Despite a rapidly growing and changing compliance landscape, employers have continued to offer wellness programs in an effort to control rising health-care costs and improve employees’ overall health and productivity. In 2016, the Equal Employment Opportunity Commission (“EEOC”) issued final wellness program regulations (“EEOC Wellness Program Regulations”) providing a framework for complying with certain aspects of this complex regulatory environment. However, on December 20, 2017, the U.S. District Court for the District of Columbia created new uncertainty in its most recent ruling in AARP v. EEOC (Civil Action No. 16-2113) by vacating the EEOC Wellness Program Regulations effective as of January 1, 2019.

Pending issuance of further guidance, the court’s ruling returns the wellness program compliance landscape to its pre-2016 status, leaving many employers wondering whether their wellness programs remain compliant. Employers can continue to rely on the EEOC Wellness Program Regulations with respect to their wellness programs in 2018. However, the court’s ruling calls into question whether and to what extent employers can continue to use incentives in 2019 and future years to encourage participation in wellness programs that involve features such as biometric screenings and health risk assessments.

To assist employers with analyzing continued wellness program compliance, the discussion below summarizes the recent court ruling and related background, describes the impact of the ruling on employer-sponsored wellness programs, and highlights several design considerations in light of the ruling.

Background

Title I of the Americans with Disabilities Act of 1990 (“ADA”) generally prohibits an employer from requiring a medical examination or making a disability-related inquiry unless such examination or inquiry is job-related and consistent with business necessity or is voluntary and part of an employee health program. Title II of the Genetic Information Nondiscrimination Act of 2009 (“GINA”) generally prohibits employers from requesting, requiring, or purchasing genetic information with respect to an employee or a family member of the employee unless the employee agrees to provide such information as part of a voluntary wellness program (among other limited exceptions and requirements). The EEOC is the federal agency with administrative authority to enforce these ADA and GINA requirements.

Prior to the issuance of the EEOC Wellness Program Regulations, the meaning of the “voluntary” requirement under the ADA and GINA was unclear. Specifically, it was unclear whether and to what extent incentives could be used as part of a wellness program that included a medical examination (e.g., biometric screening), disability-related inquiry (e.g., as part of a health risk assessment (“HRA”)), and/or genetic information (e.g., family medical history questions on an HRA). The EEOC Wellness Program Regulations provided clarity on this issue by describing how employers could provide incentives of up to 30% of the cost of self-only coverage in connection with these types of wellness programs, without violating the “voluntary” requirement.

AARP v. EEOC

In August 2016, AARP filed a lawsuit in the U.S. District Court for the District of Columbia challenging the EEOC Wellness Program Regulations under the Administrative Procedure Act. AARP claimed that permitting incentives of up to 30% of the cost of self-only coverage is inconsistent with the “voluntary” requirements of the ADA and GINA and that the EEOC failed to adequately explain and support its adoption of the 30% incentive level. In August 2017, the court ruled that the EEOC had not provided a reasoned explanation for its interpretation of the “voluntary” requirement and that the EEOC Wellness Program Regulations were therefore arbitrary and capricious. In that ruling, the court remanded the EEOC Wellness Program Regulations back to the EEOC for reconsideration. However, in an effort to avoid widespread disruption and confusion among employers sponsoring wellness programs and their employees, the court did not vacate the EEOC Wellness Program Regulations at that time.

AARP then asked the court to reconsider its decision not to vacate the EEOC Wellness Program Regulations, and the EEOC provided a status report to the court indicating that new proposed regulations would not be issued until August 2018, would not be finalized until October 2019, and would not be effective until 2021. In response to AARP’s request for reconsideration and in light of the EEOC’s anticipated timeline, the court issued another ruling in late December 2017 vacating the EEOC Wellness Program Regulations effective January 1, 2019.

Consequences for Employer Wellness Programs

Under the court’s most recent ruling in AARP v. EEOC, the EEOC Wellness Program Regulations will remain effective for 2018 but will become null and void beginning on January 1, 2019. As a result, there will likely be an element of uncertainty within the compliance landscape for employer wellness programs under the ADA and GINA beginning in 2019.

If the EEOC publishes proposed regulations in 2018 that employers can rely on until the regulations are finalized, compliance with the proposed regulations may help to mitigate that uncertainty but only if the proposed regulations are issued before employers finalize their wellness program designs for 2019. If the proposed regulations are not timely published and/or do not permit reliance pending issuance of the final regulations, the compliance landscape will return to what it was before the EEOC Wellness Program Regulations were issued in May 2016. This means that employers will once again be in the uncomfortable position of not knowing with certainty whether and to what extent they can use incentives as part of a wellness program that involves medical examinations, disability-related inquiries, and/or genetic information.

It is important to note that the court’s ruling does not impact the compliance landscape for wellness programs under HIPAA (e.g., the rules regarding participatory and health-contingent wellness programs) and is limited only to the ADA and GINA. As a result, the main types of employer wellness program features impacted by the court’s ruling are:

  • Biometric screenings (and any other medical examinations) for employees and spouses;
  • Disability-related inquiries directed at employees (which might include some questions on an HRA, depending on how questions are worded);
  • Family medical history questions (HRA questions that ask about the manifestation of disease or disorder in an employee’s family member and/or HRA questions that ask an employee’s spouse about his or her own manifestations of disease or disorder); and
  • Any other features that involve genetic information (i.e., an employee’s genetic tests, the genetic tests of the employee’s family members, biometric screening results of the employee’s spouse).

Design Considerations for Employers

Based on the developments described above and pending the issuance of further EEOC guidance, the following are several design considerations for employers analyzing their wellness programs in light of the new compliance landscape:

  • No incentives (most conservative approach) - Wellness programs that do not provide any incentives in connection with the wellness program features listed above will continue to comply with the “voluntary” requirement under the ADA and GINA; these types of wellness programs can still include biometric screening and HRA features that employees and spouses are encouraged to complete, but no rewards or penalties would be associated with whether the employee or spouse participates in the biometric screening or completes an HRA.
  • Modest incentives (middle ground approach) - Wellness programs that provide only modest incentives in connection with the wellness program features listed above will present incremental risk in the absence of the EEOC Wellness Program Regulations but may still be considered “voluntary” under the ADA and GINA. Given that the court found that the EEOC did not provide adequate justification for an incentive level up to 30% of the cost of self-only coverage, the definition of “modest” in this context is likely significantly less than 30%. Wellness programs that provide smaller incentives will present less risk than wellness programs that provide larger incentives.
  • Up to 30% incentives (more aggressive approach) - Wellness programs that provide incentives at or near the full 30% incentive level permitted under the EEOC Wellness Program Regulations in connection with the wellness program features listed above are unlikely to be considered “voluntary” under the ADA and GINA given the court’s ruling. Although the court did not rule that a 30% incentive level would definitely cause a wellness program to be considered involuntary, continuing to offer incentives at this level after 2018 will expose employers to incremental risk in the form of participant lawsuits and EEOC enforcement actions (similar to the actions taken by the EEOC in the fall of 2014 against Orion Energy Systems, Flambeau, and Honeywell).

Given the complexities associated with wellness program compliance and the constantly changing legal landscape, it remains important to continually evaluate wellness program design and any wellness program changes. Employers also should keep an eye out for the further regulatory guidance promised by the EEOC in 2018.