• The ADA does not provide a “safe harbor” for health insurance plans.
• Employers need to be aware of how the ADA applies to health and welfare plans.

The interplay between the nondiscrimination principles of the ADA and employer-provided health insurance, which is predicated on the ability to make health-related distinctions, is both unique and complex. This interplay is, undoubtedly, most complex when a health insurance plan contains distinctions that are based on disability.

The regulations implementing the employment provisions of the ADA further provide, in pertinent part, that it is unlawful for employers to discriminate on the basis of disability against a qualified individual in regard to: “[f]ringe benefits available by virtue of employment, whether or not administered by the [employer].” Employee benefit plans, including health insurance plans provided to employees, are a fringe benefit available by virtue of employment. Generally speaking, therefore, the ADA prohibits employers from discriminating on the basis of disability in the provision of health insurance to employees.

The ADA also prohibits employers from indirectly discriminating on the basis of disability in the provision of health insurance. Employers may not enter into, or participate in, a contractual or other arrangement or relationship that has the effect of discriminating against qualified applicants or employees with disabilities. Contractual or other relationships with organizations that provide fringe benefits to employees are expressly included in this prohibition. This means that employers will be liable for any discrimination resulting from a contract or agreement with an insurance company, health maintenance organization (HMO), third-party administrator (TPA), stop-loss carrier, or other organization to provide or administer a health insurance plan on behalf of the employees.

Another provision of the ADA makes it unlawful for employers to limit, segregate, or classify applicants or employees in a way that adversely affects employment opportunities or status on the basis of disability. Both the legislative history and the interpretive Appendix to the regulations indicate that this prohibition applies to employer-provided health insurance. Several consequences result from the application of these statutory provisions.

• Disability-based insurance plan distinctions are permitted only if they are within the protective scope of the ADA.
• Decisions about the employment of an individual with a disability cannot be motivated by concerns about the impact of the individual’s disability on the health insurance plan.
• Employees with disabilities must be accorded “equal access” to whatever health insurance employers provide to employees without disabilities.
• In view of the statute’s “association provision,” it would violate the ADA for employers to make an employment decision about any person, whether or not that person has a disability, because of concerns about the impact on the health insurance plan of the disability of someone else with whom that person has a relationship.

Whenever it is alleged that a health-related term or provision of an employer-provided health insurance plan violates the ADA, the first issue is whether the challenged term or provision is, in fact, a disability-based distinction. If the EEOC determines that a challenged health insurance plan term or provision is a disability-based distinction, the respondent employer will be required to prove that disability-based distinction is within the protective scope of the ADA.

The ADA permits employers, insurers, and plan administrators to establish and/or observe the terms of an insured health insurance plan that is “bona fide,” based on “underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law,” and that is not being used as a “subterfuge” to evade the purposes of the ADA.

Consequently, if the EEOC determines that the challenged term or provision is a disability-based distinction, the respondent employer will need to prove that:

• The health insurance plan is either a bona fide insured plan that is not inconsistent with state law, or a bona fide self-insured plan; and
• The challenged disability-based distinction is not being used as a subterfuge.

If the employer so demonstrates, the EEOC will conclude that the challenged disability-based distinction is within the protective scope of, and does not violate, the ADA. If, on the other hand, the employer is unable to make this two-pronged demonstration, the EEOC will conclude that the employer has violated the ADA.

It is important to note that not all health-related plan distinctions discriminate on the basis of disability. Insurance distinctions that are not based on disability, and that are applied equally to all insured employees, do not discriminate on the basis of disability and, as a result, do not violate the ADA.

Some health insurance plans, for example, provide fewer benefits for “eye care” than for other physical conditions. Such broad distinctions, which apply to the treatment of a multitude of dissimilar conditions, and which restrict individuals both with and without disabilities, are not distinctions based on disability. Consequently, although such distinctions may have a greater impact on certain individuals with disabilities, they do not intentionally discriminate on the basis of disability and do not violate the ADA.

The ADA would, however, be violated for employers to selectively apply a universal or “neutral” non-disability-based insurance distinction only to individuals with disabilities. Therefore, for example, it would violate the ADA for employers to apply a “neutral” health insurance plan limitation on “eye care” only to an employee seeking treatment for a vision disability, but not to other employees who do not have vision disabilities. Charges alleging that a universal or “neutral” non-disability-based insurance distinction has been selectively applied to individuals with disabilities should be processed using traditional disparate treatment theory and analysis.

Blanket pre-existing condition clauses that exclude from the coverage of a health insurance plan the treatment of conditions that pre-date an individual’s eligibility for benefits under that plan also are not distinctions based on disability, and do not violate the ADA. Please note, however, that the Health Insurance Portability and Accountability Act (HIPAA), as well as the Affordable Care Act, have provisions limiting or eliminating pre-existing condition exclusions.

