Workplace Wellness Programs Characteristics and Requirements
Most employers that offer health benefits today also offer at least some wellness programs in an effort to promote employee health and productivity and reduce health related costs. Workplace wellness programs vary in the services and activities they include, and about one-in-five use financial incentives to encourage employees to participate. Depending on a program’s characteristics, different federal rules might apply. A proposed regulation recently issued by the Equal Employment Opportunity Commission (EEOC) would change standards applicable to certain workplace wellness programs that use incentives. These new rules are intended to be more consistent with other standards implementing requirements in the Affordable Care Act (ACA) that apply to certain workplace wellness programs. Both rules seek to balance employer interest in incentivizing workers to participate in wellness programs against requirements that prohibit discrimination based on health status and disability. This brief summarizes key regulatory standards in light of survey data from the Kaiser Family Foundation and other national studies about the design and impact of workplace wellness programs.
Federal standards for workplace wellness programs
Three federal laws directly address workplace wellness programs within the context of other broad rules that prohibit discrimination based on health status. The Employee Retirement Income Security Act (ERISA) prohibits discrimination by group health plans based on an individual’s health status. ERISA makes exceptions for wellness programs to offer premium or cost sharing discounts based on an individual’s health status in certain circumstances. The Americans with Disabilities Act (ADA) prohibits employment discrimination based on health status and generally forbids employers from inquiring about workers’ health status, but makes an exception for medical inquiries that are conducted as part of voluntary wellness programs. Finally, the Genetic Information Nondiscrimination Act (GINA) prohibits employment discrimination based on genetic information and forbids employers from asking about individuals’ genetic information. Like the ADA, GINA allows an exception for inquiries through voluntary wellness programs.
Two other federal laws – the ADA and the Health Insurance Portability and Accountability Act (HIPAA) – establish standards to protect the privacy of personal health information, including information that may be collected by workplace wellness programs.
Recently the EEOC, which enforces ADA and GINA, issued a proposed regulation to modify ADA requirements for workplace wellness programs “in a manner that reflects both the ADA’s goal of limiting employer access to medical information … and the ACA’s provisions promoting wellness programs.” The proposed rule indicates that regulations to modify wellness program requirements in GINA will be proposed later this year.
ERISA standards for health-contingent wellness program incentives – In 2010, the Affordable Care Act amended ERISA to permit group health plans to adopt wellness program incentives that vary a person’s group health plan premiums or cost-sharing based on their health status. Such programs are called “health-contingent” wellness programs. Some health-contingent programs provide rewards, such as premium discounts, to people who can meet certain health outcomes, such as normal weight or blood pressure. Others might identify people with health problems and then provide rewards if they participate in wellness classes or activities.
Final regulations to implement ACA provisions, issued in 2013 by the US Department of Labor (DOL), said health-contingent wellness programs can vary group health plan premiums or cost sharing based on health status and will not be considered to discriminate based on health status if they meet five standards. One limits the amount of rewards.1 The maximum reward is 30% of the total cost (both the employer and employee share) of self-only group health plan coverage. The maximum can be increased to 30% of the cost of family coverage if spouses and dependents are eligible to participate in the wellness program, and to 50% if tobacco-related components are included in the wellness program. In 2014, the average annual cost of group health plan coverage was $6,025 for an individual and $16,834 for a family; thus the maximum financial incentive could reach thousands of dollars.2 Health-contingent wellness programs also must meet four other standards related to being reasonably designed, providing notice to participants, providing waivers or alternative ways for participants to earn rewards, and making rewards available to participants at least annually.
ERISA standards for participatory wellness programs – Under the DOL rule, wellness programs that do not base rewards or penalties on health status are called “participatory” wellness programs. Participatory wellness programs are not required to meet any of the five standards that apply to health-contingent wellness programs and generally are not considered to implicate ERISA nondiscrimination rules. However, the DOL rule notes that other employment discrimination laws might also apply, and that being in compliance with the ERISA/ACA wellness program standards does not relieve employers from having to comply with other federal laws.
ADA standards for wellness programs – In 2000, the EEOC issued enforcement guidance that a wellness program is considered voluntary under the ADA “as long as an employer neither requires participation nor penalizes employees who do not participate.” In 2010 final regulations to implement GINA restated this definition of voluntary wellness programs.
