Informal Discussion Letter Sheds Light on Employer-Sponsored Wellness Program Incentives

The EEOC has released a resource document that, while not considered a formal Commission opinion, nonetheless clarifies the lawful boundaries under the ADA for incentives that employers may offer in wellness programs. Released earlier this month, an informal discussion letter signed by Acting Associate Legal Counsel Christopher J. Kuczynski responds to two issues raised by a member of the public:

1. How the incentive limitation applies to wellness programs that include disability-related inquiries and/or medical examinations, but do not condition a reward or penalty on an employee answering those questions or taking a medical exam; and
2. How an employer should apply the incentive limits where all employees are allowed to participate in a wellness program, but only those who enroll in a particular health plan are eligible to receive an incentive.

The letter notes that the “same basic principles would apply under the GINA final rule where a wellness program offers incentives for an employee’s spouse to participate in the same types of wellness programs” described in the inquiry.
Voluntariness. At the threshold, the letter explains that under the ADA final rule, employee participation in employer-sponsored wellness programs that include disability-related inquiries and/or medical examinations must be voluntary. That means that employers may not:

• require employees to participate in those programs,
• deny employees access to health coverage under any of their group health plans or particular benefits packages within a group health plan for non-participation,
• limit coverage under their health plan except to the extent the limitation may be the result of a permissible incentive, and
• take other adverse action against employees who choose not to answer disability-related inquiries or undergo medical exams.

Employers are also required to provide employees with a notice that explains the medical information that will be obtained, how the information will be used, who will receive the medical information, restrictions on its disclosure, and the methods used to prevent improper disclosure.
Promoting health or preventing disease. Kuczynski also noted that disability-related inquiries and medical exams that are included in a voluntary wellness program must be reasonably designed to promote health or prevent disease. This standard is met where the wellness program “has a reasonable chance of improving the health of, or preventing disease in, participating employees, and it is not overly burdensome, is not a subterfuge for violating the ADA or other laws prohibiting employment discrimination, and is not highly suspect in the method chosen to promote health or prevent disease.”
Limitations on incentives. Under the ADA final rule, employers are allowed to offer limited incentives for employees to provide health information as part of wellness programs, when certain requirements are met. The rule lays out the calculations for permissible incentive limitation in four circumstances: (1) where a wellness program is open only to employees enrolled in a particular health plan; (2) where an employer offers only one group health plan, but enrollment in the plan is not required to participate in the wellness program; (3) where an employer has more than one group health plan, but enrollment in a particular plan is not required to participate in the wellness program; and (4) where an employer does not offer a group health plan but offers a wellness program.
Disability-related information not required for incentive. In the letter, Kuczynski discussed two examples of wellness programs that while including disability-related inquiries and/or medical exams, did not require completion of any disability-related inquiry and/or medical exam as a condition to obtaining the incentive offered by the employer.
Example No. 1. One wellness program had three independent components, each of which was linked to a financial incentive. The first two components contained disability-related inquiries and medical exams—a biometric screening and a wellbeing assessment. The third component required only completion of self-monitored and unreported exercise or diet journals, neither of which included disability-related inquiries or medical examinations. The question posed here was whether the 30-percent limit applies to the third component if completion of the first two components is not required to receive the incentive for completion of the third.
The ADA rule does not apply to a wellness program or its components that only require an employee to engage in an activity—such as attending a weight loss class—in order to earn an incentive, Kuczynski explained. Therefore, an additional incentive for completion of the third component is permitted, even if the total incentive available for completion of the three components would exceed the 30 percent limit. That’s because (1) completion of the third component does not include disability-related inquiries and/or medical exams, and (2) completion of the first two components is not a requirement to earn the incentive for completion of the third.
Example No. 2. The second wellness program included six components from which employees could complete three in order to obtain an incentive: (1) walk 30 minutes per week; (2) certify viewing of a video on stress reduction in the workplace; (3) certify no tobacco product use, or if tobacco products are used, that a tobacco cessation program paid for by the employer has been completed; (4) log calories consumed each week; (5) complete a biometric screening; or (6) complete a health risk assessment. The biometric screening and health risk assessment contained disability-related inquiries and/or medical exams. The amount of the financial incentive was the same regardless of which three components employees choose to complete.
The ADA final rule’s limitation on incentives would not apply to this wellness program, Kuczynski suggested. Employees may choose to provide medical information, but are not required to do so in order to obtain the incentive. Accordingly, the incentive limits do not apply regardless of whether an employee selects components that contain disability-related inquiries and/or medical exams. An employee who chooses to participate in the wellness program has several reasonable alternatives that do not require completion of disability-related inquiries and/or medical exams. These alternatives also do not appear overly burdensome and provide the same financial incentives that an employee would receive for completing the components that include disability-related inquiries and/or medical exams.
Other factors that matter. Kuczynski qualified his conclusion about Example No. 2, however, by noting that if the EEOC received a charge challenging a similar program, it would consider all of the facts and circumstances to determine whether the program was reasonably designed to promote health and prevent disease, including:

