Congressional Spotlight on EEOC and Wellness - Legislate

Volume 6 | Issue 4 | January 30, 2015
Congressional Spotlight on EEOC and Wellness
Programs; Key Budget Report Released
A Senate panel held a hearing this week that examined EEOC enforcement actions of employer
wellness programs. Additionally, the Congressional Budget Office released a key report, which
includes updated estimates of the cost of federal entitlement programs, tax expenditures for
employer-provided health and retirement coverage, and the costs and coverage impact of the
Affordable Care Act.
In this article: Senate Panel Calls for EEOC Guidance on Wellness Programs | Report on Federal Budget Outlook Released
Senate Panel Calls for EEOC Guidance on Wellness Programs
Yesterday, the Senate Committee on Health Education Labor & Pensions (HELP) held a hearing focused on
employer-sponsored wellness programs. These initiatives have been in the spotlight lately because of recent lawsuits
brought by the Equal Employment Opportunity Commission (EEOC) — the agency that enforces the Americans with
Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). These actions have created
uncertainty about the extent to which wellness programs can provide financial incentives or penalties for completing
health risk assessments or biometric screenings without triggering employment discrimination concerns — particularly
in the absence of EEOC regulations explaining how a wellness plan can operate in a nondiscriminatory fashion. For
more information on the recent EEOC lawsuits, please see our November 4, 2014 and October 30, 2104 FYI Alert
publications.
Throughout the hearing, HELP Committee senators from both sides of the aisle expressed support for wellness
programs and concern that the threat of EEOC enforcement actions chills employer interest in adopting and
enhancing such programs. Ranking Member Patty Murray (D-WA), however, remarked that wellness programs must
not be used to discriminate against individuals with disabilities or pressure individuals to divulge personal health
information to their employers.
Most hearing panel witnesses described the successes and benefits of employer-sponsored wellness programs,
crediting them with making workplaces healthier (by facilitating early diagnoses, encouraging weight loss, and aiding
with smoking cessation, for example) and lowering healthcare costs. In line with many of the senators’ comments,
.
1
Volume 6 | Issue 4 | January 30, 2015
several witnesses conveyed concern about the “dampening effect” of the EEOC’s recent enforcement actions on
employers’ interest in sponsoring wellness initiatives.
One witness representing a disability rights advocacy group acknowledged that wellness programs can be useful for
promoting early intervention on healthcare issues, but cautioned that these programs can erode workplace
protections for people with disabilities. Wellness programs can discriminate against individuals with disabilities, the
witness maintained, by requiring participants either to divulge highly personal health information or risk losing
thousands of dollars for failing to respond to an employer’s intrusive medical inquiries that are neither job-related nor
consistent with business necessity.
Differences of opinion notwithstanding, the senators and the entire witness panel agreed on one issue — the need for
the EEOC to propose regulations in short order. Senators and panelists relayed frustration about the EEOC’s failure
to act on this issue for the past several years, and some suggested that Congress act in the absence of forthcoming
regulations. It remains to be seen whether the hearing will help hasten the long-anticipated EEOC guidance.
Report on Federal Budget Outlook Released
President Barack Obama is expected to release his proposed budget for FY 2016 next week. (See our March 7, 2014
Legislate for employee benefit proposals included in the president’s FY 2015 proposed budget.) In advance of that
release, the Congressional Budget Office (CBO) released a report this week on the outlook for the federal budget
over the next decade. The Joint Committee on Taxation (JCT) assisted CBO in compiling the report.
The report includes the following projections on increased entitlement program spending from 2015 to 2025, which
may lead some in Congress to call for entitlement reform:



Social Security spending is expected to increase over the next decade from 4.9% of GDP in 2015 to 5.7% in 2025
Spending on major federal health programs — such as Medicare, Medicaid, Affordable Care Act (ACA) subsidies
for health insurance purchased in the public marketplaces, and the Children’s Health Insurance Program — are
expected to increase from 5.1% of GDP in 2015 to 6.2% of GDP in 2025
In contrast, spending for all other federal government programs — such as loans for college students, building
roads and operating national parks, and funding federal agencies — is expected to decline from 9% of GDP in
2015 to 7.4% of GDP in 2025
What is a tax expenditure?
