Meeting of May 8, 2013 - Wellness Programs Under Federal Equal Employment Opportunity Laws
Madam Chair and Commissioners: Thank you for the opportunity to testify before you today about the important and timely issue of the application of the Americans with Disabilities Act (ADA) to employer wellness programs. I will first discuss what the ADA itself says about wellness programs and what the Commission has said in regulations and enforcement guidance. Briefly, I will touch on the only court decision on the subject, and an informal discussion letter from EEOC's Office of Legal Counsel (OLC). Because so many of the inquiries we receive involve the relationship of the ADA to requirements under the Health Insurance Portability and Accountability Act (HIPAA), the Patient Protection and Affordable Care Act ("Affordable Care Act" or "ACA"), and Title II of the Genetic Information Nondiscrimination Act (GINA), I will also say something about those laws. I will close by proposing several questions that the Commission may want to consider if it decides to issue guidance on the ADA and employer wellness programs.
I am aware that some commentators, including participants at today's meeting, are concerned that wellness programs, particularly those that include financial incentives, could violate title VII of the Civil Rights Act of 19641 and the Age Discrimination in Employment Act.2 As the Commission has not addressed the implications of wellness programs under those statutes, I will not be discussing them in my testimony.
Employee access to programs aimed at identifying health risks and improving overall employee health has increased significantly since passage of the ADA in 1990. According to a National Compensation Survey conducted by the Bureau of Labor Statistics, in 1998-99, 54 percent of full-time employees in the public and private sector had access to employer-sponsored wellness programs; in 2008 (the last year for which statistics are available), the percentage had increased to 82 percent.3
Many employers maintain that the only way to encourage participation in wellness programs by a significant number of employees is to offer financial inducements. Employers increasingly are rewarding some workers and penalizing others for participating in wellness programs and/or for achieving certain health outcomes. Of the nearly 800 employers responding to a survey conducted by Aon Hewitt, a human resource consulting firm, 79 percent indicated that they offer incentives, 5 percent currently use penalties, and 16 percent use both penalties and rewards.4
A survey conducted in 2012 by the National Business Group on Health (NBGH) indicates that nearly 90 percent of the 120 employers surveyed -- from those with fewer than 2,000 to more than 50,000 employees in numerous industries, including transportation, health care, technology, entertainment, and retail -- currently offer wellness-based incentives, up from 60 percent in 2009. Employers indicated that they plan to spend an average of $521 per employee on wellness-based incentives in 2013 - an increase of 13 percent from the average of $460 reported in 2011, and double the per employee average of $260 reported in 2009.5 The most popular wellness-based incentives continue to be a decrease in premiums (61%), cash or gift cards (55%), or an employer-sponsored contribution to a health savings account (27%).6
A wellness program is a benefit of employment that an employer must offer to individuals with disabilities in a nondiscriminatory manner.7 If the program does not require participating employees to answer disability-related questions or undergo medical examinations (e.g., the program only requires employees to engage in a certain amount of physical activity), then the ADA simply requires that an employer make any reasonable accommodation necessary to enable an employee with a disability to participate in the program and to earn any incentive the employer may offer.8
Wellness programs that ask employees disability-related questions and/or require medical examinations raise more complicated questions, particularly when employers offer incentives to encourage participation, because of the ADA's rules that strictly limit an employer's access to medical information about current employees. These types of wellness programs will be the primary focus of this testimony.
The following examples of charges alleging violations of the ADA with respect to employer wellness programs set the stage for the legal discussion that follows:
More than 20 years ago, Congress recognized the importance of employer wellness programs and sought to avoid any conflicts between them and requirements under the ADA by including in the ADA's provisions limiting disability-related inquiries and medical examinations language which says, "[a] covered entity may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site."9 This is an exception to the general rule in the previous subsection that disability-related inquiries and medical examinations of employees must be job related and consistent with business necessity.10 The report of the House Committee on Education and Labor explains that
[a] growing number of employers today are offering voluntary wellness programs in the workplace. These programs often include medical screenings for high blood pressure, weight control, cancer detections, and the like. As long as the programs are voluntary and the medical records are maintained in a confidential manner and not used for the purpose of limiting health insurance eligibility or of preventing occupational advancement, these activities would fall within the purview of accepted activities.11
The statute, the legislative history, and EEOC's ADA regulations do not elaborate on the meaning of the word "voluntary." However, EEOC's Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act (ADA) (Employee Inquiry Guidance) explains that where a wellness program includes disability-related questions and/or requires medical examinations, the program must be voluntary, and that "voluntary" means that the employer neither requires participation in the program, nor penalizes employees who do not participate.12 The guidance says nothing directly about wellness program incentives and their impact on voluntariness. At the time the guidance was issued, financial incentives were not a feature of most wellness programs.