• differences between the amount of incentive offered to employees who choose to complete the components that do not include disability-related inquiries and/or medical exams with those who do;
• differences between the amount of time required to complete the components that do not include disability-related inquiries and/or medical exams with those that do; and
• differences between the cost associated with completing the components that do not include disability-related inquiries and/or medical exams with those that do.

Reasonable accommodations. Employers are also required to make reasonable accommodations for individuals with disabilities who want to earn the available incentives by completing only those components that do not require disability-related inquiries and medical examinations. “For example, if an employee who is deaf wants to earn an incentive by attending a nutrition class instead of completing a health risk assessment but needs a sign language interpreter to do so, the employer must provide one or, if providing an interpreter would impose an undue hardship, must provide an alternative to taking the class that would not require the employee to take the health risk assessment,” Kuczynski wrote. “Similarly, an employee with a mobility impairment who cannot fulfill a requirement to walk half an hour a day in order to earn an incentive but who does not want to complete a biometric screen as an alternative means of earning the incentive must be given a reasonable accommodation.”
Incentive only for employees enrolled in a health plan. The letter also addressed the situation where an employer allows all employees, regardless of enrollment in a health plan, to participate in the wellness program, but only those who enroll in a health plan are eligible to receive the incentive. Employers may limit wellness program incentives to employees in an employer health plan, while still permitting employees who are not enrolled in a health plan to participate in the same wellness program activities without receiving an incentive. “However, the particular provision in the final rule used to calculate wellness program incentives does not depend on whether employees who are not enrolled in an employer health plan are eligible to receive the incentive,” Kuczynski explained. “Rather, it depends on whether the employer limits the incentive to employees in a particular health plan or health plan option or, instead, makes incentives available to employees in more than one health plan or plan option.”
Where only one health plan is offered, 29 C.F.R 1630.14(d)(3)(i) may be used to calculate the incentive limit; Section 1630.14(d)(3)(ii) may also be used but will result in the same incentive limit. However, where an employer offers more than one health plan or plan option, and incentives are limited to employees participating in one of those plans or plan options, but not a particular one, Section 1630.14(d)(3)(iii) must be used to calculate the incentive limit: “[t]hirty percent of the total cost of the lowest cost self-only coverage under a major medical group health plan where the covered entity offers more than one group health plan but participation in the wellness program is offered to employees whether or not they are enrolled in a particular plan.” (Kuczynski’s emphasis). “The result of this approach is that where an employer offers a wellness program that seeks health information from employees participating in different health plans or plan options without regard to the plan in which the employees participate, the incentive available to all employees is the same and does not depend on the plan or plan option in which they happen to participate,” the letter states.
Source: Written by Pamela Wolf, J.D.
Reposted with permission from Wolters Kluwer.
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