Well Done? EEOC's New Proposed Rules Would Limit Employer Wellness Programs to De Minimis Incentives—with Significant Exceptions

On 7 January 2021, the U.S. Equal Employment Opportunity Commission (EEOC) proposed two new rules designed to clarify the scope of incentives that employers may offer employees as part of a wellness program without violating the Americans with Disabilities Act (ADA) or Genetic Information Nondiscrimination Act (GINA). The rules, which are subject to a 60-day public comment period, come in response to a 2017 court decision invalidating previous EEOC rules on this subject. In most instances, the rules would allow employers to offer employees only de minimis incentives for participating in a wellness program. However, there are some significant exceptions, including one that would allow employers to offer employees an incentive of up to 30 percent of the total cost of coverage, if the incentive is in connection with a health-contingent insurance plan.

For years, employers have offered incentives (or, alternatively, imposed penalties) to encourage employees to participate in health wellness programs.¹ Often, in order to earn an incentive, employees had to undergo medical exams or disclose medical conditions, which implicates the ADA and GINA. For example, the ADA generally prohibits employers from requiring medical exams or making inquiries of an employee’s disability. GINA provides similar protections with respect to a person’s family medical history. Nevertheless, both the ADA and GINA provide exceptions to this prohibition where the individual’s participation in the wellness program is “voluntary.”

In 2016, the EEOC promulgated a new rule pursuant to a “safe harbor” found in the ADA, whereby an employer’s use of a penalty or incentive of up to 30 percent of the cost of self-only coverage would not render “involuntary” a wellness program that sought the disclosure of ADA-protected information.² At the same time, the EEOC issued a similar GINA rule that permitted employers to offer incentives of up to 30 percent of the cost of self-only coverage for disclosure of information about a spouse’s “genetic information.”³ Significantly, employers could offer these incentives for both types of wellness programs: participatory programs (those that provided general education or rewards for participating in health activities, without any required results), and health-contingent programs (those that provided rewards for completion of a health-related activity or based on a health factor, such as satisfying a certain cholesterol level).⁴ The incentive did not even have to be offered as part of a group health insurance program, as long as it did not exceed the 30 percent cap.

Shortly thereafter, the American Association of Retired Persons (AARP) filed suit in the District of Columbia challenging the EEOC’s 2017 rules. Ultimately, the court concluded that the rules were arbitrary and capricious and vacated them.⁵ In response, the EEOC withdrew the incentive section of the ADA and GINA regulations in December 2018,⁶ but until now, it had not offered any replacement language.

In June 2020, the EEOC voted 2-1 to approve Notices of Proposed Rulemaking in response to the AARP decision. After subsequently being approved by the Office of Management and Budget, the rules’ text now has been made public for the first time and sent to the Federal Register for publication.

Proposed ADA Rule

Under the proposed ADA rule, “most” wellness programs that make disability-related inquiries or require medical examinations may offer no more than de minimis incentives to employees.⁷ Examples of such de minimis incentives include a water bottle or gift card of modest value. In contrast, incentives such as paying for an employee’s annual gym membership or rewarding an employee with airline tickets would not be de minimis.

While the EEOC says “most” programs would be limited to de minimis incentives, there is a significant exception for health-contingent wellness programs...