In a public meeting on June 11, 2020, the Equal Employment Opportunity Commission (EEOC) voted, by 2-1, to advance a new notice of proposed rulemaking on wellness programs. The EEOC intends to move forward with the proposed rule after parts of its last regulation were invalidated in court and even as the value of wellness programs has been refuted in several recent studies. This post summarizes the status of regulations for wellness programs, the comments made during the public meeting, and what to expect next.
Wellness Programs
The $8 billion employer wellness program industry is booming. The industry offers employers an alluring promise of lower medical spending, higher productivity, and improved overall well-being for employees. These programs affect millions of people: the latest data from the Kaiser Family Foundation showed that there are 63 million employees whose employer offers health benefits and a wellness program. But recent evidence refutes the claims of wellness programs, with large randomized controlled trials showing that these programs do not deliver on this promise.
One recent randomized controlled trial with nearly 33,000 participants at a large U.S. warehouse retail company found that the wellness program had no impact on employee health outcomes such as body mass index (BMI), blood pressure, or cholesterol after 18 months. Although employees with the wellness program reported engaging in higher rates of some healthy behaviors, this did not translate into better health or employment outcomes. The program had no significant effect on employee absenteeism, job performance, or health care use or spending.
Similar findings have been reported in another randomized controlled trial for employees at the University of Illinois at Urbana-Champaign. In this trial, some employees received a $200 incentive for participation in a wellness program. This incentive increased the rate of completion of the health screening, but the wellness program did not lead to healthier employees or lower health care costs one year later. Researchers concluded that the employees interested in participating in the wellness program were already healthy and incurred lower medical expenses relative to employees not interested in the program. As they put it:
“Since we know that healthier, wealthier employees are more likely to participate in wellness programs, these groups of employees may benefit disproportionately from participation incentives. Lower-income, less healthy employees—who may face legitimate barriers to participation in wellness activities—may see their health care premiums rise, even though as a group they might benefit most from reduced health care costs.”
Later studies by many of the same researchers found similar results. One analysis showed that a two-year randomized clinical trial of a wellness program had no effect on clinical health outcomes (such as weight or cholesterol levels) or the use of medical care, comparing employees with the wellness program and those without. The wellness program did show a slight increase in the proportion of employees who reported feeling more positive about their health and had a primary care doctor.
Beyond the fact that wellness programs are ineffective, critics raise concerns that these programs discriminate against people living with disabilities, penalize those in poorer health, require or coerce the disclosure of sensitive medical information, and allow employers to exert control over employees’ lives even during non-working (and unpaid) hours.
These concerns notwithstanding, wellness programs remain very popular with employers. Among large firms offering health benefits in 2019, 88 percent offered a wellness program or a health screening program. As noted above, these firms covered an estimated 63 million employees in 2019.
Although wellness programs vary considerably, large employers increasingly ask employees to disclose personal health information (72 percent) and most (54 percent) large employers that ask for such disclosure offer financial incentives to comply. Disclosure might be made through a health risk assessment, biometric screening (such as a physical exam or a lab test), or the use of wearable technologies. About 7 percent of large firms offer incentives to employees that achieve actual biometric outcomes (such as a target BMI or cholesterol level); these are known as health-contingent wellness programs. While a small percentage, this still represents more than 4 million workers.
Wellness incentives are not insignificant, particularly when applied as a surcharge to an employee’s premium. The maximum value of the incentive was, on average, $783 (although one-fifth of large firms had a maximum incentive of more than $1,000).
While wellness programs are popular with employers, this is less true for employees. Prior analysis suggests that only about half of workers complete a health risk assessment when there is an incentive to do so and only 30 percent do so when there is no incentive. Employers report that incentives are either not effective or only somewhat effective at encouraging employees to participate in wellness programs.
Wellness Programs And The ACA
Wellness programs were initially authorized by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA prohibited group health plans from determining eligibility or varying premiums based on health status. However, HIPAA regulations allowed premium discounts or rebates or cost-sharing modifications as incentives for participation in a wellness program that met certain requirements. HHS and the Departments of Labor and Treasury published final HIPAA wellness program rules in 2006, allowing wellness incentives to be tied to employees actually meeting specific biometric targets (such as losing weight or lowering your blood pressure). Under the 2006 rules, these incentives could be as high as 20 percent of the cost of group coverage.