Only one case has discussed the extent to which financial incentives are permitted in order to promote participation in a wellness program, although it did not construe the meaning of the term "voluntary." In Seff v. Broward County,13 the District Court for the Southern District of Florida held that an employer's wellness program that imposed a $20 surcharge every two weeks on employees who did not answer questions on an HRA and submit to a biometric screening was a "term" of the employer's health plan and was permissible under the ADA's "safe harbor" provision applicable to insurance. In pertinent part, that provision says that the ADA does not prohibit:
(2) a person or organization covered by this chapter from establishing, sponsoring, observing, or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; . . .14
The court reasoned that:
The wellness program falls under the safe harbor provision because it is designed to develop and administer present and future benefits plans using accepted principles of risk assessment. The program renders aggregate data to the County that it may analyze when developing future benefit plans. The County uses this information to classify various risks and decide what type of benefits plans will be needed in the future in light of these risks. The County is thus determining what kind of coverage will need to be provided. . . . Furthermore, the wellness program is an initiative designed to mitigate risks. It is based on the theory that encouraging employees to get involved in their own healthcare leads to a more healthy population that costs less to insure.15
The district court's interpretation would appear to allow incentives or penalties for participation in any wellness program that includes disability-related questions and medical examinations as long as an employer or insurer claims that participation may result in reduced risks and reduced health care costs in the future, regardless of whether there is actuarial data supporting the relationship between any incentives an employer offers or penalties it imposes. No EEOC interpretation of the safe harbor provision and nothing in the legislative history supports appears to support such an approach. EEOC's Interim Enforcement Guidance on Application of the Americans with Disabilities Act of 1990 to Disability-Based Distinctions in Employer-Provided Health Insurance defines "risk classification" as "the identification of risk factors and the grouping of those factors that pose similar risks, and defines "underwriting" as "the application of the various risk factors or risk classes to a particular individual or group (usually only if the group is small) for the purpose of determining whether to provide insurance.16 Moreover, the decision to deny or limit coverage, or to charge different rates for coverage, based on a physical or mental impairment must be based on sound actuarial principles.17
The Office of Legal Counsel (OLC) has received some inquiries during the past five years concerning wellness programs and the ADA. Responses to these and other inquiries that OLC receives constitute an informal discussion of the issues raised. They provide technical assistance, but clearly indicate that they do not represent Commission policy.
One letter asked whether an employer could condition the provision of health insurance on an employee's participation in a wellness program. In a March 6, 2009 response to that inquiry, Legal Counsel Peggy Mastroianni acknowledged that the Commission has not taken a position on the issue and that the letter does not bind the agency, but concluded that asking employees disability-related questions on an HRA would not be job related and consistent with business necessity. Addressing the question of whether the HRA could be considered part of a voluntary wellness program, she referenced the Employee Inquiry Guidance and went on to state:
In this instance . . . an employee's decision not to participate in the health risk assessment results in the loss of the opportunity to obtain health coverage through the employer's plan. Thus, even if the health risk assessment could be considered part of a wellness program, the program would not be voluntary, because individuals who do not participate in the assessment are denied a benefit (i.e., penalized for non-participation) as compared to employees who participate in the assessment.18
The letter did not address whether other forms of incentives to participate in a wellness program and/or to achieve certain health outcomes would be consistent with the ADA.
