By Sharon Begley
NEW YORK (Reuters) - In what would be a significant and hard-fought victory for U.S. businesses, the Obama administration said on Thursday it will propose new rules for workplace wellness programs that would treat as voluntary even plans that penalize workers thousands of dollars for not participating.
That decision, which will be published in the Federal Register on Monday, opening 60 days for public comment, would likely remove the government's legal challenge to the wellness program at Honeywell International Inc.
Last year, the Equal Employment Opportunity Commission (EEOC) sued Honeywell, arguing that penalties in its workplace wellness program, which can reach $4,000 a year for workers who choose not to participate, made it involuntary.
The "voluntary" standard is critical because a landmark anti-discrimination law largely prohibits employers from asking questions about the health of workers unless the queries relate to their ability to perform a job.
Wellness programs, which the vast majority of large U.S. firms have instituted, often require employees to answer detailed questions about their family medical histories and to undergo employer-specified medical exams, such as for cholesterol and glucose levels, blood pressure, weight and waist size.
The programs have expanded since President Barack Obama's signature healthcare law of 2010, which allows employers to charge non-participants 30 percent more for health coverage, including premiums and deductibles. That can amount to thousands of dollars a year.
The EEOC therefore had to reconcile that Obamacare provision with the prohibition on involuntary wellness programs, which is part of the 1990 Americans with Disabilities Act (ADA).
Although that landmark law "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 program," the EEOC said in a statement.
The agency added that the "proposed rule makes clear that wellness programs are permitted under the ADA," and that "companies may offer incentives of up to 30 percent of the total cost of employee-only coverage in connection with wellness programs."
The EEOC proposal would bar employers from firing, disciplining, coercing, or denying health coverage to employees who decline to participate in a wellness program.
About 98 percent of U.S. companies with 200 or more workers, and 73 percent of smaller firms, offered wellness programs in 2014, according to the Kaiser Family Foundation. Those numbers are up from 62 percent of larger firms and 26 percent of smaller firms offering such programs in 2006.
Wellness programs are generally managed by outside companies in what has become an $8 billion-a-year industry, research firm IBISWorld reported last month.
Reuters reported in November that leading U.S. corporations represented by the Business Roundtable, angered by the EEOC's legal action against Honeywell, were threatening to pull their tacit support for Obamacare unless the government backed off.
Since then, the Business Roundtable has made meeting government officials about the issue "a top priority," a senior official for the group said.
The Roundtable argues that wellness programs with hefty penalties are voluntary "because employees can elect to participate or pay the penalty," said its outside counsel, Nancy Taylor.
The EEOC apparently agreed.
"Employers are going to be pretty happy about the proposed regulation," said Seth Perretta, a principal at Groom Law Group in Washington and an expert in employment law.
In a statement, Honeywell called the EEOC proposal "a positive step toward enabling the implementation of the President's health care law and the desire of all Americans to lead healthier lives," and said no employee has been denied healthcare coverage "or disciplined in any way as a result of their voluntary decision not to participate in our wellness programs."
Patient advocacy and anti-discrimination groups, however, criticized the idea that a wellness program can be voluntary if opting out brings hefty financial penalties.
The EEOC proposal "appears to diminish the protections that workers have against being coerced to disclose medical information to their employers when that information is unrelated to their ability to do their jobs," said attorney Jennifer Mathis of the Bazelon Center for Mental Health Law.
If the EEOC proposal takes effect, employees who feel they are being coerced into workplace wellness programs could try to challenge it in court. In general, however, courts defer to federal agencies on such questions.
(Editing by Michele Gershberg, Jonathan Oatis and Andre Grenon)