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  • Incentives for Workplace Wellness Programs: New Rules Provide More Guidance

    Does your client want to encourage employees to participate in a workplace wellness program? Recently, new rules clarify the financial incentives that employers may offer to encourage participation, as well as the privacy and confidentiality requirements.

    Barbara J. Zabawa & Joe Forward

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    Aug. 3, 2016 – Employers nationwide have identified poor health habits as one of the top challenges in maintaining affordable health care coverage for their employees.1 Thus, more employers are turning to workplace wellness programs to reduce health care costs, improve productivity, and help employees lead healthier lives.

    Workplace wellness programs come in different shapes and sizes. From health promotion to disease prevention, they are generally designed to improve health through preventive care by identifying risk factors for disease and supporting healthy lifestyles.

    But workplace wellness programs often rely on health-related data. And such data can be used for discriminatory purposes. So how do federal laws encourage workplace wellness programs while ensuring that health-related data is not used to discriminate?

    Privacy and confidentiality rules that restrict how health-related data can be obtained and used is one way. Another way is to ensure that wellness programs are “voluntary,” with nondiscrimination rules that protect employees regardless of their participation.

    Issued in May, final rules from the U.S. Equal Employment Opportunity Commission (EEOC) clarify how employers may use financial incentives to obtain “medical” and/or “genetic” information for workplace wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

    Effective for plan years beginning on or after Jan. 1, 2017, these rules offer more clarifications to help employers comply with laws applicable to workplace wellness programs, but compliance continues to be a moving target as technological advancements push the envelope on personal data.2

    This article provides a basic overview of the EEOC rules, but does not cover many aspects of compliance related to workplace wellness programs under federal law.

    Wellness Programs on the Rise

    As of 2013, it was estimated that more than half of employers in the U.S. with 50 or more employees offered a wellness program initiative, with larger employers offering more robust programs.3 Employers may offer wellness benefits directly, through wellness program vendors, or through group health plans with a wellness component.4

    Most workplace wellness programs include health screening activities and behavior interventions.5 For instance, biometric screens that test for high blood pressure or high cholesterol can help employees identify risks for certain health conditions. And health risk assessments (HRAs) can collect data on family and/or personal medical history.

    Barbara J. ZabawaBarbara J. Zabawa, U.W. 2001, is founder of The Center for Health and Wellness Law LLC, McFarland. The center provides legal advice, resources, trainings, and advocacy to the health and wellness industries. Zabawa’s forthcoming book, Rule the Rules on Workplace Wellness Programs, will be published by the American Bar Association later in 2016. Reach her by email or by phone at (608) 579-1267.

    Joe ForwardJoe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.

    As technology advances, genetic testing is another tool for identifying risk factors. And wellness programs can encourage healthy living through exercise or reduced caloric intake, using technological tools like wearable technology to track progress.

    “Workplace wellness takes advantage of employers’ access to employees at an age when interventions can still change their long-term health trajectory.”6 Federal laws encourage wellness programs but impose safeguards to protect employees.7

    Incentive Rules: HIPAA

    The Health Insurance Portability and Accountability Act (HIPAA) prohibits group health plans and health insurance issuers from using “health factors” to discriminate against employees through health insurance premiums, benefits, or eligibility.8

    However, those covered entities can use financial incentives – such as discounts, penalties, or modifications to cost-sharing mechanisms – to encourage workers to voluntarily engage in “participatory” and/or “health-contingent” wellness programs.9

    Health-contingent wellness programs may be “activity-based” or “outcome-based.”10 An activity-based program would require the employee to engage in an activity, such as exercise, to receive an award. An outcome-based program would require the employee to reach certain goals, such as reduced cholesterol levels, to obtain a reward.

    The incentive used to encourage participation in “health-contingent” programs is capped at 30 percent of the total cost of employee-only coverage under a health plan.11

    Incentives are limited to ensure that such programs remain “voluntary.” If penalties or rewards are so great that an employee has little choice but to participate, it is no longer voluntary. Thus, the caps ensure that employees still have a choice.

    If a wellness program does not provide a reward or does not condition a reward on satisfying a standard related to a health factor, the program is “participatory.”12

    Programs that reimburse gym memberships, waive co-payments for prenatal care, or reward participation in a smoking-cessation program, regardless of outcome, would be participatory.13 There is no cap on incentives tied to participatory programs that are “made available to all similarly situated individuals, regardless of health status.”14

    The new EEOC rules under the ADA and GINA do not change the HIPAA incentive rules but harmonize the rules with financial incentives under the ADA and GINA.

