All Sections

Home | Business

NH Legal Perspectives: EEOC's wellness incentive rules run off the track

November 18. 2017 11:29PM

In May 2016, the Equal Employment Opportunity Commission (EEOC) issued regulations about employer-sponsored wellness programs. The goal was to clarify how employers could encourage and reward employees for following healthier lifestyles, while at the same time protecting employees' private health information. The regulations contain specific rules about how employers can strike the right balance.

On Aug. 22, however, a federal court in the District of Columbia ordered the EEOC to revisit some of those rules, finding that they were arbitrary. Employers are again facing uncertainty about how to promote wellness plans but still comply with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The Affordable Care Act amended the Health Insurance Portability and Accountability Act (HIPAA) to allow employers to offer incentives to employees who participate in wellness plans, and to withhold cost savings to employees who do not. If a wellness program requires disclosure of an employee's or family members' health information, however, there is a conflict with other federal laws. The ADA generally only allows employers to ask for medical information that is job-related and consistent with business necessity, unless the employer is collecting medical information through a "voluntary" employee health program.

GINA also limits an employer's ability to obtain genetic information, except if the employee "voluntarily" provides the information as part of a wellness program.

To help employers comply with the ADA and GINA, the EEOC issued regulations, a Q&A document, a Small Business Fact Sheet, and a sample notice to employees. The regulations address the question of whether a wellness program can truly be "voluntary" if the incentives offered to employees are so valuable that they can't turn it down. The EEOC agreed that it was important to prevent economic coercion, and set a limit on incentives to address that concern.

Under the regulations, employees may receive a certain level of incentives, in the form of reduced premiums, cash, prizes, gifts, time off and other benefits, in exchange for providing medical information to their employer, and not affect the "voluntary" nature of the program. Participation in a program would still be "voluntary" if the incentives did not exceed 30 percent of the cost of self-only coverage. However, if a wellness program or insurer offered incentives (or withheld cost savings) that were greater than 30 percent of the cost of coverage, that would make the disclosure of protected medical information "involuntary."

In October 2016, AARP sued the EEOC, claiming that an incentive at the 30 percent level is too high to give employees a meaningful choice about whether to participate in a wellness program. Although AARP agreed that some level of incentive would be fine, it argued that employees who could not afford a 30 percent increase in their premiums would be forced to disclose their personal health information, even though they would rather not do so. The penalty would be too steep to call the plan "voluntary" under the ADA and GINA.

At first, the court refused to stop the regulations, and they took effect in January 2017. However, on Aug. 22, the court decided that EEOC had not done enough to justify the 30 percent threshold. The court agreed that incentives promote employee wellness, and that a regulation was needed to help employers understand when an incentive would be likely to cause an employee to reveal personal information unwillingly. However, the court was not satisfied with the EEOC's explanation as to why the 30 percent threshold was "an adequate measure of voluntariness." The court rejected the EEOC's three reasons that the 30 percent figure was appropriate, in part because the EEOC's records did not contain enough information to support those reasons. In fact, as recently as 2015, the EEOC had said the opposite - that any reward or penalty would make participation in a wellness plan involuntary.

The court ruled that the EEOC must review its regulations and, in particular, must give a "logical and rational" explanation to justify the 30 percent figure. Because the court was concerned that some companies had already relied on the regulations, it did not vacate them, but directed the EEOC to revisit the issue. AARP has since asked the court to change its ruling and to vacate or delay the regulations as of January 2018.

AARP argues that this would help increase certainty for employers who have wellness plans and decrease harm to employees who are forced to make health disclosures under those plans. The court has not acted on this request. On Sept. 21, the EEOC advised the court that it plans to issue a Notice of Proposed Rulemaking (the first step in revising regulations) by August 2018 and final regulations by October 2019, although those deadlines could change. New regulations might not take effect until 2021.

Even though the regulations still remain in place at the moment, the issue is now in flux and the EEOC could, on review, decide to lower the 30 percent limit. As employers enter open enrollment season and put together their offerings, which may include wellness initiatives and incentives, they should be aware of this development and the uncertainty that exists once again.


NH Legal Perspective is a biweekly column sponsored by Sheehan Phinney Bass & Green PA. This column does not provide legal advice. We recommend that you consult an attorney for specific guidance on legal questions.

Business Politics


More Headlines

Trump surveys Michael's wrath

Hampton dog groomer arrested a second time