EEOC began to receive questions about the ADA's impact on an employer's ability to offer financial incentives as part of wellness programs when the Departments of Labor, Health and Human Services, and Treasury (Internal Revenue Service) issued regulations to implement provisions of the HIPAA in 2006.19 HIPAA's nondiscrimination provisions generally prohibit group health plans from charging similarly situated individuals different premiums or contributions, or imposing different deductible, copayment, or other cost-sharing requirements based on a health factor (including health status, medical condition, claims experience, receipt of medical care, medical history, genetic information, evidence of insurability, and disability). However, an exception to this general rule allows employers to establish premium discounts or provide other financial incentives to employees who participate in wellness programs.20 The final HIPAA regulations said that these incentives could be as much as 20 percent of the total cost of premiums for self-only or self and family coverage.21 The HIPAA regulations do not regulate incentives that a health plan may offer for participation-only wellness programs, as long as the programs are made available to all "similarly situated" individuals.22 Thus, an employer could condition employee health coverage on participation in a wellness program without violating HIPAA.
The Affordable Care Act codifies and expands HIPAA's exemption for workplace wellness programs and contains provisions designed to encourage employers to adopt wellness programs.23 Beginning on January 1, 2014, the ACA will allow employers to reward employees who participate in wellness programs with up to a 30 percent discount on the cost of health insurance premiums, and the Departments of Treasury, Labor, and Health and Human Services are authorized to raise the limit to 50 percent if they determine such an increase is appropriate.24>
The preamble to the 2006 HIPAA regulations made clear that the regulations did not define employers' obligations under the ADA.25 Consequently, the kinds of inquiries we have been receiving and the issues raised by most of the charges we receive concerning wellness programs usually involved the extent to which compliance with the HIPAA standards (and now the ACA) would satisfy an employer's ADA obligations.
On November 9, 2010, EEOC issued its regulations to implement Title II of GINA.26 GINA prohibits employers with 15 or more employees from making employment decisions based on an applicant's or employee's genetic information.27 Genetic information includes the results of an applicant's or employee's genetic tests, the fact that an applicant or employee (or an applicant's or employee's family member) received genetic services, and, most important for our purposes, an applicant's or employee's family medical history.28
GINA also prohibits an employee from requesting, requiring, or purchasing genetic information about an applicant or employee,29 and requires strict confidentiality of genetic information about an applicant or employee that an employer does have.30 The prohibition against requesting, requiring, or purchasing genetic information is not absolute. Six exceptions permit an employer to acquire genetic information without violating GINA, one of which applies to situations in which an employer offers voluntary health or genetic services, including wellness programs.31
The GINA regulations are so far the only place in which the Commission has taken a position on wellness program incentives. The regulations say that in order to comply with GINA, a wellness program may not condition receipt of an incentive on an employee providing genetic information. Thus, for example, the regulation say that if an employer offers a $150 incentive for employees who complete an HRA that includes questions about employees' current health status and family medical history, the HRA must indicate, in language reasonably likely to be understood by individuals completing it, that any inducement will be made available regardless of whether an employee answers questions that request genetic information.32 Similarly, an employer may offer $150 incentives for employees to participate in disease management programs and/or to achieve certain health outcomes, as long as the incentives are offered to employees in addition to those who provided genetic information in response to questions on an HRA, such as employees who have current health conditions and employees who engage in practices that may put them at increased risk of developing health conditions in the future.33
The EEOC sought to be consistent in its GINA regulations related to wellness program incentives with the approach taken in regulations issued by the Departments of Labor, Health and Human Services, and the Treasury in their regulations implementing Title I of GINA,34 which prohibits genetic discrimination by health plans. Title I prohibits a health plan from requiring individuals to complete a HRA that requests family medical history in order to receive a reward; such a request is deemed a request for underwriting purposes and is prohibited35.
The Commission was careful in the regulations to point out that they do not define an employer's obligations under the ADA. For example, the regulations specifically acknowledge that if an employer offers financial incentives to promote participation in a disease management program or other program that promotes healthy lifestyles and/or for employees who achieve certain health outcomes, it must make reasonable accommodations for employees with disabilities to the extent required by the ADA, since participation in a wellness program is a benefit or privilege of employment.36
Any guidance the Commission may decide to issue on the ADA and employer wellness programs should address some or all of the following questions.
