Why it matters

The Equal Employment Opportunity Commission (EEOC) has promised to revise its regulations for employer wellness programs by mid-2018 in a new filing in Washington, D.C., federal court. In 2016, the agency issued final rules attempting to clarify how the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) apply to workplace wellness programs. The AARP challenged the new rules, arguing they violate antidiscrimination provisions found in both statutes by forcing nonparticipating employees to effectively pay a penalty in the form of higher insurance premiums than do those who elect to share their disability and genetic information with employers. Last month, the D.C. court granted summary judgment in favor of the AARP but declined to throw out the rules, expressing concern that vacating the rules would “cause potentially widespread disruption and confusion.” Instead, the court remanded the rules to the EEOC for reconsideration. The agency recently filed a status report with the court that its “present intention” is to propose new rules by the middle of next year, estimating that this would result in a new rule taking effect in 2021. However, the EEOC was careful to note that the timeline could change, offering to provide the court with an update in April 2018.

Detailed discussion

With the goal of providing greater clarity to employers about the application of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) to workplace wellness programs consistent with the Health Insurance Portability and Accountability Act (HIPAA), the Equal Employment Opportunity Commission (EEOC) published a pair of final rules last year.

HIPAA prevents health plans and insurers from discriminating on the basis of “any health status related factor,” but allows covered entities to offer “premium discounts or rebates” on a plan participant’s copayments or deductibles in return for that individual’s compliance with a wellness program. Employers have struggled with the collection of employee health information, however, as the data often implicates the ADA and/or GINA. Both statutes permit such collection for wellness programs as long as participation by the employee is “voluntary,” an undefined term.

The new rules established that employer wellness programs are voluntary if health coverage is not conditioned on participation and if a penalty for nonparticipation is no more than 30 percent of an employee’s health insurance premium.

In response, the AARP filed suit, noting that the new rules were a stark departure from the prior EEOC position, which maintained that employee wellness programs implicating confidential medical information were voluntary only if employers neither required participation nor penalized employees who chose to keep their information private.

Further, the rules violated the antidiscrimination provisions in both the ADA and GINA by forcing nonparticipating employees to effectively pay a “penalty” in the form of higher insurance premiums than do those who elect to share their disability and genetic information with employers, the AARP argued. The 30 percent threshold permits a penalty so substantial as to make an employee’s participation involuntary, the AARP told the court, at an average cost of $1,800 to $5,200 per year.

Applying the two-step analysis found in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., U.S. District Judge John D. Bates agreed with the AARP that the EEOC failed to offer a reasoned explanation for the creation of the 30 percent threshold.

The parties agreed that the meaning of “voluntary” as used in the ADA and GINA is ambiguous, but the court declined to defer to the EEOC’s chosen interpretation of the term. Some level of incentives may be permissible under the statutes, but “the agency has not provided a reasoned explanation for its interpretation,” the court said, with “nothing in the administrative record that explains the agency’s conclusion that the 30 percent incentive level is the appropriate measure for voluntariness.”

Although the court granted the AARP’s motion for summary judgment, the remedy proved tricky given the consequences. The rules have already been in force for eight months, and employees who received incentives from their employers would presumably be obligated to pay them back; those who chose to disclose their protected medical information cannot make it confidential again, the court recognized.

Given that vacating the rules in their entirety “appears likely to cause potentially widespread disruption and confusion,” Judge Bates remanded the rules to the EEOC for reconsideration “for the present,” assuming the agency can address the rules’ failings in a timely manner.

In September, the EEOC provided the court with a timeline for the required change, stating that its “present intention” is to issue a notice of proposed rulemaking by August 2018 and a final rule by October 2019.

“This amount of time is necessary for the EEOC to further consider the issues at stake in the challenged rules, evaluate input from stakeholders within and outside the government, vote on any regulatory actions, obtain authorization from the Office of Management and Budget to promulgate regulations, and ultimately issue a final rule,” the agency explained. “Given the time that employers need to bring their plans into compliance with new regulatory requirements, any substantively amended rule likely would not be applicable until the beginning of 2021.”

The EEOC cautioned that its plans could change. Consideration of the relevant issues during the course of the rulemaking process could prove time-consuming, the potential for changes to the agency’s composition (nominees for two vacancies, including chair of the commission, are currently pending in the U.S. Senate) could derail the current plan, and the Solicitor General has yet to decide whether to take an appeal from the court’s August order.

Given these variables, the agency suggested “it would be most efficient for the Court to direct the EEOC to submit a further status report in April 2018, by which time the EEOC’s remand process should be significantly more developed,” the agency proposed.

To read the status report in AARP v. EEOC, click here.