Locke Lord QuickStudy: EEOC Proposes Rule Addressing Incentives in Employee Wellness Programs

Locke Lord LLP
April 23, 2015
On April 16, 2015, the Equal Employment Opportunity Commission (EEOC) released a long-awaited proposed rule and supplemental guidance addressing employers’ use of incentives to encourage participation in employee wellness programs that include disability-related inquiries and/or medical examinations.  In recent years, employers have struggled with conflicting agency positions concerning the use of such incentives.  Most of this concern arose from the EEOC’s failure to issue guidance on what amount, if any, of incentives would be allowed under Title I of the Americans with Disabilities Act (ADA) compared to permissible incentives established by the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act.  While the proposed rule brings some resolution to these varying positions, notable differences remain.  

The ADA generally prohibits employers from discriminating against employees on account of disability, which includes asking employees about their medical conditions and history (such as through health risk assessments) or requiring medical examinations (such as biometric screenings).  However, the ADA permits such inquiries if part of a “voluntary” wellness program. The EEOC has previously stated that a wellness program is voluntary only if the employer neither requires participation in the program nor penalizes non-participating employees.  Without clear EEOC guidance, employers were left to determine whether incentives offered in relation to a wellness program could constitute a penalty that would render the program involuntary and, therefore, impermissible under ADA.   

In comparison, HIPAA’s nondiscrimination provisions generally prohibit group health plans (and their health insurance issuers) from discriminating against participants and beneficiaries in premiums, benefits, or eligibility based on a health factor.  However, HIPAA specifically permits premium discounts, rebates or other incentives in return for participation in a wellness program.  If such incentives are tied to the individual’s achievement of health-related outcomes (a “health-contingent wellness program”), the incentive offered to an individual cannot exceed 30 percent of the total cost of employee-only coverage under the plan or 50 percent to the extent that the additional percentage is attributed to tobacco prevention or reduction. 

Proposed Rule
To bring some consistency between the ADA and HIPAA, the proposed rule provides that a voluntary wellness program offered by an employer as part of a group health plan may provide incentives totaling up to 30 percent of the cost of employee-only coverage.  Furthermore, for the program to be considered “voluntary” under the ADA, the employer cannot:  (1) require participation, (2) deny coverage or benefits under a group health plan for failing to participate, or (3) take an adverse employment action against any employee who refuses to participate or fails to achieve certain health-related outcomes. 

The EEOC also outlines accommodation requirements similar to those provided by HIPAA, including requiring that individuals with disabilities be provided with reasonable accommodations that allow them to participate in wellness programs and to earn whatever incentive an employer offers.  With regard to collection of employee health information, the proposed rule requires that if a wellness program seeks information about employee health or requires medical examinations, the program must be reasonably likely to promote health or prevent disease.  Medical information collected as a part of a wellness program generally may be disclosed to employers only in de-identified, aggregate form.  Both employers that sponsor wellness programs and administrators of wellness programs acting as agents of employers must comply with this requirement.  Furthermore, when the program is part of a group health plan, employers must provide employees with a notice that describes what medical information will be collected, with whom it will be shared, how it will be used, and how it will be kept confidential.

While EEOC’s proposed rule is generally consistent with HIPAA, there are notable differences:

  • The EEOC’s limit on incentives applies to all employer wellness programs that include disability-related inquiries or medical examinations and that are part of an employer’s group health plan, including those that are based only on participation.  HIPAA’s incentive caps are applicable only to health-contingent wellness programs. 
  • The proposed rule limits incentives tied to tobacco cessation programs to 30 percent. HIPAA permits employers to provide incentives of up to 50 percent of the total cost of employee-only coverage in connection with tobacco cessation programs.  The EEOC clarifies that a health risk assessment that asks about tobacco use does not contain a disability-related inquiry and is, therefore, not subject to the ADA or the 30 percent limit on incentives.  Conversely, a biometric screening that tests for the presence of nicotine or tobacco would be a medical examination under the ADA and subject to the EEOC’s proposed 30 percent cap.


The proposed rule also fails to address certain issues raised by the Genetic Information Nondiscrimination Act of 2008 (GINA), including an employer’s ability to condition incentives on a family member’s participation in a wellness program. 

If finalized, the proposed rule will provide much needed guidance for employers that want to offer incentives through an employee wellness program.  However, inconsistences among applicable federal laws remain, and employers may need to adjust their programs to address new EEOC requirements, such as notice, data aggregation and variations relating to application of incentive caps.

The proposed rule was published in the Federal Register on April 20, 2015, and the EEOC is accepting comments until June 19, 2015.  The EEOC has also released a Fact Sheet for Small Businesses and a Question and Answer document for the general public.  For more information regarding the current HIPAA regulations, please refer to Locke Lord Quick Study: Changes to Employee Wellness Programs Effective in 2014.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.