United States: The Emerging Contours Of The Rules Governing Wellness Programs

 As the costs of providing health insurance continue to rise, employers have sought—with limited success—to find options to hold down costs. One of the few promis­ing approaches in an otherwise bleak cost-containment landscape is the workplace wellness program. While the evidence supporting of the efficacy of workplace well­ness programs is mixed, U.S. employers,1 large employ­ers in particular,2 have embraced these arrangements. The consensus seems to be that workplace wellness programs improve workforce health, thereby diminish­ing the demand for services at the margins.

Wellness programs come in all shapes and sizes. They may be (or be or integrated with) group health plans, or not. A wellness program that simply offers dis­counts on gym memberships, for example, is not a group health plan; a wellness program under which an employee qualifies for discounted group health plan premiums is integrated with a group health plan; and an arrangement where the employer simply provides biometric screenings and health coaching but offers no other major medical coverage is its own stand-alone group health plan. Whatever the form, these programs share a common need to navigate a shock­ingly complex legal and regulatory environment.

While a host of Federal laws impact the maintenance and operation of workplace wellness programs, three in particular are currently at the epicenter of wellness program design:

  • The Health Insurance Portability and Account­ability Act ("HIPAA"),3 which prohibits employer-sponsored group health plans from discriminating against an employee on the basis of the employ­ee's (or a family member's) adverse health factors;
  • The Americans with Disabilities Act, as amended by the ADA Amendments Act of 2008 ("ADA"),4 which prohibits discrimination against a quali­fied individual with a disability in any aspect of employment; and
  • Title II of the Genetic Information Nondiscrimina­tion Act ("GINA"),5 which protects job applicants, current and former employees, labor union mem­bers, and apprentices and trainees from employ­ment discrimination based on their genetic information.

Another Federal law, the Patient Protection and Afford­able Care Act of 2010 ("ACA")6 also figures prominently. The ACA codified and expanded on a set of 2006 HIPAA regulations establishing the basis for the regula­tion of wellness programs under the Internal Revenue Code (the "Code"), the Employee Retirement Income Security Act of 1974 ("ERISA"),7 and the Public Health Service ("PHS") Act.8

With the issuance of final regulations under the ACA in June 2013, employers thought that they understood the legal and regulatory environment in which they must operate. This is not to say that they were unaware that the ADA also could impact wellness plan design. They did. But the apparent early lack of interest on the part of the Equal Opportunity Employment Commission ("EEOC"), the agency with the authority to interpret the ADA, followed by contradictory signals from that agency, imparted what ultimately proved to be a false sense of security. As one commentator aptly put it, the EEOC was "late to the party."9 That changed with a flurry of recent cases and an even more recent bout of regulatory activity by the EEOC. Overnight the question became, do wellness incentives violate the ADA?

Employers also started to worry about the impact of GINA following the issuance of final regulations in October 2009 (relating to GINA Title I, barring the use of genetic information for group health plan under­writing purposes)10 and November 2010 (relating to GINA Title II, barring the use genetic information for employment purposes).11 The GINA Title I regulations, which interpreted the term "underwriting" broadly, proved particularly irksome to employers. The rule all but barred incentives aimed at obtaining family medi­cal histories, thereby impairing the usefulness of health risk assessments. Separately, a narrow issue arose under GINA Title II relating to the participation of spouses in health risk assessments. This issue was addressed in a recent notice of proposed rulemaking.12

Commentators may differ on the reasons why work­place wellness programs have had to travel such a torturous route. Some claim that the fault lies with Congress for failing to enunciate clear priorities. Others demur and instead place the blame at the feet of over­zealous regulators. Or it may simply be that the goal of the ACA is to keep people healthy, while the goal of the ADA is to prevent employers from gaining access to medical information about employees that could be used to discriminate against their employees. What­ever the cause, a basic structure for the regulation of wellness programs is still emerging. And the final EEOC rules, once they emerge, will almost certainly include some limitations with which employers disagree.

There is also the matter of how wellness programs are implemented. For a combination of reasons, employ­ers have come to rely on independent, third-party ven­dors to deliver wellness services. This approach is all but mandated under the EEOC's view of the ADA. The use of third-parties in this context introduces an additional layer of regulatory complexity as vendors must coordi­nate their compliance efforts with their employer-clients.

This article traces the development of the regula­tion of workplace wellness program design. Section I examines the regulation of wellness programs under HIPAA and the ACA, with respect to which final reg­ulations are in place. Sections II and III provide back­ground on the ADA and GINA, respectively, as they affect wellness program design and operation. Section IV surveys EEOC enforcement actions prior to its recent proposed rules. Section V offers a look at two recent proposed EEOC rules, relating to voluntary wellness programs under the ADA and spousal participation in wellness programs under GINA. Section VI shifts the focus to the emerging trends in third-party wellness programs and vendors, with a particular emphasis on service agreements. Finally, Section VII offers some predictions concerning the eventual content of the final EEOC rules on the subject.