Those regulations became the basis for the ACA’s wellness program requirements, which offer a narrow exception to the ACA’s general prohibition on health status underwriting. These requirements are laid out in Section 2705 of the Public Health Service Act. Under Section 2705, employers must meet certain requirements to offer a wellness program that grants rewards or imposes surcharges based on an enrollee’s medical condition.
The ACA allowed health-contingent wellness incentives to be as high as 30 percent of the cost of coverage (up from 20 percent under HIPAA); federal regulators can increase this ceiling to 50 percent if they determine that such an increase is appropriate. The incentive can be based on the cost of family coverage if family members can also participate in the health outcomes-based wellness program. To implement the part of Section 2705 on employer wellness programs, HHS and the Departments of Treasury and Labor published a proposed rule in November 2012 and a final rule in June 2013. The rule further defined the conditions under which employers could offer a wellness program. The agencies generally limited health-related incentives to 30 percent but allowed increases of up to 50 percent for wellness programs that target tobacco use. The final rule also made clear that wellness programs had to comply with other federal laws, including the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), among others.
Section 2705 does not allow wellness programs in the individual market, but it did authorize a 10-state demonstration project for states to experiment with this type of program. HHS issued guidance for states on the wellness demonstration project in September 2019; to my knowledge, no state has applied for or been approved to participate in the wellness demonstration project. (HHS will also allow individual market insurers to include wellness incentives as quality improvement activities for purposes of the medical loss ratio calculation beginning with the 2021 reporting year.)
Lots And Lots Of Litigation
As recounted in detail in many prior posts by Tim Jost, the legality of wellness programs has long been questioned. The ADA and GINA generally prohibit employers from asking for or collecting employee health or genetic information, but one exception is when the information is collected voluntarily as part of an employee health program, including a workplace wellness program.
In 2014, the EEOC filed a number of lawsuits against employers asserting that their wellness programs violated the ACA and GINA by requiring employees to submit to biometric testing and health risk screening. Following outcry from employers, federal regulators released additional guidance in 2015. This included new guidance on HIPAA privacy rules and wellness programs, a report on workplace wellness programs, and additional frequently asked questions.
Also in 2015, the EEOC released two proposed rules, one on how the ADA applies to wellness programs and the other on how GINA applies to wellness programs. The EEOC rules allowed employers to impose penalties of up to 30 percent of self-only coverage if an employee refused to complete health information questionnaires as part of a wellness program. This applied to all types of wellness programs, whether participatory or health-contingent, and even when the wellness program was not related to a group health plan. Both rules were finalized on the same day in May 2016.
Under those rules, a wellness program was considered “voluntary” if it was reasonably designed to promote health or prevent disease, was not overly burdensome, and was not a subterfuge for violating nondiscrimination laws. An employer could not require an employee to participate in the program, deny coverage under its group health plans or particular group health plan benefits, or take any adverse action against an employee who refuses to participate in a wellness program or fails to achieve certain outcomes under such a program. The EEOC included other requirements: programs could not be established, for instance, mainly to shift costs to employees based on their health status.
Litigation soon followed. In October 2016, the AARP challenged the EEOC’s rules, asserting that the rules allow employers to impose draconian penalties on employees who refuse to provide health information to their employer. The potential to impose stiff penalties on employees who refuse to provide sensitive medical and genetic information, the AARP argued, made the program involuntary. This violates the ADA and GINA, and thus the rules violated the Administrative Procedure Act.
In the waning days of the Obama administration, Judge John D. Bates of the federal district court for the District of Columbia denied the AARP’s request for a preliminary injunction against the rules. However, in August 2017, he agreed with the AARP on the merits and concluded that the EEOC failed to adequately explain or justify its ADA and GINA rules. In particular, the court took issue with the fact that the EEOC failed to consider the level of coerciveness that the rules allowed and whether the rules themselves were consistent with the purposes of the ADA and GINA.