First, is offering a financial incentive for participating in a wellness program, for engaging in certain activities as part of that program, and for achieving certain health outcomes consistent with the ADA?
Second, if offering financial incentives in connection with wellness programs is permitted, should the incentives be limited in any way? As a related matter, because the requirement that a wellness program be "voluntary" applies specifically to those wellness programs that include disability-related inquiries (such as the kinds of questions asked on an HRA) or medical examinations (which may be part of an HRA or may be a means of determining whether a participating employee has achieved a certain health outcome), does it make sense to place greater limitations on incentives offered as a part of such programs?
Third, if incentives are permitted as part of wellness programs that include disability-related inquiries and/or medical examinations but the Commission concludes that limitations on these incentives are necessary, how should the limitations be determined? Should compliance with HIPAA or the ACA satisfy the requirement under the ADA that such programs be "voluntary"?
Fourth, although HIPAA and the ACA permit both incentives and penalties, is there a meaningful way to distinguish between the two under the ADA, and does the ADA require the Commission to do so?
Finally, regardless of whether the Commission decides that the ADA allows incentives as part of wellness programs under the ADA, what is the role of reasonable accommodation in enabling employees with disabilities to participate fully in such programs?
Employers will continue to use wellness programs in an effort to reduce health insurance costs. Yet confusion persists about the relationship of the ADA to laws that encourage the use of financial incentives to promote participation in these programs. Guidance from the Commission will promote both uniformity in the handling of charges alleging violations of the ADA with respect to wellness programs, and voluntary compliance to prevent discrimination from occurring in the first place. Again, I thank you for the opportunity to testify and will be happy to take any questions.
4 See "Aon Hewitt Survey Highlights Important Role of Incentives in U.S. Employers' Efforts to Improve Workforce Health and Performance," at http://aon.mediaroom.com/2013-03-25-Aon-Hewitt-Survey-Highlights-Important-role-of-Incentives-in-U-S-Employers-Efforts-to-Improve-Workforce-Health-and-Performance.
7 See 42 U.S.C. § 12112(a) (prohibiting discrimination with respect to "terms, conditions, and privileges of employment"); 29 C.F.R. § 1630.4(f) (prohibiting discrimination with respect to "fringe benefits available by virtue of employment, whether or not administered by the covered entity").
8 42 U.S.C. § 12112(b) (5)(A) (prohibiting covered entity from failing to provide reasonable accommodations absent undue hardship); 29 C.F.R. § 1630.9(a) (same); 29 C.F.R. § 1630.2(o)(1)(iii) (reasonable accommodation includes modifications and adjustments that enable a covered entity's employees to enjoy "equal benefits and privileges of employment").
10 42 U.S.C. § 12112(d)(4)(A). The statute does not define the term "job-related and consistent with business necessity." However, EEOC enforcement guidance explains that the standard is met, and an employer may ask an employee to answer disability-related questions or to take a medical examination, when the employer has a reasonable belief, based on objective evidence, that "(1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition." Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act (ADA), (July 27, 2000) , at Q&A 5. A disability-related inquiry is a question (or series of questions) that is likely to elicit information about a disability. Id. at Q&A 1. A medical examination is a procedure or test that seeks information about an individual's physical or mental impairments or health. Id. at Q&A 2. Few employers would disagree that many questions on health questionnaires about employees' current health status constitute disability-related inquiries, or that procedures used to determine employees' blood pressure, blood glucose levels, or cholesterol levels (three risk factors that many wellness programs assess) are medical examinations.
11 House Comm. on Education and Labor, HR Rep No 485(II), 10st Cong., 2d Sess. At 75 (1990). See also 29 C.F.R. Part 1630, app. § 1630.14(c) (citing legislative history and noting that permissible activities include blood pressure screening, weight control counseling, and cancer detection, as well as administration of prescription medications, such as insulin).
14 42 U.S.C. § 12201(c). Employees apparently were not required to achieve certain health outcomes in order to earn the incentive, but only to participate in the program by completing the HRA and undergoing the biometric screening. Employees identified as having one or more of five conditions -- asthma, hypertension, diabetes, congestive heart failure, and kidney disease -- were given the opportunity to participate in a disease management coaching program and to receive medications for the identified conditions at no additional cost to themselves. Seff, 778 F. Supp. 2d at 1372.