In 2014, EEOC brought enforcement actions against several employers that penalized workers who would not participate in wellness programs that included medical inquiries. One action involved an employer that used financial incentives to encourage participation. Employer groups expressed disagreement with these actions, urging that the ADA should be interpreted to permit use of financial incentives similar to those authorized under the ACA/ERISA.
Shortly thereafter, in April 2015, EEOC issued a proposed regulation to reinterpret ADA standards for voluntary wellness programs. The proposed rule would require any wellness program that involves medical inquiries to be reasonably designed to promote health, not act as a subterfuge for discrimination or be overly burdensome, and not be designed mainly to shift costs onto employees based on their health.
Proposed ADA standards for wellness programs offered through a group health plan – In addition, two new standards relating to notice and financial incentives would apply only to wellness programs that are offered as “part of a group health plan.” The proposed rule would allow use of financial incentives to promote employee participation in wellness programs that include medical inquiries. The maximum financial incentive would be 30% of the total cost (employer and employee share) of self-only group health plan coverage. The proposed rule specifies this limit would apply to both health-contingent and participatory wellness programs. A wellness program would be considered voluntary under the ADA if the amount of an incentive offered for participation – alone or in combination with incentives offered for health-contingent wellness programs – does not exceed this maximum.
In addition, new notice requirements would apply to wellness programs that involve medical inquiries such as HRAs. Programs would be required to provide workers notice of what information would be requested, how it would be used, and how the privacy and security of personal information would be protected. Notice requirements would also apply to any workplace wellness program, either health-contingent or participatory, offered as part of a group health plan.
The EEOC proposed rule does not address use of financial incentives or notice requirements in workplace wellness programs offered outside of group health plans. Nor does the rule define what it means for a wellness program to be offered as “part of” a group health plan.
Federal privacy standards and workplace wellness programs – Federal privacy protections may also apply to personal information gathered under workplace wellness programs. The ADA establishes privacy standards for covered entities subject to that law – employers with 15 or more workers. Covered employers are required to keep private all medical information about workers that they may obtain, whether such information is collected through a wellness program or gathered for other permitted employment-related purposes. Access to identifiable medical information is restricted and only need-to-know exceptions are allowed, such as for administering a health plan. Identifiable medical information must be kept securely and separate from other employment records. With respect to employer wellness programs, the proposed EEOC rule reiterates that medical information obtained by the program may only be provided to the employer in aggregate terms that do not disclose or are not reasonably likely to disclose the identity of any employee. In case of a suspected violation of ADA privacy rules, individuals may file a complaint with the EEOC and/or initiate a private law suit.
Federal privacy protections under HIPAA also apply to some workplace wellness programs. Covered entities under HIPAA include most health care providers, health care clearinghouses, and health plans, including group health plans sponsored by employers, but employers are not covered entities under HIPAA. As a consequence, HIPAA privacy rules do not apply to wellness programs that are offered directly by employers outside of a group health plan. Under HIPAA, a group health plan generally cannot disclose personal health information to a person’s employer without that person’s authorization, but a group health plan is permitted to disclose protected health information to the employer without authorization if the employer certifies to the plan that it will safeguard the information and not use or share it for any employment-related activity or in connection with any other benefit. In case of a suspected violation of HIPAA privacy rules, individuals may file a complaint with the US Department of Health and Human Services (HHS); there is no private right of action under HIPAA. For a complaint involving a covered workplace wellness program, HHS would investigate and verify whether the plan had received the required certifications from the employer. If the group health plan had not obtained the required certification HHS could seek civil monetary penalties. However, if HHS found that an employer had violated its promise to only use the information that it receives for permitted purposes, HHS could not pursue enforcement against the employer due to the agency’s limited jurisdiction.
The EEOC proposed rule notes that different privacy standards might apply to worksite wellness programs, depending on whether the program is offered as part of a group health plan. Under the proposed rule, privacy standards established under the ADA would continue to apply to any ADA covered entity. Guidance issued with the proposed EEOC rule suggests that when a wellness program is part of group health plan, its obligation to comply with ADA privacy rules is generally satisfied by adhering to HIPAA privacy rules.