Judge Bates did not, however, vacate the rules as the AARP had requested. Because some employers had already relied on the rules in establishing their wellness programs, the court took the view that vacatur would be too disruptive to employers and employees. Instead, he remanded the issue to the EEOC for further consideration. In September, the EEOC indicated that it would not issue new proposed rules until 2018 or new final rules until fall 2019. As such, the agency did not expect to require employers to comply with new rules before 2021.
The AARP asked the court to reconsider vacating the rules, a request that Judge Bates granted in December 2017. To provide employers with sufficient time to adjust their employee benefits, Judge Bates vacated the rules effective January 1, 2019. Although he initially ordered the EEOC to issue new proposed rules by August 31, 2018, this part of his order was vacated following a request from the EEOC.
In a March 2018 status report, the EEOC indicated that it had not yet determined whether the agency would issue a new proposed rule, leave the rules in place (without the vacated provisions), or continue studying wellness programs. There were no plans to issue a proposed rule, but the EEOC declined to rule out this possibility in the future. Then, in late December 2018, the EEOC issued two final rules, one under the ADA and one under GINA, to formally eliminate the parts of the final rules that were invalidated by Judge Bates’ order (i.e., the incentive sections of the rules). These final rules went into effect on January 1, 2019.
EEOC’S Public Hearing
That long history brings us to the EEOC’s public hearing on June 11 where the commissioners, by a vote of 2-1, agreed to proceed with a new proposed rule. Commissioners Janet Dhillon and Victoria Lipnic voted in favor of proceeding while Commissioner Charlotte Burrows urged a series of amendments, all but one of which were rejected, and ultimately voted against the proposal. Although the text has not yet been released, a member of the EEOC’s Office of Legal Counsel summarized the proposed rule. What follows is based on the discussion from the hearing and may not reflect the proposed rule once it is issued.
De Minimis Incentives Only
Based on the hearing, the proposed rule would prohibit most types of wellness programs from using incentives to get employees to disclose health information. Incentives that are too high would coerce employees into sharing this information, which violates the ADA and GINA. To be deemed voluntary, then, the proposed rule would require wellness programs to offer no more than de minimis incentives to employees to participate. It was not clear from the hearing how “de minimis” will be defined but this could be an important issue.
Similar to the 2016 rules, employers would not be able to require an employee to participate in the program, deny coverage under its group health plans or particular group health plan benefits, or take any adverse action against an employee who refuses to participate in a wellness program or fails to achieve certain outcomes.
Insurance Safe Harbor Exception
That said, the proposed rule would (newly) interpret the ADA’s insurance “safe harbor” as an exception to this general de minimis rule for a subset of wellness programs: health-contingent wellness programs that meet ACA/HIPAA requirements. Thus, an employer’s wellness program that is connected to a health insurance plan could use data obtained from a wellness program to impose a penalty of up to 30 percent of premiums for plan participants who do not satisfy wellness program biometric targets, such as normal weight, blood sugar, or blood pressure. Although this was not further clarified during the hearing, wellness programs would purportedly still have to comply with the ADA’s requirement that participation in wellness programs is voluntary and with HIPAA nondiscrimination rules.
The ADA safe harbor provides that insurers or benefit plan administrators are not prohibited from “establishing, sponsoring, observing or administering the terms of a bona fide benefit plan based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law.” Historically, the EEOC has limited its view of this safe harbor to true insurance practices (such as risk analysis and underwriting) and has not applied the safe harbor to employee wellness programs. The EEOC’s own 2016 rules emphasized that the ADA safe harbor does not apply to wellness programs, even if such plans are part of the group health plan.
Commissioner Burrows argued that applying the safe harbor as proposed contravenes the text and legislative history of ADA as well as long-standing EEOC policy rules, guidance, and interpretations where EEOC has taken the position that the safe harbor does not apply to wellness programs (whether part of a health plan or not). The safe harbor has always been viewed as allowing insurers to treat employees differently based on disability but only if doing so was actuarially based and not a subterfuge for discrimination. Nothing in the ADA has been changed to justify the proposed rule’s shift from this position nor, in her view, should the EEOC be creating an exemption (sight unseen) for all health-contingent wellness programs connected to a health plan. Given these concerns and the fact that the proposed rule’s preamble may not have fully articulated a justification for this shift, Commissioner Burrows believes a court could have grounds to invalidate the rule once again after the rule is finalized.
