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The Equal Employment Opportunity Commission Has Come Around to Employer-Sponsored Wellness Plans – Sort of

The Obama Administration has touted the use of wellness programs through the Affordable Care Act (Obamacare) and regulations under the Health Insurance Portability and Accountability Act (“HIPAA”). But until recently, the Equal Employment Opportunity Commission (“EEOC”) seemed at odds with this policy goal, even bringing lawsuits against employers for health plans that the EEOC saw as “involuntary” because of incentives that those employers provided to employees participating in the programs, which the EEOC characterized as penalties against non-participating employees. In May 2016, the EEOC adopted a more conciliatory stance, when it published its final regulations on wellness programs sponsored by employers. The new regulations finally offered some clarity on what the EEOC sees as “voluntary” and “involuntary,” and provide some bright-line rules in place of the ambiguity reflected in the EEOC’s prior enforcement actions under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). Unfortunately, the rules still limit the benefit for both employers and employees that the HIPAA and Obamacare regulations intended to provide.

Many companies like wellness programs because they allow them to reduce health care costs and generally encourage a healthier workforce. Obamacare and pre-existing HIPAA regulations were designed to facilitate this mutually beneficial arrangement by, for example, allowing employers to provide discounts or rebates for meeting wellness program standards set by the employer. The EEOC’s new regulations, however, impose some additional requirements before a wellness program can be considered “voluntary.” Employee participation can’t be mandatory, employees who don’t participate can’t be completely barred from any particular plan offered by the employer or denied coverage entirely, and the employer must give notice of what medical information will be received and how it will be used under the program. In addition, to be considered voluntary, a program that asks disability-related questions can only provide a 30% incentive on the cost of coverage. For example, a program that uses biometric screening or some other method to test for the presence of nicotine can only provide a 30% incentive to employees who don’t smoke, whereas the Obamacare regulations would allow for a 50% incentive.

Perhaps these new regulations were intended to provide more clarity and to be viewed as a step in the right direction, i.e., away from the EEOC’s prior enforcement actions based on a vague standard. But the reality is that the regulations also create additional hurdles for employers, are inconsistent with Obamacare regulations on the subject, and will likely require many employers to do a wholesale review and revision of their wellness programs (which were implemented pursuant to the existing Obamacare regulations). Further, the notes to the final regulations point out that EEOC’s intention is “to continue its vigorous enforcement” of confidentiality obligations under the ADA and GINA. It remains to be seen how many employers decide that the costs of this extra layer of compliance are worth the trouble to encourage a healthier workforce.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.