The U.S. Equal Employment Opportunity Commission shocked companies lastfall when it filed a lawsuit against Honeywell arguing that itswellness program, which is similar to the programs offered by manyother companies, violated both the Americans with Disabilities Act(ADA) and the Genetic Information Nondiscrimination Act (GINA).

Although a judge rejected the EEOC's request for a temporary restrainingorder against Honeywell's program, the lawsuit created a great dealof uncertainty for employers. Such wellness programs and incentivesto encourage employees to participate in them have becomemainstream as companies attempt to control their health carecosts.

A recent survey of 121 large corporates conducted by theNational Business Group on Health and Fidelity found that 79% offersome type of health improvement or wellness program. Among thosecompanies, 74% offer employees an incentive to participate.

Recently there have been a couple of developments that couldprovide provide some clarity for employers on the questions aroundwellness program incentives. Last month, legislation was introducedin both the House and Senate that says that if a company's wellnessprogram complies with the Affordable Care Act, it also complieswith the ADA and GINA. And the EEOC sent a set of proposed rulesregarding wellness programs to the Office of Management and Budgetfor its sign-off.

Voluntary or Not

The ACA's rules about wellness programs limit incentives to 30%of the cost of the health coverage, or up to 50% in the case oftobacco cessation programs.

Honeywell's incentives were within those limits. But the EEOCargued that the Honeywell program's biometric screening was inviolation of the ADA's prohibition against requiring medical testsnot related to an employee's job. The ADA has an exception for“voluntary wellness programs,” but the EEOC argued that thefinancial penalties imposed on Honeywell employees that didn'tagree to the screening meant that it wasn't voluntary.

In addition, the EEOC said Honeywell's requirement thatemployees' spouses covered by the company be tested violated theGenetic Information Nondiscrimination Act.

“It's really hard for employers,” said Gretchen Young, seniorvice president for health policy at the ERISA Industry Committee,which represents large employers on benefits issues. “Here you haveHoneywell, with a mainstream wellness program in full compliancewith the ACA, being told it violated the ADA. You can't protectyourself from that sort of thing.”

EEOC's Proposed Rules

TheEEOC's proposed rules won't be made public until they're approvedby OMB. Brian Marcotte, president and CEO of the National BusinessGroup on Health, which represents the views of large employers onhealth policy issues, said the best-case scenario for employerswould be rules that said a company that complies with the wellnessprovisions of the ACA and HIPAA is also in compliance with the ADAand GINA, in line with the proposed legislation.

“The fact the EEOC has finally reached the point where they aregoing to take the regulatory route rather than attempting to suecompanies is a good sign,” said Marcotte, pictured at left.

The EEOC “did vote on a bipartisan basis to move the rulesforward, so we're hoping they'll be more in line with theAffordable Care Act,” he added.

“The proposed rule will be helpful in limiting some of the riskonce employers have a better sense of what are the rules of play,”said Seth Perretta, a principal with the Groom Law Group. “But itis quite possible that the EEOC's rules may become a ceiling onwellness programs that is lower than the ceiling otherwise allowedby HIPAA and the ACA.”

The ACA's 30% limit on incentives applies to activity-only andoutcome-based programs, and there is currently no limit on theincentive that companies can provide for participation-onlyprograms, such as completing a health risk assessment or abiometric screening, he explained.

Perretta noted that with respect to participation-onlyprograms, the Senate legislation would provide the ADA reliefonly if such programs comply with the 30% limit the ACA applies toactivity-only and outcome-based programs.

“I can see the EEOC moving in that direction,” he said, notingthat the EEOC expressed concerns about this issue at a 2013 hearingon wellness programs. “I would think the proposed regulation mightinclude some ceiling on participation-only programs that is nototherwise imposed, but this is obviously merely conjecture untilthe rules are made public and we can see what the commission hasproposed.”

There's no guarantee the EEOC will come out with final rules anytime soon. Once the OMB approves the proposed rules, the EEOC willprovide a public comment period, review the comments it receivesand put out a final rule.

“You are talking about in an optimistic world probably a minimumof 120 days, but conceivably a much longer period before the finalrulemaking,” said Frank Morris Jr., who heads the labor andemployment practice in the Washington office of Epstein Becker& Green.

Meanwhile, there's legislation on Capitol Hill, the PreservingEmployee Wellness Programs Act, was introduced by Sen. LamarAlexander (R-Tenn.) and Rep. John Kline (R-Minn.).

Marcotte described the legislation as a “backup” in case theEEOC gets bogged down in approving its regulations.

He acknowledged that Congress often has a hard time passinglegislation, but said he thought this issue had bipartisansupport.

Perretta argued that since the EEOC has proposed rules,legislators are likely to wait and see what the rules look like andhow providers and employers respond to the rules.

Gradual Adoption

Perretta pointed to an array of risks posed by wellnessprograms, from reputation risk to employee relations risk and legalrisk.

Given those risks, employers should take a long-term view andadopt wellness measures gradually, he said. “Layering it allon in one year expecting massive returns, that's the scenario thatcreates the greatest amount of risk.”

Morris, picturedat right, noted “a lot of concern” among employers, given “theuncertainty caused by the EEOC's litigation and the absence untilnow of EEOC rulemaking,” and suggested some steps companies cantake in the meantime.

Employers should ensure that wellness programs comply with theADA's rules about reasonable accommodation and provide alternativeways to qualify for an incentive for employees who aren't able tomeet a program's requirements the regular way, Morris said.

“We also suggest [companies] strongly emphasize that any medicalinformation that's disclosed in the context of a [health riskassessment] or biometric screening is never available tosupervisors or managers who are making employment decisions,” hesaid, adding that companies should also ensure that such medicalinformation is “maintained separately and securely.”

Morris said companies might also consider integrating theirwellness program as part of their health plan, noting a decisionfrom the Court of Appeals for the Eleventh Circuit, Seff v. BrowardCounty, that suggested making a wellness program part of thecompany's health plan could provide some protection.

“The key part is the court reached the conclusion that you don'thave to engage in the inquiry about voluntary or involuntary if thewellness program is part of the employer's health benefit programbecause then it's inside the ADA safe harbor for bona fide benefitplans,” Morris said. “Although that's only the Eleventh Circuit,it's still an important precedent.”