Employee Benefits Compliance

Court Vacates Current EEOC Wellness Incentive Maximums Beginning in 2019

wellness programs

On December 20, 2017, the D.C. District Court vacated EEOC regulations that allow a maximum wellness program penalty/incentive of 30%, but delayed the effective date to January 1, 2019 (“to avoid the potential for disruption”).  This means employers must continue to comply with existing regulations through the end of 2018. The case is AARP v EEOC, https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2016cv2113-55  [This article was updated June 11, 2018, to note the EEOC’s statement in its March 30th status report to the Court.]

Why Did the Court Issue this Ruling Now?

The Court’s December ruling is in response to AARP’s motion to alter or amend the court’s August 2017 ruling, in which it ordered the EEOC to reconsider its 2016 final regulations that allow a maximum wellness program penalty/incentive of 30% of the total cost of employee-only coverage under the employer’s group health plan, for wellness programs that are subject to the Americans with Disabilities Act (ADA) or to the Genetic Information Nondiscrimination Act (GINA). However, in August the Court did not vacate (invalidate) that provision of the regulations nor indicate a particular date by which the EEOC must issue new regulations. (The provisions at issue are at 29 C.F.R. Sections 1630.14(d)(3) and 1635.8(b)(2)(iii).)

In its December ruling, the Court said the reason it is now imposing a deadline of January 1, 2019 (at which time the existing regulations will no longer apply) is because the EEOC’s proposed timeframe to issue new regulations is much longer than the Court expected.  Specifically, in response to the Court’s August ruling the EEOC had indicated that it intended to issue a notice of proposed rulemaking in August 2018 and a final rule in October 2019 that would be applicable in 2021 at the earliest. The Court felt that three years was “unacceptable” and was not “in a timely manner” as the court had envisioned when it last August ordered the EEOC to explain the reason it felt 30% was an appropriate limit and/or to issue new regulations.  The Court also issued an order directing the EEOC to file a status report by March 30, 2018, informing the court of the EEOC’s schedule for review of the rules and any other proceedings.  [Update:  The EEOC did file a March 30th status report with the court, in which the EEOC stated it “does not currently have plans to issue a Notice of Proposed Rulemaking addressing incentives for participation in employee wellness programs by a particular date certain, but it also has not ruled out the possibility that it may issue such a Notice in the future.”   The EEOC also noted that two of its top positions remain unfilled (EEOC Chair and one Republican Commissioner seat), with both nominees awaiting Senate confirmation, which makes major policy-making difficult.] 

For additional information on the August 2017 ruling, see this September 2017 article on this website: https://news.leavitt.com/health-care-reform/wellness-programs/wellness-program-incentives-ok-now-uncertain-future-eeoc-case/

What does this Mean for Employers with Wellness Programs?

Employers must continue to comply with existing EEOC regulations through the end of 2018.  These impose a maximum 30% limit on wellness programs subject to the ADA and to GINA.  New regulations should be issued no later than August 2018.  These will likely lower the current 30% limit, or possibly even prohibit employers from offering a financial incentive to get individuals to divulge their private medical information (unless Congress passes legislation allowing this under the ADA and GINA).  These EEOC incentive limits apply to both participatory and health-contingent wellness programs that require medical examinations (such as biometric screenings) or inquire whether an individual has a disability (some Health Risk Assessments).  Other types of wellness programs are not subject to the EEOC limits, but only to the HIPAA and ACA limits, which will continue to allow the 30% maximum incentive amount (50% for tobacco cessation programs).  See additional details below.

Background: Why is the 30% Maximum at Issue Now?

Wellness programs must comply with requirements under HIPAA, ACA amendments to HIPAA, the ADA and GINA. The various laws have different goals and statutory requirements and are administered by different federal government agencies. HIPAA and the ACA expressly permit the use of incentives in wellness programs, but the ADA and GINA do not. Instead, they prohibit employers from collecting certain protected health information about employees or spouses, but also make an exception and allow an employer to conduct medical examinations (ADA) and to collect employee or spouse (GINA) medical history as part of an “employee health program” or wellness program, but only if the employee’s and/or spouse’s participation in the program is “voluntary,” a term neither law defines.