Universal limits or exclusions from coverage of all experimental drugs and/or treatments, or of all “elective surgery,” are likewise not insurance distinctions based on disability. Similarly, coverage limits on medical procedures that are not exclusively, or nearly exclusively, utilized for the treatment of a particular disability are not distinctions based on disability. Therefore, for example, it would not violate the ADA for employers to limit the number of blood transfusions or X-rays that it will pay for, even though this may have an adverse effect on individuals with certain disabilities.

In contrast, however, health-related insurance distinctions that are based on disability may violate the ADA. A term or provision is “disability based” if it singles out a particular disability (e.g., deafness, AIDS, schizophrenia), a discrete group of disabilities (e.g., cancers, muscular dystrophies, kidney diseases), or disability in general (e.g., non-coverage of all conditions that substantially limit a major life activity).

As previously noted, employers may establish and/or observe the terms and provisions of a bona fide benefit plan, including terms or provisions based on disability, that are not a “subterfuge to evade the purposes” of the ADA. Such terms and provisions do not violate the ADA.

However, disability-based insurance distinctions that are a “subterfuge” do intentionally discriminate on the basis of disability and, as a result, does not violate the ADA.

Wellness programs

Many organizations have implemented wellness programs to help employees begin to lead healthier lives or continue to do so, thereby reducing health care costs for both the employee and employer, and perhaps improving job performance.

Many employers offer wellness programs as part of a group health plan as a means of improving overall employee health with the goal of realizing lower health care costs. Other employers offer wellness programs that are available to all employees, regardless of whether they are enrolled in a group health plan. Still other employers offer wellness programs but don’t even sponsor a group health plan.

These programs sometimes use health risk assessments (HRA) and biometric screenings to determine an employee’s health risk factors, such as body weight as well as cholesterol, blood glucose, and blood pressure levels. Some of these programs offer financial and other incentives for employees who participate or achieve certain health outcomes.

Although the ADA limits the circumstances in which employers may ask employees about their health or require them to undergo medical examinations, it allows such inquiries and exams if they are voluntary and part of an employee health (wellness) program.

Questions have come up about the relationship of the ADA to such programs, in part because such programs may involve providing employee incentives to participate and asking for medical information.

The ADA provisions apply to all wellness programs that ask for medical information or that require a medical exam. It does not matter whether the program is part of or tied to a group health plan or not.

Under the ADA, wellness programs must meet certain general criteria, including the following:

• Meet the definition of a wellness program,
• Be voluntary,
• Limit participation incentives, and
• Keep medical information confidential.

The ADA defines what a wellness program is for purposes of its provisions. The term generally refers to a program that is reasonably designed to promote health or prevent disease. It is not sufficient to simply claim that a collection of medical information is part of a wellness program. In order to meet this criterion, the program must:

• Have a reasonable chance of improving the health of, or preventing disease in, participating employees;
• Not be overly burdensome,
• Not be a subterfuge for violating the ADA or other employment anti-discrimination laws; or
• Not be highly suspect in the method chosen to promote health or prevent disease.

Asking employees to complete an HRA and/or undergo a biometric screening for the purpose of alerting them to health risks of which they may have been unaware would meet these criteria, as long as employers use aggregate information from HRAs to design and offer health programs aimed at specified conditions identified by the information collected. On the other hand, if employers collect such information and do not share it with the participants so they can use it to improve their health, but rather use it only to gauge plan premiums, the program would not meet these criteria.

The concept of providing a medical certification with information regarding any medical risks an individual has that are under active treatment instead of being required to complete an HRA or undergo a medical exam would limit the effectiveness of wellness programs. Therefore, employers need not accept such a certification in lieu of an HRA or exam.

In addition to meeting the definition of a wellness program, it must be voluntary. Such a program is voluntary if it meets the following:

• Employees are not required to participate — merely offering employees a choice whether or not to participate does not render the program voluntary;
• Group health plan coverage is not denied or limited for non-participation;
• Employees suffer no adverse employment actions, retaliation, interference, coercion, intimidation, or threats; and
• Employees are provided with a notice regarding medical information use.

This notice bears more detail. It needs to meet the following criteria:

• Be written so that employees from whom medical information is being obtained are reasonably likely to understand it;
• Describes the type of medical information that will be obtained and the specific purposes for which the information will be used; and
• Describes the restrictions on the disclosure of the employee’s medical information, the employer representatives or other parties with whom the information will be shared, and the methods used to ensure that the information is not improperly disclosed (think HIPAA privacy/security).

If employers already provided a notice that informs employees what information will be collected, who will receive it, how it will be used, and how it will be kept confidential, employers need not provide a separate notice under the ADA. Perhaps, for example, an employer already provides a HIPAA notice. If, however, the existing notice does not provide all this information or if it is not easily understood by employees, then the employer must provide a separate ADA notice that sets forth this information in a manner that is reasonably likely to be understood by employees.

Employers may have a wellness program provider give the notice to employees, but employers are still responsible for ensuring that employees receive it.

Employees need not receive the notice at any particular time, but they must receive it before providing any health information, and with enough time to decide whether to participate in the wellness program. Employers should not wait until after an employee has completed an HRA or medical exam to provide the notice.

