Editor’s note: This post is part of a series stemming from the Third Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015. The conference brought together leading experts to review major developments in health law over the previous year, and preview what is to come. A full agenda and links to video recordings of the panels are here.
Wellness programs have been enthusiastically embraced by employers seeking to promote health and hoping to control costs. On April 20, 2015, program proponents received long awaited news: the Equal Employment Opportunity Commission (EEOC) issued a proposed rule clarifying how the Americans with Disabilities Act (ADA) would apply to wellness programs. Many large employers likely breathed a sigh of relief upon reading the rule, but the rule is not final and may reignite a longstanding debate over the appropriate use of wellness incentives.
Wellness Programs Today
Wellness programs have become common in the workplace. A 2014 Kaiser Family Foundation survey found that among large employers offering health benefits, just over half offered an opportunity to complete a health risk assessment (HRA), a questionnaire that is often a gateway for the provision of health risk information and other wellness program components (Exhibit 12.8 in the Kaiser survey). A similar fraction offered biometric screenings (Exhibit 12.1), such as tests for cholesterol or blood pressure, or measurement of body mass index. Some screening programs test for cotinine, which is associated with nicotine exposure.
Some wellness programs offer financial incentives such as premium adjustments or gift cards. The 2014 survey found that more than half of large employers using HRAs provide incentives for their completion, and more than a third of these incentives equaled or exceeded $500 (Exhibit 12.10). A federally commissioned report prepared by RAND suggests that incentives are effective in increasing HRA completion.
Employers may use incentives in other ways as well. About 12 percent of large firms reported tying incentives to wellness program completion (Exhibit 12.7), while about 8 percent of large firms with biometric screening programs reported tying incentives to biometric outcomes, not including smoking (Exhibit 12.12). Studies have shown that appropriately structured incentives can influence health behaviors, but high-quality evidence on the impact of employer wellness incentives is in short supply.
Federal Regulation Of Wellness Program Incentives
Federal policy makers have long seen both the promise and perils of employer wellness incentives. When Congress prohibited group health plans from discriminating based on health factors in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), it created an exception for programs of health promotion and disease prevention.
When regulators (the Departments of Health and Human Services, Labor, and Treasury) promulgated a final rule implementing this provision, they imposed a limit on wellness incentives tied to health factors of 20 percent of the total cost of coverage, a level thought to avoid “rewards or penalties so large as to deny coverage or create too heavy a penalty” on individuals not meeting the requisite standards.
The Affordable Care Act offered support for the development and expansion of health incentives in a variety of ways, including by lifting the ceiling on health-contingent wellness incentives to 30 percent (close to $1,800 annually for an average employee-only plan) and inviting regulators to increase the ceiling to 50 percent if appropriate. In a 2013 final rule, regulators preserved the 30 percent ceiling as a general matter but allowed it to rise to 50 percent for programs targeting tobacco use.
The Americans With Disabilities Act
Employers have structured wellness programs to comply with the HIPAA/ACA regulations, but have long been concerned about issues raised by other statutes. The Americans with Disabilities Act, for example, limits medical examinations and disability-related inquiries, but provides an exception for “voluntary medical examinations, including voluntary medical histories, which are part of an employee health program.” (42 USC § 12112(d)(4)).
Enforcement guidance issued by the EEOC in 2000 explained that “[e]mployees may be asked disability-related questions and be given medical examinations” pursuant to voluntary wellness programs, and that programs are voluntary “as long as an employer neither requires participation nor penalizes employees who do not participate.” The guidance did not clarify what constituted a penalty, however, leaving an open question about whether tying incentives to biometric exams or HRAs with disability-related questions might violate the ADA.
