What Relevance Does The ADA Have To HIPAA-Regulated "Bona Fide Wellness Programs"?

     Many employers are at a loss as to what they are allowed to do to encourage their employees to live healthy lifestyles.  Because of the confusion, and lack of guidance on this issue, employers have put into practice a wide range of programs and incentives for their employees.  This article attempts to clear the air, and explain how the ADA's requirements intersect "bona fide Wellness Programs" provided for by HIPAA.  This article will be particularly useful for employers attempting to stagger health insurance premiums that different employees are charged.

HIPAA and Bona Fide Wellness Programs

     The Health Insurance Portability and Accountability Act (HIPAA) prohibits health plans from “charging similarly situated individuals different premiums or contributions based on a health factor.”[1]  What this means is that a health plan may not charge employees different premiums or fees due to health status, medical history, or past claims history. HIPAA provides for an exception to this general rule, allowing for the implementation of “premium discounts or rebates or modifying otherwise applicable co-payments or deductibles in return for adherence to programs of health promotion and disease prevention.”[2]  The term “bona fide wellness program” has been repeatedly used in published rules and regulations to refer to programs that will pass muster under the HIPAA exception.[3] In 2001, the Department of Labor, joined by the Treasury and HHS, issued proposed regulations hoping to define “bona fide wellness programs.”[4] A wellness program that offers an incentive based upon performance (such as a reduction in health care premiums for non-smokers) must satisfy the following requirements: (1) the incentive cannot exceed 10-20% of the total cost of individual coverage (even if the employee’s family is covered); (2) the program must be designed to promote health or prevent disease; (3) the program must be available to all similarly situated participants, meaning that a reasonable alternative must be available for individuals for whom it is unreasonably difficult to meet the standards or for whom it is medically inadvisable to attempt to meet the standard; and (4) all plan materials describing the terms of the program must disclose[5] the availability of a reasonable alternative standard.[6]

     For example,[7] an employer could charge higher health insurance premiums to employees who smoke. This would act as an incentive to the employees who smoke, to quit smoking. The employer would have to provide an alternative for employees who cannot reasonably quit, such as their attendance to a smoking cessation program, regardless of whether they actually quit smoking.[8] All of the program’s materials would need to mention the availability of an alternative requirement for the incentive.

     There are many programs that an employer could sponsor that do not have to satisfy the “bona fide wellness programs” requirements in order to comply with HIPAA’s nondiscrimination policies. These are programs that offer an incentive for mere participation, regardless of an employee’s performance or achievements.[9] Thus, instead of offing an incentive to employees who achieve a certain blood pressure level, requiring the program to meet the “bona fide wellness program” requirements, an employer could offer the incentive for merely taking the test. In the context of smoking, an employer could escape the same requirements by merely offering the incentive for those who complete a smoking cessation course. However, the incentive is earned by completing the course, not by discontinuing smoking.

ADA

     The Americans with Disabilities Act (ADA)[10] prohibits employers from discriminating, in employment and benefits, against a qualified individual with a disability.11 The ADA also prohibits medical inquiries or examinations[12] of applicants and employees regarding the existence, nature or severity of a disability unless job-related and consistent with business necessity. Thus, if a program was set up to pay for employees to attend a smoking cessation program and only inquired about the smoking habits of the employees, rather than their health, the ADA would not apply.[13] Further, in an unofficial opinion letter dated March 31, 1998, the E.E.O.C. confirmed that a program’s voluntariness is irrelevant if participants need not answer questions likely to elicit information about a disability. Courts have concluded that all employees, and not just individuals with qualifying disabilities, are entitled to this ADA protection.

     Recognizing the benefits of programs such as smoking cessation courses and weight management training, the ADA specifically exempts health programs from its requirements if certain requirements are satisfied.[14] Compliance with the HIPAA nondiscrimination requirements will, for the most types of wellness programs, protect employers from ADA discrimination claims.

