Monday, August 28, 2017

EEOC Ordered to Reconsider Wellness Regulations

Last week a federal judge in Washington, D.C. directed the Equal Employment Opportunity Commission to revisit its regulations governing employee wellness programs but did not vacate the regulations.  The court noted that striking down the regulations until they could be revised may have “significant disruptive consequences” and it assumed that the EEOC could address the failings it identified in short order.  Nonetheless, the decision not to stay implementation or vacate the regulations creates confusion for employer wellness programs.

The EEOC’s wellness regulations took effect on January 1, 2017.  The regulations were used to address the conflict between the American with Disabilities Act (“ADA”) and the Genetic Information Act (“GINA”), which permit employers to collect medical and genetic information from employees who participate in wellness program as long as the employees provide the information voluntarily, and the Health Insurance Portability and Accountability Act (HIPAA)/Affordable Care Act (ACA) wellness regulations, which expressly permit the use of incentives in wellness programs.  In the regulations the EEOC reversed its previous position that in order for a wellness program to be voluntary employers could not condition the receipt of incentives on the employee’s disclosure of ADA- or GINA-protected information.

Prior to the regulations taking effect, AARP filed a lawsuit seeking to block implementation of the regulations.  AARP argued that the EEOC failed to show how the incentives and penalties of up to 30% of the cost of the employee’s health insurance premium does not render plan participation “involuntary.”  AARP also contended that the EEOC did not reasonably justify the reversal of its previous position that no incentive could be offered under a “voluntary” wellness program.  In essence, AARP argued that the 30% incentives/penalties set forth in the new rules are inconsistent with the “voluntary” requirement of the ADA and GINA.

The EEOC responded by stating that the 30% level was chosen for three reasons: (1) it would harmonize the ADA and GINA standards with the Health Insurance Portability and Accountability Act (HIPAA)/Affordable Care Act (ACA) wellness regulations; (2) the 30% level was appropriate in light of “current insurance rates”; and (3) it was consistent with a comment letter from the American Heart Association.

The court rejected the EEOC’s arguments finding that the EEOC failed to adequately explain and justify how it determined how the 30% incentive level was voluntary.  The court noted that the 30% level for voluntariness was actually inconsistent with the final HIPAA/ACA wellness regulations.  In addition, the court noted that the lack of support for the EEOC’s position that current insurance rates supported the 30% mark, and the EEOC’s reliance on the American Heart Association’s endorsement of the 30% level was insufficient in light of the fact that most of the other commenters opposed the EEOC’s choice as being too low or too high.

The court ultimately ordered that the EEOC redraft the regulations, but did not vacate the regulations because of the potential disruption to businesses.  Therefore, the wellness regulations remain in effect until the EEOC takes further action, subject to any ruling on appeal of the court’s order.

Because the regulations remain in effect, employers with incentive-based wellness programs should continue to comply with the wellness regulations.  Stay tuned for further developments.

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