The employee need not provide a signed authorization, like the HIPAA provisions. GINA, however, requires prior, written, knowing, and voluntary authorization when a wellness program collects genetic information, including family medical history. Employers would not, therefore, need to provide a spouse with an ADA notice if they already provide the spouse with a GINA notice that covers the same information.

The notice may be provided in any format that will be effective in reaching employees being offered an opportunity to participate in the wellness program. For example, it may be provided in hard copy or as part of an email sent to all employees with a subject line that clearly identifies what information is being communicated (e.g., “Notice Concerning Employee Wellness Program”).

Employers would not provide the notice along with a lot of information unrelated to the wellness program, as this may cause employees to ignore or misunderstand the contents of the notice. If an employee files a charge with the EEOC claiming that he or she was unaware of a particular medical exam conducted as part of a wellness program, the EEOC will examine the contents of the notice and all of the surrounding circumstances to determine whether the employee understood what information was being collected, how it was being used, who would receive it, and how it would be kept confidential.

Employees with disabilities may need to have the notice made available in an alternative format. For example, if employers distribute the notice in hard copy, they may need to provide a large print version to employees with vision impairments, or may need to read the notice to a blind employee or an employee with a learning disability. A deaf employee may want a sign language interpreter to communicate information in the notice, whether the notice is in hard copy or available electronically. Notices distributed electronically should be formatted so employees who use screen reading programs can read them.

The EEOC has a model notice to use to meet this requirement. Employers need not use the exact words in the EEOC’s model, but it would need to tell employees, in language they can understand, the appropriate information. The EEOC model is written in a way that enables employers to tailor their notice to the specific features of their wellness plan.

The ADA wouldn’t be the ADA without a reasonable accommodation provision, and this is true for wellness programs. Regardless of whether a wellness program includes disability-related questions or medical exams, employers must provide reasonable accommodations (absent undue hardship) to enable employees with disabilities to earn whatever financial incentive you offer. Providing a reasonable alternative standard and notice to an employee of the availability of a reasonable alternative under HIPAA and the ACA as part of a health-contingent program would generally fulfill this requirement.

Employers would also need to provide a reasonable accommodation for a participatory program even though HIPAA does not require such a reasonable alternative standard.

For example, if an employer offered a financial incentive for employees to attend a nutrition class, regardless of whether they reach a healthy weight as a result, the employer would need to provide a sign language interpreter so an employee who is deaf and needs an interpreter could understand the information communicated in the class and could earn the incentive, as long as providing the interpreter would not result in undue hardship.

When it comes to smoking cessation programs, a program that merely asks employees whether or not they use tobacco (or whether or not they quit using tobacco upon completion of the program) is not an employee wellness program that includes disability-related questions or medical exams. Therefore, the ADA provisions would not apply, and employers could offer incentives up to 50 percent of the cost coverage for that smoking cessation program, per HIPAA/ACA.

Incentives

While employers may have incentives with a wellness plan, the incentives should be limited; how limited they must be under the ADA is currently unclear. The EEOC did attempt to enact final rules regarding incentives with a limit of 30%, but in August 2017, the U.S. District Court for the District of Columbia, based on the court case AARP v. EEOC, invalidated the rules because the EEOC did not adequately explain how it determined that an incentive or penalty of up to 30% was the appropriate maximum that would make the plan be considered “voluntary” under the ADA. The court found that the regulations were arbitrary and capricious, and instructed the EEOC to reconsider them. The EEOC indicated that it was not going to continue to pursue the rules at this time and, therefore, the incentive provisions became vacated as of January 1, 2019, and were removed from the books. In response to the court’s ruling, the EEOC was planning on publishing proposed regulations on this by December 2019, but they did not materialize.

In 2021 the EEOC proposed new regulations that apply to wellness plans that involved medical exams. Such plans would be prohibited from including a financial incentive other than something very small, such as a water bottle or gift card.

Exceptions would apply for wellness plans that are activity based or outcome based that otherwise meet the requirements for those types of plans (including the 30%/50% maximum incentive rule) and are otherwise are completely voluntary.

Until those rules are finalized, under the ADA, the incentive limitations break down as follows based on plans and participation:

• If the wellness program is limited to employees enrolled in the plan, the incentive may not exceed 30 percent of the total cost of self-only coverage (including both the employee’s and employer’s contribution).
• If the wellness program is offered to all employees regardless of whether they are enrolled in the plan, the incentive limit is 30 percent of the total cost of self-only coverage if employers offer only one group health plan.
• If employers offer more than one group health plan but participation in the wellness program is offered to employees whether or not they are enrolled in a particular plan, the incentive limit is 30 percent of the total cost of the lowest cost self-only coverage under a major medical plan.
• If employers do not offer a group health plan, the incentive limit is 30 percent of the cost of self-only coverage under the second lowest cost silver plan for a 40-year-old non-smoker on the exchange in the location you identify as your principal place of business.

Incentives may be financial or in-kind (e.g., time off awards, prizes, and other items of value).

The ADA’s confidentiality provisions would apply to wellness plans.