The federal government’s mixed signals on wellness programs is costing employer and employees alike.
By Christopher T. Scanlan
Chronic but preventable diseases are costing employers plenty. For example, employers nationwide are paying an estimated $93 billion in additional premiums to treat obesity and obesity-related diseases. It’s no surprise, then, that employers are eager to step-up the intensity of their wellness programs.
“Wellness” used to mean free smoking-cessation classes and on-site gyms. Today it can mean much more, including sophisticated incentive programs and personalized health coaching. And that variety has become a source of confusion.
The federal government knows these approaches yield results. A 2006 report from the Centers for Disease Control and Prevention (CDC) lists ingredients for successful wellness programs, including “effective targeting of high-risk individuals” and providing “incentives to motivate employees to participate.” Unfortunately, unclear guidance from the U.S. Equal Employment Opportunity Commission (EEOC) is deterring broader use of these important interventions. And the situation becomes even more confusing considering that the EEOC has thus far ignored another federal statute—the Health Insurance Portability and Accountability Act (HIPAA)—that authorizes such programs.
Participation and Safe Harbor
Before we turn to the EEOC’s confusing guidance, a brief review of the relevant HIPAA provisions is in order. HIPAA prohibits employers from using “health factors” to set employees’ premiums or to deny them coverage. But two important caveats to that rule help employer wellness programs comply with HIPAA:
Caveat number one: “Participation” criteria are not discrimination. HIPAA only prohibits discrimination based on a “health factor.” The HIPAA regulations make clear that requiring employees to participate in a health-related activity is not—by itself—a “health factor.” Thus, if an employer requires all employees to fill out an annual health risk assessment to be eligible for health benefits, the employer is not using a “health factor.” Similarly, if it provides a 50-percent health premium subsidy for employees who get an annual body mass index (BMI) and blood lipids panel—again, a permitted “participation” incentive.
Caveat number two: Even “health factor” discrimination can be legal as part of a wellness program. The “participation” rules apply when the employer requires only participation in a program. But what if the employer wants to reward employees for the results of their activities? For example, what if the employer wants to reduce employees’ portions of their premiums if they achieve a healthy BMI or lower their bad cholesterol? Although an employee’s weight or cholesterol level is a “health factor,” a special exception for wellness applies under HIPAA. Under that exception, an employer can use financial incentives to encourage healthy results, assuming certain conditions are met. One of the key conditions is that the total amount of the incentives can be no greater than 20 percent of the employer’s cost of paying for the employee’s health insurance. (Other conditions apply as well, and are described in the FAQ at <http://www.dol.gov/ebsa/faqs/faq_hipaa_ND.html>.) In 2014, that percentage will increase to 30 percent as part of the Affordable Care Act.
These rules might not be perfect, but they do permit a variety of incentive-based programs. Many employers, however, are still shying away from using incentives. For example, the latest Kaiser Family Foundation annual survey reports that only 1 percent of employers have health plans that feature lower premiums as a wellness incentive and another 1 percent offer lower deductibles as an incentive. But a more recent Aon Hewitt survey found that many more employers are planning to begin implementing wellness incentives.
EEOC + ADA
The EEOC does not enforce the wellness provisions of HIPAA (the Department of Labor does.) But the EEOC enforces the Americans with Disabilities Act (ADA), and it has repeatedly suggested that even wellness programs that comply with HIPAA may violate the ADA.
Two provisions of the ADA are at issue. One is the ADA’s prohibition on discriminating against employees based on “disability.” The other is the ADA’s restriction on employer’s conducting “medical examinations” or making “disability-related” inquiries.
In two “informal discussion letters” that were issued in 2009, the EEOC Office of Legal Counsel stated, among other things, that many common questions asked in health risk assessments (HRAs) are “disability-related inquiries,” and that blood pressure screening and blood tests are “medical examinations.” It therefore issued an opinion stating that benefit programs that require completion of an HRA, or taking a blood pressure or blood test, would violate the ADA.
The opinion letters also discount a separate provision of the ADA that permits employers to offer “voluntary” wellness programs. The EEOC stated that conditioning participation in health benefit programs on answering “disability-related inquiries” or submitting to a “medical examination” was not voluntary, because employees would otherwise face loss of health benefits. One of the 2009 opinion letters stated that limited incentives (such as a modest percentage of premium costs) would comply with the ADA, but refused to state how low that percentage would have to be.
“Informal discussion letters” are issued by the EEOC’s legal staff, and do not represent the EEOC’s official position. But the EEOC has yet to address the matter more formally, leaving the “opinion letters” as the agency’s only written pronouncements on the subject.
Employer representatives have complained to the EEOC about the lack of clarity around the ADA. The complaints might finally be getting through. In a June 2011 informal discussion letter, the EEOC Office of Legal Counsel acknowledged that the agency “has not taken a position” on employers’ right “to offer financial incentives for employees to participate in wellness programs that include disability-related inquiries (such as questions about current health status asked as part of a health risk assessment) or medical examinations (such as blood pressure and cholesterol screening to determine whether an employee has achieved certain health outcomes).” However, the agency has not rescinded the 2009 discussion letters that suggested that these incentives might be unlawful.
Permission Should Be Granted
The EEOC should rescind the 2009 opinion letters and issue formal regulations permitting wellness programs that comply with HIPAA. There are several reasons why this would be not just good national health policy, but also good law.
First, the ADA’s provisions on disability-related inquiries and health examinations were clearly designed to prevent employers from asking questions that would allow them to screen-out or terminate disabled applicants and employees. In many wellness programs, however, the employer does not even see, let alone, consider an individual’s answers to the questions on her HRA or her blood pressure tests. Instead, an outside wellness administrator sees that information. Certainly in cases where the employer does not even receive individual test results or assessment answers, it makes no sense even to apply the ADA rules.
Second, HIPAA already contains protections for disabled employees. HIPAA limits financial incentives for achieving specific health outcomes to 20 percent of the employer’s premium costs. Moreover, HIPAA regulations provide that employers must offer reasonable accommodations to employees who have medical conditions that prevent them from reaching a specified health standard. For example, an employee who has a documented medical reason for not being able to completely control her blood pressure would not be penalized if she fails to achieve a specified blood pressure standard.
Third, the ADA contains other provisions recognizing that employer health plans may take into account underwriting criteria, suggesting that the drafters of the ADA never envisioned that employees would all have to pay the same premium for their health insurance.
Fourth, Congress could not have possibly intended to allow the EEOC (or private plaintiffs’ lawyers) to veto employee wellness programs. HIPAA specifically upholds an employer’s right to implement wellness programs, and the 2010 Affordable Care Act both reiterates that right and increases to 30 percent from 20 percent of health costs the financial incentive an employer can offer its employees for improving their health. These laws—both passed after passage of the ADA—placed federal policy on the side of controlling health costs, not using overly broad readings of disability-discrimination law to make wellness programs unlawful.
It is time for the United States government to speak with one voice on the issue of employee wellness programs. One hopes that, when it does, it will speak out in favor of an employee’s ability to improve their health and reduce their healthcare costs.
Christopher T. Scanlan is a director with Howard Rice in San Francisco, where he is a member of the labor & employment practice group. He can be reached at firstname.lastname@example.org or 415.677.6427.