One answer might be that reasonable incentive amounts would not render a medical exam involuntary. A 2009 letter hinted that the EEOC might not object to incentives falling below HIPAA’s 20 percent cap, but the relevant portion of the letter was later rescinded. Subsequently, in enacting rules under the Genetic Information Nondiscrimination Act (GINA), which allows the voluntary provision of genetic information in the context of wellness programs (42 USC § 2000ff-1(b)(2)), the EEOC rejected the HIPAA approach, instead requiring employers to make clear that employees could qualify for HRA incentives even if they declined to answer questions requiring genetic information.
In October 2014, the EEOC filed suit against Honeywell, alleging in part that its biometric testing program violated the ADA. The negative reaction from large employers was swift. In January 2015, the Senate held hearings on wellness programs; employers touted the promise of wellness programs, disability advocates highlighted their concerns, and both groups called for more legal clarity. In March 2015, Representative John Kline (R-MN) introduced the Preserving Employee Wellness Programs Act, which would offer clarity by ensuring that incentives consistent with the ACA final rule would not violate the ADA.
In April, the EEOC finally issued a proposed rule applying the ADA to wellness programs (see Timothy Jost’s excellent summary on Health Affairs Blog). The rule embraced the HIPAA/ACA approach to incentives, limiting incentives for wellness programs including disability-related inquiries or medical examinations to 30 percent of the total cost of employee-only coverage.
Continuing Questions On Incentives
The EEOC’s approach is broadly consistent with the ACA’s support for incentive-based wellness programs, but is not perfectly aligned with the ACA. For example, the ADA’s limit is more restrictive than the ACA’s because it applies to rewards for HRA completion, while the ACA’s does not. The ADA’s limit is less restrictive, however, in that the ADA’s limit applies only to programs involving disability-related inquiries or medical examinations, while the ACA’s limit applies to all health-contingent wellness programs. As a result, incentives awarded based on responses to questions about tobacco use are subject only to the ACA’s 50 percent limit, while those based on biometric testing results are subject to the ADA’s 30 percent limit as well.
Does it make sense to define voluntariness based on a limit chosen because it was deemed to be not too heavy a penalty in the context of insurance coverage? Perhaps, although note that incentives reaching the 30 percent limit (or even the previous 20 percent limit) would equal or exceed many employees’ contributions toward health insurance premiums, and the absolute amounts involved would seem large to many people. But even so, an exploration of the theoretical relationship between incentives and coercion yields little insight about where to draw the line.
In the preamble to the proposed rule, the EEOC asks whether it should instead tie limits to the ACA’s definition of insurance affordability, which in 2015 is set at 9.56 percent of employee household income. An individual-specific approach has some intuitive appeal, although it is not clear how it would be implemented. The rule’s brief discussion suggests that a medical exam would be deemed coercive if associated incentives would render coverage unaffordable.
But what are the implications of this approach? Would low-income employees be shielded from exam-related incentives structured as penalties, but nevertheless be eligible for rewards? If so, this is an odd result, given that penalties can be transformed into economically equivalent rewards. Or would low-income employees automatically be deemed to earn all incentives necessary to ensure affordability? A more theoretically appealing approach might be to base an entire incentive program on income, but employees might protest visible differentials in rewards and penalties.
Does it make sense to sweep biometric tests related to nicotine within the 30 percent limit? On one hand, the exam is as intrusive as any other involving the same procedure. On the other hand, one might argue that 50 percent does not surpass any obvious voluntariness threshold, and policy makers have repeatedly treated smoking differently from other health-related issues.
Examples include the differential ACA incentive limit; the ACA’s premium rules, which allow insurers to charge individuals 50 percent more for tobacco use but not for other health factors; and the aforementioned ACA affordability rules, which determine affordability based on rates charged to non-tobacco users, even for smokers who must pay more under wellness programs.
It is unclear how much impact the proposed rule’s incentive limits would have in the near future, as many current programs likely fall well below these limits. But the proposed incentive rule and other issues, including the ADA’s and GINA’s implications for wellness programs extending to family members, remain under discussion. The EEOC is accepting comments through June 19, 2015.