Last week, the American Association of Retired Persons (“AARP”) won a challenge to the Equal Employment Opportunity Commission’s (“EEOC”) rules regarding employee wellness programs. This post discusses the legal challenge, the EEOC rules at issue, and practical takeaways for employers.
Background Concerning Regulations and EEOC Rules Governing
Employee Wellness Programs
Employer-sponsored wellness programs have become a popular means of promoting employee health and reducing healthcare costs. Wellness programs are regulated, in part, by the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Affordable Care Act (“ACA”). Among other regulations, under HIPAA (as amended by the ACA), health plans and insurers may not discriminate on the basis of any health factor, but may offer incentives of up to 30%, in the form of premium discounts or rebates, on a plan participant’s copayments or deductibles in exchange for that individual’s compliance with a wellness program.
Because employer-sponsored wellness programs often involve the collection of individual medical information from employees, including information about disabilities or genetic information, the programs can implicate the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”), both of which are administered by the EEOC. Specifically,
- The ADA prohibits employers from requiring medical examinations or inquiring whether an individual has a disability, but makes an allowance for wellness programs. It provides that an employer may collect employee medical information as part of an employee health program as long as the employee’s participation in the program is “voluntary.”
- Similarly, GINA prohibits employers from requesting genetic information from employees or their family members, but contains an exception that permits employers to collect such information as part of a wellness program as long as the employee’s submission of information is “voluntary.”
Neither the ADA nor GINA define the term “voluntary.” The EEOC previously took the position that in order for a wellness program to be deemed “voluntary,” employers could not condition the receipt of incentives on the employee’s disclosure of ADA or GINA protected information. However, in 2016, the EEOC issued new rules reversing this position. The 2016 ADA rule provides that the use of a penalty or incentive of up to 30% of the cost of self-only coverage will not render “involuntary” a wellness program that seeks the disclosure of ADA protected information. These were the rules at issue in the AARP case.
The D.C. District Court Decision
In its decision, the United States District Court for the District of Columbia held that the EEOC has to provide more explanation for adopting rules that allow employers to provide incentives for employee participation in wellness programs. The Court ruled that the EEOC had not adequately explained why programs that allowed participation incentives of up to 30% of the cost of an employee’s health insurance premiums did not violate the ADA’s and GINA’s requirements that participation in such programs be voluntary. At issue was the question of whether a program is truly voluntary if employees must choose between receiving a 30% decrease in health insurance premiums or providing their family’s personal health information to their employer. The Court remanded the rules to the EEOC for reconsideration, but did not vacate them.
The Court’s decision leaves employers uncertain as to what form any incentive allowances would take in the future, after the EEOC revisits the rules. Employers should monitor any guidance that the EEOC issues regarding allowed incentives for wellness programs, so that they can determine what, if any, changes need to be made to their wellness programs and accompanying incentives for 2018. If the EEOC does not implement any new rules before employers have to act for plan year 2018, employers should discuss with employment counsel whether it should revise wellness plan incentives.
 See 29 U.S.C. § 1182(b)(2)(B); 26 U.S.C. § 9802(b); 42 U.S.C. § 300gg-4(b). A wellness program incentive may include a discount on insurance costs or a penalty that increases the individual’s insurance costs due to non-participation in the wellness program. See 26 C.F.R. § 54.9802-1(f)(1)(i).
 42 U.S.C. § 12112(d)(4)(A); 42 U.S.C. § 12112(d)(4)(B).
 42 U.S.C. § 2000ff-1(b); 42 U.S.C. § 2000ff-1(b)(2)(A)-(B).
 ADA Rule, 81 Fed. Reg. at 31, 133-34. The 2016 GINA rule allows employers to offer incentives of up to 30% of the cost of self-only coverage for disclosure of information in accordance with a wellness program about a spouse’s manifestation of disease or disorder, which falls within the definition of “genetic information” under GINA. GINA Rule, 81 Fed. Reg. at 31,144.
 AARP v. United States Equal Employment Opportunity Commission, --F.Supp.3d--, 2017 WL 3614430 (D.D.C. Aug. 22, 2017).
 The AARP argued that the 30% incentives permitted by these new rules were inconsistent with the “voluntary” requirements of the ADA and GINA, and that employees who could not afford to pay a 30% increase in premiums would be coerced to disclose their protected information when they otherwise would not do so. Analyzing whether the EEOC had adequately explained the reasoning for implementing the new rules, the District of Columbia, agreed with the AARP and found the new rules to be arbitrary because the EEOC had failed to provide a reasonable explanation for its decision to adopt the 30% incentive levels. As a result, having found that vacating the rules would have serious disruptive consequences for employers and employees, the Court remanded the rules back to the EEOC for reconsideration.