August 24, 2017

Judge orders EEOC to reconsider workplace wellness rules

Daily Briefing

    A federal judge on Tuesday issued a memorandum that orders the U.S. Equal Employment Opportunity Commission (EEOC) to reconsider two provisions of its regulations regarding workplace wellness programs.

    A legal crash course on wellness programs

    Background

    Under the Affordable Care Act (ACA), companies are authorized to reward employees who participate in wellness programs. Specifically, the ACA allows financial incentives for employees participating in wellness programs that equate to up to 50 percent of employees' monthly health premiums, deductibles, and other health insurance costs.

    EEOC in May 2016 issued final rules that among other things describe how the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) apply to wellness programs. The rules took effect Jan. 1 and apply to all workplace wellness programs, including those that are not connected to health insurance.

    AARP in October 2016 filed a lawsuit against the final rules on behalf of one-third of AARP's 38 million members. AARP in the suit argued that wellness programs violate anti-discrimination laws intended to protect workers' medical information. The group said the rules "enable employers to pressure employees to divulge their own confidential health information and the confidential genetic information of their spouses as part of an employee 'wellness' program."

    In addition, the lawsuit questioned whether wellness programs can actually be considered voluntary when the price of not participating can be high. For instance, AARP said the penalties "[o]n average" could "double or even triple ... employees' individual health insurance costs" if they choose not to participate in the programs.

    AARP said the rules effectively would force workers to choose between significant financial penalties or revealing private health information.

    However, EEOC argued that AARP lacked legal standing to bring the suit because AARP's members simply share common interests and do not contribute to AARP's governance. Further, EEOC said AARP failed to prove that the new rules would harm the group's members.

    Memorandum details

    Judge John Bates of the U.S. District Court for the District of Columbia in the memo issued Tuesday wrote that EEOC had not properly explained wellness program compliance obligations in regards to ADA and GINA, nor how it concluded that wellness programs would be considered voluntary if financial incentives for participating in the programs are limited to no more than 30 percent of the cost of an employee's individual health plan.

    Bates wrote in the memo, "Neither the final rules nor the administrative record contain any concrete data, studies, or analysis that would support any particular incentive level as the threshold past which an incentive becomes involuntary in violation of the ADA and GINA." He continued, "To be clear, this would likely be a different case if the administrative record had contained support for and an explanation of [EEOC's] decision, given the deference courts must give in this context. But 'deference' does not mean that courts act as a rubber stamp for agency policies."

    Despite those conclusions, Bates wrote that he would not immediately vacate the final rules because doing so would have "significant disruptive consequences." For instance, Bates wrote that employees who had already received incentives for participating in workplace wellness programs "would presumably be obligated to pay these back," and employers that imposed penalties on nonparticipating workers "would likewise be obligated to repay to employees the cost of the penalty."

    Instead, Bates ordered EEOC to reconsider the provisions of the final rules that relate to ADA and GINA and classify workplace wellness programs as voluntary.

    Implications

    Nicholas Bagley in a blog post wrote that the memorandum "leaves open the possibility that EEOC can explain why a 30 percent penalty means that a health assessment is still 'voluntary'" and gives "EEOC a chance [to] fix the rules 'in a timely manner'" without immediately changing workplace wellness programs implemented under the final rules (Golden, HRDive, 8/22; Barber, New Jersey Law Journal, 8/23; Diamond, "Pulse," Politico, 8/23; Bagley, "Incidental Economist," 8/23).

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    To design legal wellness programs and health benefit plans, you need working knowledge of an alphabet soup of laws, including HIPAA, GINA, ERISA and the ADA.

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