Legal Updates


EEOC REGULATIONS ON WELLNESS PROGRAMS VACATED

February 26, 2019

In recent years, many public school districts, and other employers, instituted wellness programs which provide employees with an incentive, such as a discount on employer sponsored health insurance, in exchange for participating in certain health-related activities or programs.  However, a recent court decision vacated important Equal Employment Opportunity Commission (EEOC) rules related to offering such incentives, effective January 1, 2019.  The EEOC has not yet issued new regulations.  Consequently, in the interim, employers should evaluate their wellness plans to ensure that they remain compliant with federal law, including the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

Background

Wellness programs are regulated by a number of different federal statutory and regulatory schemes.  First, the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA) prevents health plans and insurers from discriminating against individuals on the basis of “any health status related factor,” but allows these entities to offer “premium discounts or rebates” in return for an individual’s participation in a wellness program.  See 29 U.S.C. § 1182(b)(2)(B); 26 U.S.C. § 9802(b); 42 U.S.C. § 300gg-4(b).  Under these laws, an incentive may include a discount on insurance costs for participating individuals or a penalty that increases insurance costs for non-participants.  26 C.F.R. § 54.9802-1(f)(1)(i).  Additionally, the ACA’s amendments to HIPAA allow plans to offer incentives up to 30% of the cost of coverage in exchange for participation in a health-contingent wellness program.  A health-contingent wellness program is a program that bases its incentives on a participant’s satisfaction of a particular health-related factor. See Incentives for Nondiscriminatory Wellness Programs in Group Health Plans, 78 FR 33157 at 33161.

However, HIPAA and the ACA are not the only laws implicated in wellness programs.  Because wellness programs often involve the collection of medical information from employees, such as information about disabilities or genetic information, both the ADA and GINA must be considered.  Under the ADA, employers may not require medical examinations or undertake disability inquires unless the inquiry is both job related and “consistent with business necessity.”  42 U.S.C. § 12112(d)(4)(A).  However, the ADA does allow employers to conduct medical examinations and collect medical history as part of a wellness program so long as the employer’s participation in the program is “voluntary.”  Id § 12112(d)(4)(B).  Similar to the ADA, GINA prohibits employers from requesting, requiring, and purchasing “genetic information” from employees or their family members.  Id § 2000ff-1(b).  Again, similar to the ADA, GINA does provide an exception for the collection of this information in connection with a wellness program, so long as the program is “voluntary.”  Id § 2000ff-1(b)(2)(A)-(B). 

Critically, in both the ADA and GINA context, the term “voluntary” is not defined by the respective statutes.  Prior to 2016, the EEOC, the federal agency tasked with enforcing compliance with the ADA and GINA, took the positon that a wellness program was not “voluntary” if employers conditioned incentives on a participant’s disclosure of ADA or GINA protected information.  However, in 2016, the EEOC reversed this position and released new regulations that allowed wellness plans collecting ADA and GINA protected information to offer incentives of up to 30% of the cost of self-only insurance and still be considered “voluntary.” See 81 FR 31126 and 31143.  In response to these new regulations, the American Association of Retired Persons (AARP) filed suit against the EEOC.

Court Decision

Ultimately, the United States District Court for the District of Columbia concluded that the EEOC’s regulations must be vacated, effective January 1, 2019.  AARP v. EEOC, 292 F. Supp. 3d 238 (D.D.C. 2017).

The court came to this conclusion by first determining that the word “voluntary” in both the ADA and GINA statutes was ambiguous.  When a statute is ambiguous, a court will then defer to an agency’s, in this case the EEOC’s, interpretation of the ambiguous term if the agency has offered a reasoned explanation for the decision.

The EEOC provided three (3) reasons for why it adopted the 30% rule for incentives.  First, the EEOC sought to harmonize the ADA and GINA regulations with the changes made to HIPAA through the ACA and therefore selected the 30% value to provide symmetry.  Next, the EEOC argued that the 30% value is a reasonable interpretation of “voluntary” based on “current insurance rates.”  And finally, the EEOC referenced a comment letter from the American Heart Association endorsing the 30% level.  AARP v. EEOC, 267 F. Supp. 3d 14, 29 (D.D.C.), on reconsideration, 292 F. Supp 3d 238 (D.D.C. 2017).

The court found all three of these arguments unpersuasive.  On the regulation’s goal of seeking harmony with HIPAA, the court concluded that HIPAA’s lack of a “voluntary” provision likely proved fatal to the EEOC’s first rationale. Id at 31.  Next, the court addressed the EEOC’s argument related to current insurance rates and determined that the agency did not undertake enough study into current insurance rates to make a determination about whether the 30% level was truly voluntary. Id.  Finally, the court addressed the American Heart Association’s comment letter endorsing the 30% level.  Again, the court rejected this argument because the majority of comment letters were opposed to the 30% level and the EEOC did not explain why it relied on certain comment letters at the exclusion of others.  Id.  This ultimately led the court to vacate the EEOC’s regulations effective January 1, 2019.

Current Landscape

Currently, the EEOC has not released a new set of regulations to guide employers in determining whether their wellness plans are considered “voluntary” under the ADA and GINA.  However, on October 17, 2018, the EEOC issued notices RIN 3046-AB10 and RIN 3046-AB11.  These notices provide a June 2019 date for new regulations addressing these proposed rules.  In the meantime, employers should consult with legal counsel to ensure their wellness programs are compliant with federal law.

For questions regarding this article, please contact the author, Attorney Colin M. Lane (email: clane@strangpatteson.com; telephone: 844-626-0909), or your Strang, Patteson, Renning, Lewis & Lacy, s.c., attorney.

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