The report also includes projections of foregone revenue due to tax
expenditures. Tax expenditures, for this purpose, include the income
A tax expenditure is a rule in the tax
and payroll tax exclusion for employer-provided health coverage and
code that allows for a special
the favorable tax rules for employer sponsored retirement plans. CBO
exclusion, exemption or deduction, or
reports that the single largest expenditure in the tax code is the
that provides a special credit, tax
exclusion for employer-provided health coverage — which the agency
rate, or deferral of liability.
projects will equal 1.6% of GDP between 2016 and 2025. The
exclusion of retirement plan contributions and earnings is the next
largest tax expenditure — estimated by CBO to equal 1.1% of GDP
between 2016 and 2025. President Obama has previously proposed to limit the value of tax expenditures such as
employer-provided health and retirement coverage for high earners. (See our March 7, 2014 Legislate for more
information on the president’s proposed 28% cap for certain tax preferences.) His budget that is unveiled next week is
likely to include this proposal again. Similarly, the first comprehensive tax reform proposal introduced in Congress
2
Volume 6 | Issue 4 | January 30, 2015
within the last year — released last year by retired Ways and Means Chairman Dave Camp (R-MI) — also included a
proposal that would limit the value of tax expenditures for top earners. (See our February 27, 2014 FYI Alert for more
information.)
The CBO report also includes updated estimates on the net cost of the insurance coverage provisions of the ACA —
primarily the Medicaid expansion and the subsidies for purchasing coverage in the public marketplaces, reduced by
individual mandate penalties, employer shared responsibility penalties, and the 40% excise tax on high-cost plans
(often referred to as the “Cadillac Tax”) that is first effective in 2018. CBO and JCT estimate that these provisions will
cost $1.35 trillion on net between 2016 and 2025 — which is $101 billion less than the two agencies estimated a year
ago. Notably, the report mentions that CBO and JCT expect that “premiums for health insurance will tend to increase
more rapidly than the threshold for determining liability for the high-premium excise tax” — with the result that the
40% excise tax will impact an increasing number of employer health plans. The two agencies anticipate that
employers will try to avoid the tax by reducing premiums, but that federal tax revenue will still increase over the next
decade because employers will pay employees more taxable cash compensation to compensate for a reduction in
benefits designed to avoid the excise tax.
The number of uninsured individuals is declining, with CBO and JCT estimating that 12 million individuals received
insurance coverage in 2014 because of the ACA. Employer-provided coverage, however, is expected to decline over
the next decade — ranging from 7 to 10 million fewer individuals covered by employer plans beginning in 2016 on
account of the health reform law. The agencies predict that the losses in employer-provided coverage will be offset by
coverage gains through enrollment in the public marketplaces or Medicaid — with enrollment in those programs
ranging from 34 to 41 million individuals over the next decade.
Authors
Drew Crouch, JD, LLM
Julia Zuckerman, JD
Produced by the Knowledge Resource Center of Buck Consultants at Xerox
The Knowledge Resource Center is responsible for national multi-practice compliance consulting, analysis and publications,
government relations, research, surveys, training, and knowledge management. For more information, please contact your account
executive or email [email protected]
You are welcome to distribute Legislate® publications in their entireties. To manage your subscriptions, or to sign up to receive our
mailings, visit our Subscription Center.
This publication is for information only and does not constitute legal advice; consult with legal, tax and other advisors before
applying this information to your specific situation.
©2015 Xerox Corporation and Buck Consultants, LLC. All rights reserved. Xerox® and Xerox and Design® are trademarks of Xerox
Corporation in the United States and/or other countries. Buck Consultants® and Legislate® are trademarks of Buck Consultants, LLC in the
United States and/or other countries. BR11291
3