    Learn More at the Health, Labor, and Employment Law Institute this Month

    If you are interested in helping clients design and implement workplace wellness programs that are legally compliant, don’t miss Barbara Zabawa’s presentation on “Workplace Wellness and the Law” at the 2016 Health, Labor, and Employment Law Institute, sponsored by State Bar of Wisconsin PINNACLE®, Aug. 18-19 at the Wilderness Hotel & Golf Resort in Wisconsin Dells. Zabawa will speak on day one.

    Check out the schedule or register now.

    Incentive Rules: ADA

    The Americans with Disabilities Act (ADA) bars employers from discriminating against employees on the basis of a disability and “restricts the medical information employers may obtain from employees by generally prohibiting them from making disability-related inquiries or requiring medical examinations.”15 There are exceptions.

    For instance, employers may make disability-related inquiries or conduct medical examinations as part of a voluntary “employee health program,” which is generally synonymous with “employee wellness program.” The phrases are often used interchangeably.

    The program “must be reasonably designed to promote health or prevent disease” and must have a reasonable chance of doing so.16 Employers can conduct medical examinations and obtain medical histories “that are part of an employee health program available to employees at that work site.”17 For instance, employers could use voluntary HRAs and biometric screens to alert employees to personal health risks, or aggregate HRA information to design a wellness program that would benefit its employees.

    The rulemaking process revealed confusion on what makes employer health programs “voluntary” and whether employers can offer financial incentives to participate.

    The ADA regulation clarifies what is required to be considered a “voluntary” program.18 Employers may not deny or limit access to health care coverage for nonparticipation in a wellness program, and cannot coerce participation.19

    The new regulation also provides guidance “on the extent to which employers may use incentives to encourage employees to participate in wellness programs that ask them to respond to disability-related inquiries and/or undergo medical examinations.”20

    The new rules clarify that the maximum allowable incentive that may be offered to participate in a workplace wellness program may not exceed:

    1) 30 percent of the total cost of self-only coverage (including both the employee's and employer's contribution) where participation in a wellness program depends on enrollment in a particular health plan;

    2) 30 percent of the total cost of self-only coverage when the covered entity offers only one group health plan and participation in a wellness program is offered to all employees regardless of whether they are enrolled in the plan;

    3) 30 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; or

    4) 30 percent of the cost to a 40-year-old nonsmoker of the second lowest cost Silver Plan (available under the Affordable Care Act) in the location that the employer identifies as its principal place of business, where the employer does not offer a group health plan or group health insurance coverage.21

    If an employer is asking disability-related questions or conducting medical examinations as part of a voluntary workplace wellness plan, these ADA incentive rules apply. But workplace wellness programs that do not have a medical information collection component to earn an incentive are not subject to the new ADA incentive rules.

    In addition, employers must meet certain notice requirements to ensure employees understand how their medical information will be used, shared, and protected.22

    To protect an employee’s identity and minimize the risk of discrimination or retaliation, the information should be provided to employers in aggregate terms, unless individually identifiable information disclosure is necessary to administer the health plan.

    Also, employees cannot be required to agree to third-party disclosure of their medical information (except as necessary to carry out specific activities of the wellness program), and cannot be required to waive confidentiality protections.23

    It is important to note that the new ADA regulations apply to all workplace wellness programs that collect medical information, regardless of whether the program is part of a group health plan.

    Confidentiality Rules: ADA

    In addition, the new rule clarifies the requirements regarding confidentiality of “medical information,” which includes medical conditions and histories.24 There are special obligations and notice requirements to protect such information from disclosure, separate and apart from the HIPAA rules governing “covered entities” like health plans.

    Interpretive guidance instructs employers to “properly train all individuals who handle medical information about the requirements of the ADA and, as applicable, HIPAA’s privacy, security, and breach requirements and any other privacy laws.”25

    Although the new regulations provide useful guidance, they do not make clear whether information obtained from a wearable activity device is information subject to the ADA’s confidentiality rules when used in connection with wellness programs.

    Fitbits, for example, can track heart rates, sleeping patterns, and other information that could be used to identify disabilities or other health risks. More devices will come.

    “In every piece of data, there’s a story,” the Fitbit website notes. As technology allows more detailed data to emerge, what constitutes “medical information” that is subject to the ADA confidentiality rules will certainly raise questions in the near future.26

    Without clear guidance, employers should use a cautious compliance strategy when it comes to protecting data that could be considered “medical information” in the future.