The issue in AARP v EEOC is whether a wellness program is “voluntary” if the employer conditions incentives on whether or not an employee or spouse discloses ADA- or GINA-protected information. The EEOC initially took the position that such a wellness program was not “voluntary,” but later reversed this position and issued rules in 2016 allowing an incentive of up to 30% — the same cap that applies under the HIPAA and ACA wellness rules (which do not include these “voluntary” provisions).

AARP filed this law suit on behalf of its members in October 2016—several months after the EEOC’s final rule in May—and argued that:

  • the 30% incentives permitted by the EEOC final rule are inconsistent with the “voluntary” requirements of the ADA and GINA, and
  • employees who cannot afford to pay a 30% increase in premiums will be coerced into disclosing their protected information when they otherwise would choose not to do so.

The D.C. District Court seems to agree with the AARP, or at least will require the EEOC to explain the reason it believes the 30% maximum is consistent with the ADA’s and GINA’s “voluntary” requirements and is not coercive.  Perhaps the EEOC can do so by citing studies or other empirical data.

What Types of Wellness Programs are Affected?

Wellness programs subject to the ADA or to GINA and that impose financial penalties or rewards equal to the current 30% maximum limit will be affected if the current EEOC rules are vacated or if new revised rules are issued by the EEOC. On the other hand, Wellness programs subject only to HIPAA and the ACA will not be affected.

The practical effect is that most Wellness Programs will likely be affected if the EEOC limits change, for the following reasons:

  • ADA applies to all workplace wellness programs that make disability-related inquiries (e.g., health risk assessments) or require medical examinations (e.g., biometric or lab tests, tests for nicotine use).  ADA applies to both participatory and health-contingent wellness plans.
  • The GINA rule applies to wellness programs that request employees’ spouses to participate in health risk assessments and provide their medical history or health information. This is because GINA applies to all wellness programs that request, require or purchase genetic information about employees or their family members, and “genetic information” includes the above information.

Wellness plans that are not subject to the EEOC rules can provide financial incentives or penalties of any amount. Such plans include:

  • Wellness plans sponsored by employers with fewer than 15 employees, because such employers are not subject to either the ADA or GINA.
  • Wellness plans that only ask (but do not test) whether an employee uses tobacco products or exercises regularly.
  • Wellness programs that do not obtain medical information but simply require employees to engage in specified activities to earn an incentive. Examples of allowable activities include: walking a certain amount every week, engaging in any type of exercise, eating healthy foods, lower or no use of tobacco or alcohol, or attending a nutrition or weight loss class or classes on any health-related topics. Examples of permitted incentives include points, money, giftcards or gifts.

Additionally, plans that are subject to EEOC rules – because they do make disability-related inquiries (e.g., health risk assessments) or offer medical examinations (e.g., biometric or lab tests, tests for nicotine use) – may continue after 2018 if:

  • They do not require employees to participate, and
  • They do not offer financial incentives for participating (or impose penalties for not participating), or
  • They do offer financial incentives, but these do not exceed whatever limits the EEOC subsequently issues and justifies and the court approves. (E.g., perhaps a 10% or 15% maximum).

Next Steps for Employers

Most employers who sponsor wellness programs probably will need to make changes in program design and/or incentives after 2018, unless the wellness program is not subject to the ADA or to GINA.  One possible change it to amend the wellness program to meet the criteria listed immediately above.

Although it is possible Congress will enact a new law stating that the 30% maximum limit on incentives applies for the ADA and GINA, that seems unlikely at this time, given the lack of legislation Congress has enacted in the past year.  It is also possible, though unlikely, that Trump appointees to the EEOC will issue regulatory action that allows the 30% limit to continue.