EEOC Proposal Increases Restrictions on Wellness Programs

Employers who have designed wellness incentives in their group health plans to comply with the requirements established by the IRS and DOL under the Affordable Care Act will have to scale back those programs if the EEOC gets its way.

The EEOC's proposed regulations on how wellness plans can comply with the "voluntary" requirement under the Americans with Disabilities Act, released today and pending publication in Monday's Federal Register, impose greater restrictions on wellness programs than the IRS/DOL regulations under the ACA.

Two of the significant differences between the proposed EEOC regulations and the IRS/DOL regulations, include:

• The IRS/DOL regulations treat "participation-only" programs and "outcome-based programs" differently, by imposing no limit on the maximum reward/penalty for participation-only programs and limiting the total reward/penalty for all outcome-based programs to 30 percent of the total cost of employee-only coverage (with a higher limit of 50 percent of the cost of employee-only coverage permissible if one of the outcome-based programs is based on tobacco use). The proposed EEOC regulations limit the total reward/penalty for all participation-only and outcome-based programs to 30 percent of the total cost of employee-only coverage, with no higher limit if tobacco use is a factor.
• The IRS/DOL regulations impose no restrictions on the penalty/reward for participation-only programs, which can allow a group health plan to limit a non-participating employee to enrolling in only certain options in a benefit plan. The proposed EEOC regulations prohibit any wellness program from denying participation in the plan or any benefit package within the plan to employees who choose not to participate.

The preamble to the proposed regulations solicits comments (due June 19, 2015) on a number of specific topics, including:

• The practical impact on group health plans of the EEOC limit on the total reward/penalty of 30 percent of the total cost of employee-only coverage, in light of the IRS/DOL regulations higher limit of 50 percent when tobacco use is a factor; and
• Whether the reward/penalty should be limited so that employee-only coverage will still be "affordable" under the ACA (employee contribution limited to ~9.5 percent of the employee's household income). What's not clear from the question posed in the preamble is whether the EEOC is considering requiring all options under the group health plan to remain affordable, or if only one option would be required to remain affordable (which is all that's required for an employer to avoid ACA penalties).

The EEOC's authority to promulgate regulations governing wellness programs within group health plans has been questioned, and specifically denied by a federal court in Florida and the 11th Circuit Court of Appeals, because of statutory language in the ADA stating that the ADA "shall not be construed to prohibit or restrict" a covered entity from establishing, sponsoring, observing, or administering the terms of a "bona fide benefit plan." A footnote in the preamble states the EEOC's belief that this language doesn't exempt wellness programs in health plans because elsewhere the ADA provides for "voluntary" medical examinations conducted by a "covered entity," and if the provision for "voluntary" medical examinations is superseded by the "bona fide benefit plan" provision," the "voluntary" medical examination provision would be "superfluous."

It remains to be seen if this statutory analysis will stand up under further judicial review, especially because a "bona fide benefit plan" is not a "covered entity" that would not be subject to the "voluntary" medical examination provision.