     To qualify for the ADA’s exception provided for health programs, a program must meet the following requirements: (1) participation in the program must be voluntary; (2) any health information that is obtained must remain confidential and separate from other employment records; and, (3) the health information obtained must not be used to limit health insurance coverage eligibility or to take adverse employment action or deny promotional opportunities.[15] “A wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.”[16] Besides this bland statement, the E.E.O.C has not been extremely helpful to employers in defining whether certain incentives convert an otherwise voluntary program into an involuntary one through financial coercion.

     A 1998 opinion letter from the E.E.O.C. should put employers contemplating such a program on notice of potential ADA difficulties concerning the voluntariness requirement. In response to an inquiry about wellness program that gave non-smoking employees substantial reductions on the health insurance premiums, the E.E.O.C. stated, "It could be argued that providing a monetary incentive to successfully participate renders the program involuntary because the size of the payment must be considered." There has been no guidance from the E.E.O.C. as to whether the incentive limits for bona fide wellness programs under HIPAA would satisfy the ADA’s requirement that a plan be voluntary. Perhaps, for now, other sources of authority might provide instructive guidance. In a 1987 ADEA case from the Seventh Circuit, a thorough discussion of the word “voluntary,” in the context of employee benefits, can be found.[17] In Henn, the defendant-employer made a onetime offer of early retirement to a group of employees, promising them “a severance payment of one year's salary, retirement benefits calculated as if the retiree had quit at 65, medical coverage for life as if the employee were still on the payroll, and some supplemental life insurance coverage.”[18] In deciding that “voluntary” meant “without undue mental strain,” the Henn court observed:

[The offer p]rovided the employee may decline the offer [but] the offer makes him better off. He has an additional option, one that may be (as it was here) worth a good deal of money. He may retire, receive the value of the package, and either take a new job (increasing his income) or enjoy new leisure. He also may elect to keep working and forfeit the package. This may put him to a hard choice; he may think the offer too good to refuse; but it is not Don Corleone's ‘Make him an offer he can't refuse.’ ‘Your money or your life?’ calls for a choice, but each option makes the recipient of the offer worse off. When one option makes the recipient better off, and the other is the status quo, then the offer is beneficial. That the benefits may overwhelm the recipient and dictate the choice cannot be dispositive. The question ‘Would you prefer $100,000 to $50,000?’ will elicit the same answer from everyone, but it does not on that account produce an ‘involuntary’ response.[19]

Where the Henn court thought the question of voluntariness turned is the following: (1) if the person receives information about the consequences of his choices; (2) if the choice is free from fraud or other misconduct; and, (3) if the person has an opportunity to say no.[20] The Henn court further state that:

[T]he fact that he still found the decision hard cannot be decisive. A person contemplating an offer of early retirement may find the choice hard because both options-continued employment and early retirement-are desirable. The high value of each option hardly calls the voluntariness of the choice into question . . .[21]

Even without the Henn court’s influence on the matter, it would be hard to see how $12 a month[22] could render a wellness program involuntary. In all likelihood, the ADA would not apply to a wellness program that confines itself to providing reductions in insurance premiums to non-smoking employees, and kept its inquiries to the topic of smoking, as opposed to the health complications surrounding tobacco use.[23] The reason why such a program would not involve the ADA is that smoking is generally not seen as a disability.[24] The district court in Brasher stated:

[C]ommon sense compels the conclusion that smoking, whether denominated as “nicotine addiction” or not, is not a “disability” within the meaning of the ADA. Congress could not possibly have intended the absurd result of including smoking within the definition of “disability,” which would render somewhere between 25% and 30% of the American public disabled under federal law because they smoke. In any event, both smoking and “nicotine addiction” are readily remediable, either by quitting smoking outright through an act of willpower (albeit easier for some than others), or by the use of such items as nicotine patches or nicotine chewing gum. If the smokers' nicotine
addiction is thus remediable, neither such addiction nor smoking itself qualifies as a disability within the coverage of the ADA, under well-settled Supreme Court precedent.[25]

