EEOC Ordered to Reconsider Wellness Rules

ADA and GINA regulations were arbitrary, court decides

Allen Smith, J.D. By Allen Smith, J.D. August 24, 2017
EEOC Ordered to Reconsider Wellness Rules

​The Equal Employment Opportunity Commission's (EEOC's) rules about the fees employers can assess workers who do not participate in wellness programs were ruled arbitrary by the U.S. District Court for the District of Columbia on Aug. 22. Rather than vacate the rules, the court sent them back to the agency for redrafting in an attempt to avoid business disruptions. But the decision still creates "confusion and uncertainty" about employer wellness programs, said Ilyse Schuman, an attorney with Littler in Washington, D.C., and co-chair of the firm's government affairs branch, the Workplace Policy Institute.

HR professionals should know that the decision threatens the viability of wellness programs, and an employee may push back on an employer that uses financial incentives or penalties to encourage wellness program participation, said Ann Caresani, an attorney with Tucker Ellis in Cleveland and Columbus, Ohio.

[SHRM members-only toolkit: Designing and Managing Wellness Programs]

"The EEOC's regulations were helpful to employers because they finally resolved the long-pending question of what EEOC would consider to be a permissible incentive under ADA [Americans with Disabilities Act] and GINA [Genetic Information Nondiscrimination Act]," said Frank Morris Jr., an attorney with Epstein Becker Green in Washington, D.C. "This permitted employers who wanted to use incentives to design [them] with reasonable certainty that they would be lawful under the two statutes."

Employers should keep in mind, however, that the court's decision does not vacate the EEOC rules, said Sarah Bassler Millar, an attorney with Drinker Biddle in Chicago. "In the absence of other guidance, it would be prudent for employers to take steps to ensure compliance with the final ADA and GINA regulations in their current form," she said. 

But Erin Sweeney, an attorney with Miller & Chevalier in Washington, D.C., recommended that employers closely examine wellness program incentives and penalties in light of the decision.

Rules Permitted Raised Premiums

In a lawsuit filed Oct. 24, 2016, AARP challenged the portions of the EEOC's 2016 workplace wellness regulations under the ADA and GINA that let employers impose greater premiums of up to 30 percent of self-only coverage on employees who refuse to disclose medical and genetic information through wellness programs at work.

"The court found that the rules are unlawful because the EEOC did not justify its rules: it didn't consider any factors relevant to whether penalties make these exams and inquiries coercive and did not respond to comments raising significant concerns about the hardship workers would face if they exercise their right to keep private information private," said Dara Smith, an attorney with the AARP Foundation.

AARP argued that the penalties violate the civil rights statutes' requirements that any exams and inquiries in employee wellness programs be voluntary, Smith noted.

Court Rejects EEOC's Rationale

"While the court did note that it is likely difficult for the EEOC to figure out when exactly an incentive [or penalty] renders a wellness program involuntary, the court ruled that the EEOC needs to provide a well-reasoned and supported justification for setting the [percentage]. The EEOC failed to do so in this case," said James Plunkett, senior government relations counsel for Ogletree Deakins in Washington, D.C.

"The EEOC failed to develop any concrete data, studies or analysis to support its conclusion that a 30 percent incentive level made the incentive 'voluntary' under the ADA and GINA. It just borrowed the 30 percent level from the Health Insurance Portability and Accountability Act (HIPAA) regulations, where there is no 'voluntary' requirement," Caresani said.

"These regulations apply in addition to existing regulations under HIPAA and were intended to harmonize with HIPAA regulations, to the extent possible."

The EEOC argued principally that it adopted its rules to harmonize ADA and GINA regulations with HIPAA regulations on wellness programs and to encourage more individuals to participate in wellness programs, as that was a goal expressed by Congress in the Affordable Care Act, the court said.

The EEOC's regulations did not achieve consistency with HIPAA, which calculates the 30 percent incentive level differently: The HIPAA level is based on the total cost of coverage, which includes the cost of family coverage, rather than the cost of self-only coverage that the ADA rule adopted. The HIPAA regulations also place no cap on the financial incentive or penalty for participatory wellness programs (e.g., gym membership), which are more common than health-contingent wellness programs (e.g., reaching a goal weight in a weight-reduction program).

"Even assuming that the ADA rule had achieved consistency with HIPAA, the agency's failure to consider the fact that HIPAA contains no 'voluntary' requirement might be fatal to its chosen interpretation," the court stated.

Stacking of Incentives Not Considered

Further, the court questioned the potential cumulative effect of ADA and GINA incentives and penalties. "With the adoption of the GINA rule, an employee and his or her family may face stacked penalties or incentives for the disclosure of information," the court noted.

An employer may adopt a 30 percent incentive for the disclosure of an employee's ADA-protected information and a 30 percent incentive for the disclosure of the employee's spouse's GINA-protected information. "The potential cumulative effect of these incentives is surely relevant to the question of whether disclosure is voluntary or not. But beyond the mention in the final rule that stacking is possible, there is no indication that the EEOC considered this at all," the court said.

"The EEOC can appeal, but that won't relieve the agency of its obligation to start working on revising its regulations," Smith said.

This decision is AARP v. EEOC, D.D.C., No. 16-2113.


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