I. HIPAA AND THE ACA

The regulation of employer-sponsored group health plans is governed by a patchwork of overlapping Federal laws:

  • Title I of ERISA regulates group health plans other than those maintained by churches13 and state and local governments. While ERISA is primar­ily enforced by the Department of Labor, its civil enforcement scheme also provides plan par­ticipants and beneficiaries with private rights of action to recover benefits, clarify rights, and obtain other relief;
  • Group health plans are also subject to parallel provisions set out in group health provisions in the Code, which apply to all group health plans (including church plans) but not to governmen­tal plans or health insurance issuers. The Treasury Department, acting by and through the Internal Revenue Service, promulgates regulations under and otherwise enforces the Code.14 These rules are enforced through the imposition of excise taxes;15 and
  • The PHS Act imposes requirements on health insurance issuers in the individual and group mar­kets and on self-funded non-federal governmen­tal group plans. While the Secretary of Health and Human Services is the primary enforcer of the PHS Act as it applies to governmental plans, with respect to health insurance issuers, the Depart­ment of Health and Human Services (HHS) gener­ally defers to the states for enforcement.16

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Footnotes

1 The Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits 2014 Annual Survey 6 (2014) (51 percent of firms with 200 workers or more offer incentives for employees to complete health risk assessments; and 36 percent of firms with more than 200 workers, and 18 percent of firms over all, use financial incentives tied to health objectives like weight loss and smoking cessation). See also Rand Corporation, Do Workplace Wellness Programs Save Employers Money? (2014), available at http://www.rand.org/content/dam/rand/pubs/research_ briefs/RB9700/RB9744/1 The Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits 2014 Annual Survey 6 (2014) (51 percent of firms with 200 workers or more offer incentives for employees to complete health risk assessments; and 36 percent of firms with more than 200 workers, and 18 percent of firms over all, use financial incentives tied to health objectives like weight loss and smoking cessation). See also Rand Corporation, Do Workplace Wellness Programs Save Employers Money? (2014), available at http://www.rand.org/content/dam/rand/pubs/research_ briefs/RB9700/RB9744/RAND_RB9744.pdf.

2 Id.

3 Pub. L. No. 104-191, 110 Stat. 1936 (1996).

4 42 U.S.C. § 12101 (1990) (amended 2008).

5 Pub. L. No. 110–233, 122 Stat. 881 (2008).

6 Pub. L. No. 111-148 (2010), amended by Health Care and Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152 (2010). The ACA and the Internal Revenue Code sections added by it also have been amended by the TRICARE Affirmation Act, Pub. L. No. 111-159, Pub. L. No. 111-173 (2010); the Medicare and Medicaid Extenders Act of 2010, Pub. L. No. 111-309 (2010); the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, Pub. L. No. 112-9 (2011); the Department of Defense and Full- Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10 (2011); and the 3% Withholding Repeal and Job Creation Act, Pub. L. No. 112-56 (2011).

7 Pub. L. No. 93-406, 80 Stat. 830 (1974) (codified as amended at 29 U.S.C Chapter 18).

8 Pub. L. No. 78-410, 58 Stat. 682 (1944) (codified at 42 U.S.C. Chapter 6A).

9 Sally Doubet King, Late to the Party: EEOC Proposes Wellness Program Regulations, McGuirewoods Healthcare Reform Guide: Installment No. 50, May 28, 2015, available at https:// www.mcguirewoods.com/Client-Resources/Alerts/2015/5/ EEOC-Proposes-Wellness-Program- Sally Doubet King, Late to the Party: EEOC Proposes Wellness Program Regulations, McGuirewoods Healthcare Reform Guide: Installment No. 50, May 28, 2015, available at https:// www.mcguirewoods.com/Client-Resources/Alerts/2015/5/ EEOC-Proposes-Wellness-Program- Regulations.aspx.

10 74 Fed. Reg. 51,664 (Oct. 7, 2009) (to be codified at 26 C.F.R. pt. 54; 29 C.F.R. pt. 2590; 45 C.F.R. pt. 144, 146, 148).

11 75 Fed. Reg. 68,912 (Nov. 9, 2010) (to be codified at 29 C.F.R. pt. 1635).

12 80 Fed. Reg. 66,853 (proposed Oct. 30, 2015) (to be codified at 29 C.F.R. pt. 1635).

13 9 U.S.C. § 1003 (b); I.R.C. § 414(e).

14 See I.R.C. § 7805 (giving Secretary of the Treasury the power to create the necessary rules and regulations for enforcing the Internal Revenue Code).

15 I.R.C. § 4980D.

16 42 U.S.C. § 300gg-22(a)(1).

Originally published in THE PRACTICAL LAWYER AUGUST 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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