Sutton v. United was a case dealing with the issue of whether two severely myopic sisters, who had uncorrected visual acuity of 20/200 or worse, but normal acuity with corrective measures, were “disabled” as is defined by the ADA.[26] In deciding that the sisters were not “disabled,” the Supreme Court noted that since congress estimated that 43 million Americans were disabled, it was an obvious conclusion “that Congress did not intend to bring under the ADA's protection all those whose uncorrected conditions amount to disabilities. That group would include more than 160 million people.”[27]

Sources

[1] 29 U.S.C.A. 1181 et seq., (West 2006); See generally Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421 (Jan. 8, 2001) (to be codified at 29 C.F.R. pt. 2590).
[2] Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421.
[3] Interim Rules for Health Insurance Portability for Group Health Plans, 26 C.F.R. pt. 54 (1997); Rules and Regulations for Group Health Plans, 29 C.F.R. pt. 2590 (2006).
[4] Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421.
[5] In discussing this requirement, the proposed regulations state:

To satisfy this…requirement…it is sufficient to determine a reasonable alternative standard once a participant informs the plan that it is unreasonably difficult for the participant due to a medical condition to satisfy the general standard…under the program.

[6] Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421.
[7] Additional examples are found in the Appendix that the DOL provided with the proposed regulations.
[8] The proposed regulations specifically discuss this requirement as it pertains to smoking cessation
programs. In stating that nicotine addicts must be given an alternative standard if quitting is unreasonably difficult, the regulation observes:

Under the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, American Psychiatric Association, 1994 (DSM IV), nicotine addiction is a medical condition. See also Rev. Rul. 99-28, 1999-25 I.R.B. 6 (June 21, 1999), citing a report of the Surgeon General stating that scientists in the field of drug addiction agree that nicotine, a substance common to all forms of tobacco, is a powerfully addictive drug.

Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421, n.1.
[9] See Notice of Proposed Rulemaking for Bona Fide Wellness Programs, 66 Fed. Reg. 1421.
[10] 42 U.S.C.A. § 12101 et seq. (West 2006).
[11] 42 U.S.C.A. § 12112(c)(4)(A) (2006), ADA § 102(c)(4)(A); 1-5 Jonathan R. Mook, Americans With Disabilities Act: Employee Rights And Employer Obligations § 5.04 (2005).
[12] Neither the ADA statute nor the E.E.O.C. regulations have specifically defined the term “medical examination.” However, the E.E.O.C.’s Enforcement Guidance on Preemployment Disability-Related Inquiries and Medical Examinations does define the term. E.E.O.C., Enforcement Guidance: Preemployment Disability-Related Questions and Medical Examinations, No. 915.002 (Oct. 10, 1995). A ''medical examination'' is a “procedure or test that seeks information about an individual's physical or mental impairments or health.” CITE. The EEOC has enunciated a number of factors that will be considered in determining whether a particular procedure or test will be deemed a ''medical examination'': (1) is it administered by a health care professional or someone trained by a health care professional; (2) are the results interpreted by a health care professional or someone trained by a health care professional; (3) is it designed to reveal an impairment or physical or mental health; (4) is the employer trying to determine the applicant's physical or mental health or impairments; (5) is it evasive (for example, does it require the drawing of blood, urine or breath); (6) does it measure an applicant's performance of a task, or does it measure the applicant's physiological responses to performing the task; (7) is it normally given in a medical setting (for example, a health care professional's office); and, (8) is medical equipment used? Final Enforcement Guidance on Preemployment Inquiries at 14.
[13] See E.E.O.C., Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of
Employees Under the Americans with Disabilities Act (ADA), at n. 78 (July 26, 2000), available at
http://www.eeoc.gov/policy/docs/guidance-inquiries.html.
[14] 42 U.S.C.A. § 12112(c)(4)(B) (West 2006), ADA § 102(c)(4)(B); See also E.E.O.C., Enforcement
Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans
with Disabilities Act, No. 915.002 (July 27, 2000), question 22, available at http://www.eeoc.gov/policy/docs/guidance-inquiries.html (''the ADA allows employers to conduct
voluntary medical examinations and activities, including voluntary medical histories, which are part of an employee health program without having to show that they are job-related and consistent with business necessity as long as any medical records acquired as part of the wellness program are kept confidential and separate from personnel records.'').
[15] See E.E.O.C., A Technical Assistance Manual On The Employment Provisions (Title I) Of The
Americans With Disabilities Act § 6.6 (2002); Disability Compliance Bulletin, ADA is light on program
requirements (Mar. 31, 2005); H.R. Rep. No. 101-485, pt. 2, at 75 (1990) ("As long as the programs are voluntary and the medical records are maintained in a confidential manner and not used for the purpose of limiting health insurance eligibility or preventing occupational advancement, these activities would fall within the purview of accepted activities."); E.E.O.C., Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act, No. 915.002 (July 27, 2000) at n. 77, available at http://www.eeoc.gov/policy/docs/guidance-inquiries.html.; Id. at question 22; Bender's Labor & Employment Bulletin, An Introduction to Wellness Programs: The Legal Implications of ''Bona Fide Wellness Programs'' (June 1, 2006); 29 C.F.R. § 1630.14(d) app., 56 Fed. Reg. 35,726, 35,751 (1991); See also H.R. Rep. No. 485, Part 2, 101st Cong., 2d Sess. at 75 (1990) (House Committee on Education and Labor); H.R. Rep. No. 485, Part 3, 101st Cong., 2d Sess. at 43-44 (1990) (House Judiciary Report); 1-5 Jonathan R. Mook, Americans With Disabilities Act: Employee Rights And Employer Obligations § 5.04 (2005).
[16] EEOC Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act (ADA) at Question 22 (July 26, 2000),
http://www.eeoc.gov/policy/docs/guidance-inquiries.html.
[17] Henn v. Nat’l Goegraphic Society, 819 F.2d 824 (7th Cir. 1987). Although the ADEA voluntary
option case law is not binding in ADA litigation, see Cooper v. Neiman Marcus Group, 125 F.3d 786, 793 (9th Cir. 1997), it may be of some use to be aware of the courts’ interpretation of the word “voluntary” in those cases.
[18] Id. at 826.
[19] Id. at 826.
[20] Id. at 828.
[21] Id. at 829.
[22] “The total health-insurance premium for an individual at New Philadelphia, Ohio-based Lauren is $60 a month, Hummel says. Proposed HIPAA rules prohibit a company's wellness program from offering financial incentives more than 20% of the total cost of employee-only coverage. So, the largest wellness incentive Lauren could offer if such rules go into effect is less than $12 a month.” Tom Anderson, HIPAA Limits Curb Some Wellness Incentives, Wall St. J., Jan. 16, 2006,
http://www.careerjournal.com/services/print/?url=http%3A//www.careerjournal.com /hrcenter/benefitnews/20060116-bn.html&skyscraper=undefined (last visited July 11, 2006).
[23] See Bender's Labor & Employment Bulletin, An Introduction to Wellness Programs: The Legal
Implications of ''Bona Fide Wellness Programs'' (June 1, 2006).
[24] See generally Rose v. Home Depot U.S.A., Inc., 186 F.Supp.2d 595 (D. Md. 2002); Brashear v.
Simms, 138 F.Supp.2d 693 (D. Md. 2001); 5-137 Labor and Employment Law, What Is a Disability? §
137.08 (2006) (“Is a person who smokes five packs of cigarettes a day and is addicted to smoking
''disabled'' under the terms of the ADA? Probably not. Being addicted to nicotine is not considered to be a medical impairment under the ADA”).
[25] Brashear, 138 F.Supp.2d at 695 (citing Sutton v. United Airlines, Inc., 527 U.S. 471 (1999)). See also Rose, 186 F.Supp.2d 595 (following Brashear, where smoker claimed to be addicted to nicotine, and had attempted to quit through hypnosis, acupuncture, Wellbutrin, and patches).
[26] See Sutton, 527 U.S. 471.
[27] Id. at 472.

The author of this article can be reached at JonDwainMcLaughlin@gmail.com, or (312) 622-2750.

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