it's inside the ADA safe harbor for bona fide benefit plans,” Morris said. “Although that's only the Eleventh Circuit, it's still an important precedent.”