24 August 2017

Court Orders EEOC to Try Again in Drafting Wellness Program Regulations Under the ADA and GINA

The U.S. District Court for the District of Columbia has ordered the EEOC to reconsider its previously issued regulations regarding permissible wellness programs under the ADA and GINA.  However, the EEOC’s current regulations remain in force while the EEOC conducts this reconsideration.

The Americans with Disabilities Act (“ADA”) generally prohibits employers from requiring employees to undergo medical examinations (e.g., biometric screenings) or disability-related inquiries (e.g., health risk assessments), unless the examination or inquiry is both job-related and consistent with business necessity.  Similarly, the Genetic Information Nondiscrimination Act (“GINA”) prohibits employers from requesting, requiring, or purchasing genetic information for an employee or their family members.  However, both the ADA and GINA provide an exception to these prohibitions for voluntary wellness programs.

Many employer-sponsored wellness programs utilize incentives (either rewards or penalties) to encourage participation.  These incentives often include variations in the amount of employee health plan premiums, or an employee’s cost-sharing obligations under the employer’s group health plan (e.g., deductibles, copayments or coinsurance).

The Equal Employment Opportunity Commission (“EEOC”)—the agency with the jurisdiction to enforce both the ADA and GINA—previously took the position that almost all incentives (with some minor exceptions for items such as water bottles and t-shirts) offered in conjunction with a wellness program caused the wellness program to be involuntary.  In other words, the EEOC interpreted the ADA and GINA as prohibiting the use of incentives in wellness programs subject to the ADA or GINA.

In response to urging from the Obama administration, the EEOC issued regulations regarding permissible uses of incentives in wellness programs under the ADA and GINA.  (For additional information regarding these regulations, please see our client alert here.)  These regulations were issued in 2016, and were generally effective on January 1, 2017.

Generally, these regulations allow the use of incentives, provided the amount of the incentive does not exceed 30% of the total cost (employer and employee portions) of employee-only coverage under the employer’s lowest-cost plan for which the wellness program applies.  This 30% limitation somewhat corresponds with the permissible limit under HIPAA and the ACA, which apply only to health-status and activity-based wellness programs connected to an employer’s group health plan.

The American Association of Retired Persons (“AARP”) brought a lawsuit challenging the regulations issued by the EEOC.  In this lawsuit, AARP argued that this 30% limit is inconsistent with the voluntary exception under the ADA and GINA.

On August 22, 2017, the U.S. District Court for the District of Columbia granted AARP’s motion for summary judgment (and denied the EEOC’s motion to dismiss and motion for summary judgment).  With respect to the voluntary exception under the ADA, the district court held that the EEOC’s interpretation was “neither reasonable nor supported by the administrative record.”  With respect to the voluntary exception under GINA, the district court similarly held that the EEOC “failed to give a reasoned explanation for its decision to interpret the term voluntary to allow incentives of up to 30% of the cost of self-only coverage.”

The district court decided not to vacate the EEOC’s current regulations because it would be particularly disruptive to employers that relied on these regulations when designing their wellness programs for the 2017 plan year.  In fact, the court stated, “[e]mployers who adopted incentives would be faced with the possibility that their current health plans are illegal; at best, employers would once again be left in limbo as to what is permitted and what is not with regard to incentives.”

Instead, the district court remanded these regulations back to the EEOC for reconsideration.  But, while the EEOC is conducting this reconsideration, the current regulations remain in force.  The EEOC must file a proposed schedule for its review of the current regulations, including any further administrative proceedings, by no later than September 21, 2017.

Employers may continue to rely on the EEOC’s current regulations.  However, employers with wellness programs that include features such as health risk assessments or biometric screenings should closely monitor future developments.  Keep in mind, however, that this reconsideration does not mean that the EEOC is required to completely revamp the current regulations.  Rather, it could instead provide reasonable support for its regulations.

If you have any questions about this client alert, please contact the authors or another member of the Employee Benefits Practice Group.