Commissioner Burrows offered an amendment to address the safe harbor issue, which was rejected by Commissioners Dhillon and Lipnic. Commissioner Lipnic disagreed on the scope of the safe harbor, noting that at least one other court has found that safe harbor extends to employer wellness programs.
Privacy And Confidentiality Protections
The proposed rule will only allow the wellness program to disclose aggregated medical information to the employer. Employers and wellness programs could not take action that would disclose or be reasonably likely to disclose the identity of individual employees. And employees cannot be required to agree to the sale, transfer, or disclosure of their information.
Commissioner Burrows advocated for an amendment that would impose notice requirements on employers. The notices would inform employees about the data that is being collected by the wellness program and how this data would be used. She emphasized that HIPAA does not apply to employers and that an employee’s decision to share health information with an employer cannot be considered voluntary unless that employee knows what they are agreeing to. This amendment was rejected—and not even seconded to allow for further discussion.
Notices on data collection are already required under the 2016 rules, which suggests this may be a part of the current rules that the EEOC intends to pull back. Under the 2016 rules, employers must give employees advance notice that clearly explains what medical information will be obtained, how this information will be used, who will receive it, any restrictions on its disclosure, and methods that the employer or wellness program will use to prevent improper disclosure of this information.
The EEOC did approve a separate “incredibly modest” amendment from Commissioner Burrows to require employers to ask about the privacy and confidentiality standards used by third-party vendors that administer the wellness program. The amendment would not require a vendor to safeguard an employee’s health information but employers would have to at least ask about and be familiar with a vendor’s privacy policies.
The Discussion
The commissioners that voted in favor of moving ahead with the proposed rule emphasized that it was still early on in the process and that the EEOC would receive significant feedback before changes are made. Commissioner Lipnic raised the point that Congress, in the ACA, authorized health-contingent wellness program incentives and that the EEOC must find the right balance to reconcile this directive from Congress with the ADA and other EEOC protections.
Commissioner Burrows, in contrast, raised significant concerns about the forthcoming rule and proposed several amendments, all but one of which were rejected by the other two commissioners. She emphasized that health-contingent wellness programs most heavily impact the most vulnerable workers—including workers with disabilities, low-wage workers, workers of color, and older workers. This means that the workers most likely to face a penalty for failing to meet a health outcome under a wellness program are among the most marginalized who can least absorb higher health care costs. She emphasized this point in the context of the coronavirus crisis, noting that health care is needed now more than ever and that those fortunate enough to still have a job during the pandemic cannot afford to leave their health insurance, to pay more, or to speak out against their employer.
As noted above, Commissioner Burrows also raised concerns about the legality of the proposed rule, asserting that it will conflict with the ADA and long-standing EEOC interpretations. She believes that the proposed rule, in its current form, is inconsistent with the ADA, which must be read to broadly end discrimination based on health and disability.
GINA was not a focus of the hearing at all, which mostly centered on the ADA, so it will be interesting to see how and whether the proposed rule grapples with GINA. Another question is how the rule will address the health information of employees’ family members. (Unlike the ADA, GINA does not contain a safe harbor provision. To the extent that outcomes-based wellness programs are offered to the family members of employees, participation would require disclosure of health information about these family members, which is prohibited by GINA except under voluntary wellness programs.) Finally, the privacy and security of employee medical information is likely to be raised as a critical issue. As noted above, the proposed rule may pare back current informed consent requirements in the 2016 rules.
What Comes Next?
From here, the EEOC will submit its rule for review by the Office of Management and Budget (OMB). Once OMB completes its review, the rule will be sent back to EEOC and then released to the public for comment. The public will have a specified amount of time (say, 30 or 60 days) to review and comment on the regulation. EEOC will then consider these comments and respond to them in the preamble of a final rule. This process will take many months unless the rule is seen as a significant priority.
Litigation over a future rule should be expected. In fact, wellness program litigation is pending even at this moment. In summer 2019, the AARP filed a new lawsuit alleging that Yale University’s employee wellness program is “unusually punitive” and violates the ADA and GINA. Briefing in that case is almost complete with a decision to follow. The Kaiser Family Foundation has a great summary of Yale’s wellness program and the arguments being made in the litigation.