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Court Ruling Creates New Uncertainties for Wellness Programs

Employers may need to reconsider the designs of their employee wellness programs for 2019 as a result of a recent court ruling. On Jan. 20, 2017, the United States District Court for the District of Columbia issued an opinion vacating regulations issued by the Equal Employment Opportunity Commission ("EEOC") under the Americans with Disabilities Act ("ADA") and the Genetic Information Nondiscrimination Act ("GINA") (referred to in this article as the "Rules"). The EEOC Rules were issued on May 17, 2016, in response to requests from employer groups and others to provide certainty in the design of wellness programs commonly provided by employers. The Court's decision vacates the Rules, but stays the vacation until Jan. 1, 2019, in order to give employers time to react to the decision. The Court's decision throws employers back into the uncertain environment in which they operated prior to the issuance of the EEOC Rules as they design their employee wellness programs for 2019.

The Departments' HIPAA Rules

The Health Insurance Portability and Accountability Act ("HIPAA") prohibits group health plans from discriminating against individuals based on health status factors. Since 2006, employers sponsoring wellness programs have relied on regulations issued by the Departments of Treasury, Labor, and Health and Human Services ("Departments") under the HIPAA nondiscrimination provisions when designing compliant programs. The Departments' regulations set out specific standards that must be met to ensure any incentives provided under a wellness program do not discriminate against individuals as a result of a health status factor. The Departments updated their regulations in 2013 because of modifications made by the Patient Protection and Affordable Care Act of 2010 ("PPACA").

Under the regulations, as updated, participatory wellness programs are not subject to significant regulation, and the incentives related to such programs are not subject to limits. Participatory wellness programs provide an incentive that is not contingent upon any health status factor. For example, a participatory program might provide a premium discount in exchange for a plan participant taking a health risk assessment. Health contingent wellness programs , on the other hand, are subject to a number of regulatory requirements, including limits on incentives. Incentives under a health contingent wellness program generally cannot exceed 30% of the cost of the premium for the health plan. Over time, employers have become comfortable with the application of these rules.

The EEOC's ADA and GINA Rules

The EEOC enforces the ADA. Under the ADA, an employer is not allowed to make disability-related inquiries to an employee or to require an employee to undergo a medical examination, except in limited circumstances. One of these limited circumstances allows an employer to request disability-related information or require a medical examination in connection with a "voluntary" wellness program. Prior to 2016, the EEOC had not provided any official regulations or guidance defining a "voluntary" wellness program. Instead, the EEOC brought several lawsuits against different employers and sought to enforce its ambiguous standard through litigation. In response to much criticism related to its "regulation by litigation" approach, the EEOC issued its Rules in 2016. The Rules in many ways paralleled the Departments' HIPAA regulations. Significantly, the EEOC defined "voluntary" to permit incentive limitations similar to those permitted under the Department's HIPAA regulations. In other words, an incentive to provide disability-related information or to undergo a medical examination is considered voluntary if the incentive does not exceed 30% of the cost of single coverage under the employer's health plan. This simplified the administration of wellness programs for employers.

The EEOC also enforces GINA. Under GINA, spousal participation in wellness programs is problematic, because GINA prevents an employer from seeking an employee's "family history." Under GINA, the health information of an employee's spouse is considered the employee's family history. Thus, allowing an employee's spouse to obtain an incentive under an employee wellness program in exchange for the spouse taking a health risk assessment violates GINA. The EEOC's 2016 Rules created a method for an incentive of up to 30% of the cost of single coverage under an employer's health plan to be provided in exchange for a spouse disclosing the spouse's health information if the spouse provides affirmative consent to participate in the wellness program.

In 2016, the American Association of Retired Persons ("AARP") brought a lawsuit against the EEOC alleging the EEOC had not sufficiently justified that the incentive limits it permitted under the ADA and GINA Rules should be permitted under the voluntary wellness program exception. On Aug. 22, 2017, the United States District Court for the District of Columbia found the EEOC had not provided a reasoned explanation for the incentive limits it had adopted in the ADA and GINA Rules. The Court did not vacate the Rules in its original decision. However, in an opinion on Dec. 20, 2017, the Court vacated the Rules but stayed that decision until Jan. 1, 2019. In doing so, the Court held the stay was needed so employers would have sufficient notice that the Rules had been vacated in designing their wellness programs for 2019. Thus, the Rules remain in effect for 2018, and employers should continue to comply with them.

Ice Miller Analysis

While an initial reaction may be to celebrate that there is less regulation of wellness programs, the vacation of the Rules will result in increased uncertainty, and possible confusion, in the administration of wellness plans. Prior to the promulgation of the Rules, it was unclear what constituted a "voluntary" wellness program under the ADA. While many employers and advisors felt comfortable that complying with the Department's HIPAA regulations would provide some safety in terms of complying with the "voluntary" standard under the ADA, the EEOC undermined that assumption by bringing litigation against employers who sponsored wellness programs that complied with the HIPAA rules. Thus, prior to the issuance of the Rules, employers took some level of risk under the ADA by providing any level of incentive in connection with disability-related inquiries and medical examinations under a wellness program. They also took some level of risk by extending their wellness programs to spouses to the extent incentives were offered to the spouses in exchange for their health information. The EEOC's 2016 Rules provided the certainty employers generally desired in terms of designing their wellness programs. As of Jan. 1, 2019, that certainty may vanish.

The EEOC has told the Court it intends to issue new proposed rules by August 2018. The new proposed rules may provide guidance on which employers could rely in designing their 2019 wellness programs. However, the new proposed rules most likely will not be finalized until sometime in mid-to-late 2019, and their effective date will likely be a year or two after that time. This creates a time period of several years during which employers may lack sufficient guidance in designing their wellness programs.

We will continue to monitor this situation and provide updates as the EEOC develops and issues new proposed rules. In the meantime, employers should carefully review their wellness programs for 2019, and consider whether—and if so, in what amount—to offer incentives in connection with disability-related inquiries or medical examinations and/or to spouses under their wellness programs.

If you have questions about these developments, please contact Audra Ferguson-Allen , Sarah Funke , Robert Gauss , Melissa Proffitt , Tara Sciscoe , or Chris Sears .

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.