    Incentive Rules: GINA

    Like the ADA rule on “medical information,” GINA prohibits employers from using “genetic information” to make employment decisions and prohibits employers from requesting or purchasing genetic information about an employee.27

    However, employers that offer health or genetic services through voluntary wellness programs can request genetic information if certain requirements are met. Genetic information includes genetic tests, genetic tests of family members, and/or family medical history, such as the manifestation of a disease or disorder.28

    For instance, the employee must provide knowing, voluntary, and written authorization and the information must not be disclosed to the employer “except in aggregate terms that do not disclose the identity of specific employees.”29 Other requirements apply.

    Employers cannot offer financial inducements to provide genetic information. That is, they cannot give rewards to encourage employees to undertake genetic testing.

    However, employers may offer financial inducements for completion of HRAs “that include questions about family medical history or other genetic information.”30

    But the employer must make clear, “in language reasonably likely to be understood by those completing” the HRA, that the inducement “will be made available whether or not the participant answers questions regarding genetic information.”31

    Under existing GINA regulations, it was not clear whether financial inducements could be offered to spouses of employees who are covered under the employee’s health plan and are eligible to participate in wellness programs that offer genetic services. The new rules clarify financial inducements related to spouses in these circumstances.

    Covered entities may offer inducements to employees whose spouses voluntarily agree to complete HRAs that include questions about the spouse’s own manifestation of disease or disorder. But no inducement may be offered in return for a spouse providing genetic information, such as genetic test results or information about the manifestation of disease or disorder in an employee’s children, including adult children.32

    Inducements are limited to 30 percent of the cost of self-only health insurance coverage, per person, similar to the new incentive rules under the ADA.33

    Conclusion

    The new rules provide employers with guidance when offering financial incentives to employees in exchange for health-related data as part of a wellness program. Employers (and their lawyers) should understand these rules in order to comply, in addition to the myriad of federal laws that govern wellness programs and health data.

    Moving forward, as new technology allows even more data to be gleaned concerning employees’ activities and health, more legal pitfalls will need to be addressed.

    Endnotes

    1 Final Report: Workplace Wellness Programs Study, RAND Health (2013).

    2 See Scott R. Peppet, Regulating the Internet of Things: First Steps Toward Managing Discrimination, Privacy, Security, and Consent, 93 Tex. L. Rev. 85, 124 (2014). “[I]t would not be surprising if various sensor devices--aFitbit, heart-rate tracker, or driving sensor, for example--could easily discern a user's age, gender, or disabilities. If sensor fusion leads to a world in which “everything reveals everything,” then many different types of devices may reveal sensitive personal characteristics. As a result, the Internet of Things may make possible new forms of obnoxious discrimination.This is a novel problem and one that legal scholars are just beginning to recognize."

    3 Final Report: Workplace Wellness Programs Study, RAND Health (2013).

    4 Id.

    5 Id.

    6 Id.

    7 Id.

    8 29 C.F.R. § 2590.702 (prohibiting discrimination against participants and beneficiaries based on a health factor). The eight health factors are: health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), and disability.

    9 45 C.FR. § 146.121(f) (nondiscriminatory wellness programs).

    10 45 C.F.R. § 146.121(f)(1)(iii)-(v).

    11 45 C.F.R. § 146.121(f)(5) (the applicable percentage is increased an additional 20 percent, up to 50 percent, if the additional percentage relates to a program designed to prevent or reduce tobacco use.)

    12 45 C.FR. § 146.121(f)(1)(ii).

    13 Id.

    14 45 C.F.R. § 146.121(f)(2).

    15 81 Fed. Reg. 31127 (May 17, 2016); see also 42 U.S.C. 12112(d)(4)(A) (“A covered entity shall not require a medical examination and shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.”).

    16 29 C.F.R. 1630.14(d)(1).

    17 42 U.S.C. § 12112(d)(4)(B).

    18 81 Fed. Reg. 31127, 31139 (May 17, 2016).

    19 29 C.F.R. 1630.14(d)(2)(i)-(iii).

    20 81 Fed. Reg. 31126 (May 17, 2016).

    21 29 C.F.R. Part 1630.14(d)(C)(3)(i)-(iv).

    22 29 C.F.R. 1630.14(d)(2)(iv).

    23 29 C.F.R. 1630.14(d)(4).

    24 29 C.F.R. § 1630.14(d)(4).

    25 81 Fed. Reg. 31142 (May 17, 2016).

    26 Peppet, supra note 2, at 124 (“This is a novel problem and one that legal scholars are just beginning to recognize.”

    27 42 U.S.C. § 2000ff et seq.

    28 Id. at § 20000ff.

    29 Id. at § 2000ff-1.

    30 29 CFR § 1635.8(b)(2)(ii).

    31 Id.

    32 29 C.F.R. § 1635.8(b)(2)(iii).

    33 29 C.F.R. § 1635.8(b)(2)(iii).




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