15 778 F. Supp. 2d at 1374. On appeal, Seff argued that genuine issues of fact precluded summary judgment on the question of whether the wellness program was a "term" of the employer's insurance plan, but did not challenge the district court's interpretation of the safe harbor provision. The Eleventh Circuit found that the wellness program was a "term" of the health plan and agreed with the district court that the safe harbor provision applied.
16 See Interim Enforcement Guidance on the Application of the Americans with Disabilities Act of 1990 to Disability-Based Distinctions in Employer-Provided Health Insurance, http://www.eeoc.gov/policy/docs/health.html (June 8, 1993), n.15.
17 See Committee on Education and Labor, H.R. Rep. No. 101-485, pt. 2, at 136-37 (1990). The report further states that the "safe harbor" provision "insures that decisions concerning the insurance of persons with disabilities which are not based on bona fide risk classification be made in conformity with non-discrimination requirements" and that benefit plans "need to be able to continue business practices in the way they underwrite, classify, and administer risks, so long as they carry out those functions in accordance with accepted principles of insurance risk classification." Id. See also Report from the Committee on the Judiciary (the "ADA requires that underwriting and classification of risks be based on sound actuarial principles or be related to actual or reasonably anticipated experience"), H.R. Rep. No. 101-485, pt. 3, at 71; Senate Report from the Committee on Labor and Human Resources ("[t]he Committee does not intend that any provisions of this legislation should affect the way the insurance industry does business under State laws"), S. Rep. No. 101-116, at 84 (1989).
This is consistent with the holdings in the two cases cited by the district court in Seff, neither of which supports Seff's conclusion. Barnes v. Benham Group, Inc., 22 F. Supp. 2d 1013 (D. Minn. 1998), permitted an employer to require 34 employees to answer a health questionnaire so that the employer could obtain insurance rates based on risks actually associated with the employees. Id. at 1018, 1020. The court in Zamora-Quesada v. HealthTexas Medical Group of San Antonio, 34 F. Supp. 2d 433 (W.D. Tex. 1998), held that the safe harbor provision was inapplicable in a suit against two health maintenance organizations, their provider of medical services, and the administrator that negotiated the contracts between the HMOs and the provider challenging the manner in which medical services were provided to people with disabilities, because the record did not contain the actuarial and statistical data the defendants used in making their decisions. Id. at 443.
21 29 C.F.R. § 2590.702(f)(1). An outcome-based wellness program generally must meet the following five criteria to comply with HIPAA's nondiscrimination rule: (1) the size of the reward may not exceed 20 percent of the total cost of coverage for an employee or family; (2) the program must reasonably be designed to promote health and prevent disease; (3) employees eligible to participate in the program must be given the program the opportunity to qualify for a reward at least once a year; (4) any reward must be available to all similarly situated employees and must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward if it is "unreasonably difficult" or "medically inadvisable" for an employee to satisfy the health standard because of a medical condition; and (5) all materials describing the program must include information about the availability of a reasonable alternative standard (or the possibility of waiver of the initial standard). 29 C.F.R. § 2590.702(f)(2).
36 See, e.g., 29 C.F.R. § 1635.8(b)(2)(iv) (citing 29 C.F.R. § 1630.2(o)(1)(iii) and 29 C.F.R. § 1630.9(a)). See also 29 C.F.R. § 1635.11(a)(1) (stating that "[t]his part does not . . . [l]imit the rights or protections of an individual under any other Federal, State, or local law that provides equal or greater protection to an individual than the rights or protections provided for under this part, including the Americans with Disabilities Act of 1990 . . . ").
Despite the fact that the GINA regulations do not describe ADA requirements with respect to wellness programs, doubtless some employers have interpreted the regulations as allowing for incentives of at least $450 for participating in a wellness program -- $150 for completing an HRA, $150 for participating in a disease management or similar program aimed at improving health, and $150 for actually achieving certain health outcomes.