U.S. District Court Remands Wellness Program Regulations to EEOC for Reconsideration

August 29, 2017

On August 22, 2017, the U.S. District Court for the District of Columbia ordered the Equal Employment Opportunity Commission (the “EEOC”) to reconsider its wellness program regulations (the “Regulations”) under the Americans with Disabilities Act (the “ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). As discussed in our previous Client Alert, the Regulations, which became applicable on January 1, 2017, generally allow employers to offer limited incentives in exchange for providing certain information in connection with wellness programs. However, the Regulations have been controversial and problematic for many employers because they directly conflict with permissible practices under HIPAA. The court remanded the Regulations to the EEOC for reconsideration but declined to vacate the Regulations, so they are still in effect until further notice.

Background

HIPAA regulates wellness programs, including the maximum rewards that a wellness program may provide. The ADA and GINA also regulate wellness programs by limiting the incentives employers may provide in collecting certain information from employees and their families. The Regulations generally provide that, under the ADA and GINA, disclosure of such information is permissible if the employer limits incentives to no more than 30% of the cost of self-only coverage in exchange for the disclosure of information.

The Court’s Opinion

In AARP v. EEOC, the court stated the EEOC “failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels in both the ADA and GINA [wellness program] rules.” The court determined that the administrative record did not “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.” This further supported the court’s holding that the EEOC did not provide a reasonable explanation for choosing the 30% incentive level under the ADA and GINA Regulations.

The court noted the ADA and GINA Regulations were not harmonized with the HIPAA wellness regulations in two respects. First, the ADA and GINA Regulations differ from the HIPAA regulations in the way the incentives are calculated. Under the HIPAA regulations, incentives are generally limited to 30% of the cost of family coverage in certain circumstances, while the ADA and GINA Regulations are limited to 30% of the cost of self-only coverage. Second, the ADA and GINA Regulations apply to both participatory wellness programs and health contingent wellness programs, while the HIPAA regulations place no caps on the incentives offered in connection with participatory wellness programs.

Although the court held the EEOC did not provide a reasonable explanation for the incentive limits set forth in the Regulations, it declined to vacate the Regulations, stating that “while the Court has serious concerns about the agency’s reasoning regarding the ADA and GINA rules, these concerns are currently outweighed by the ‘disruptive consequences’ that are likely to result from [vacating the judgment].”

Next Steps

As a practical matter, the court held the Regulations were arbitrary and capricious, meaning they may be unenforceable as to other employers. The Regulations, however, are technically still in effect pending the EEOC’s reconsideration. As a result, employers should review their current wellness programs to determine whether their incentives are compliant with these Regulations. We would expect the EEOC to issue guidance explaining its enforcement position on wellness programs and providing guidance on how to structure wellness programs that are permissible under the ADA and GINA.

Additional Information

If you have any questions regarding the US District Court’s decision in AARP v. EEOC or would like additional information on complying with current wellness program regulations, please contact your Kutak Rock attorney or a member of the Kutak Rock Employee Benefits practice group listed in the right-hand column of this page.