A New Year, A New Wellness Program

by Seyfarth Shaw LLP
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Seyfarth Synopsis: New Year’s resolutions typically address health and well-being. Many among us have resolved this year to get off the couch, to sweat a bit more often to the “oldies,” to meditate and be mindful, and to eat less cake and fewer tacos. And so one might think that courts would endorse the EEOC’s approval of employer-sponsored wellness programs, as a great way to encourage employees to follow through on their health goals. But beware! A recent federal court decision in D.C. has cited two statutes—the ADA and GINA—to roll back the EEOC regulation approving employer wellness programs. This decision, though prospective only, may significantly affect the structure of such programs, including those in California.

The Legal Landscape

GINA—the Genetic Information Nondiscrimination Act of 2008—is a federal law that protects individuals from genetic discrimination in health insurance and employment. GINA prohibits employers from using genetic information in hiring, firing, promotion, and pay decisions, or in determining privileges or terms of employment, including health insurance, although employers may collect genetic information as part of a wellness program, so long as the employee’s provision of the information is “voluntary.”

ADA—the Americans with Disabilities Act—prohibits many medical inquiries and generally permits employers to collect medical data only in connection with a “voluntary” employee health program.

California’s GINA equivalent—CalGINA—passed in 2011. CalGINA added “genetic information” to the list of protected classes found in California laws, including public accommodations statutes, the California Fair Employment and Housing Act (“FEHA”), and the Health and Safety Code. CalGINA also empowers plaintiffs to recover unlimited monetary damages, without facing the damages caps existing under federal law.

The EEOC, administering both GINA and the ADA, has issued regulations allowing employers to provide employees with financial incentives—up to 30%—to participate in wellness programs and to disclose genetic information in order to participate. These incentives effectively penalize employees who fail to participate, as they would pay more for health coverage. Many California employers—equally subject to the ADA, GINA, and the broader CalGINA—rely on the EEOC regulations to structure incentives in their workplace wellness programs. In light of CalGINA’s unlimited damages provision, any changes to the permissible structuring of wellness programs creates peculiar exposure for California employers.

The Challenge to the ADA and GINA Regulations

In October 2016, AARP (once called the American Association of Retired Persons) challenged the EEOC regulations, arguing that wellness programs are not really “voluntary” if, as the EEOC would allow, employers can charge employees up to 30% more if they refuse to disclose the medical and genetic information required by a wellness program. The EEOC defended its regulations as a reasonable effort to harmonize ADA, GINA, and HIPAA regulations to promote overall health through participation in employer wellness programs.

The Decision

In its ruling in AARP v. EEOC, a federal district court in the District of Columbia found that the EEOC rules were unlawful, on the ground that the EEOC had failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels. The EEOC, in particular, had failed to show how a 30% differential in employee cost would be consistent with the employee’s participation being “voluntary” as opposed to coerced. On December 20, 2017, the court vacated the EEOC regulations and remanded them to the EEOC for reconsideration.

To avoid unnecessary disruption to employers and employees, the court left the regulations in place till January 1, 2019. While this distant date may seem to leave plenty of time to review and revise wellness programs, employers would do well not to procrastinate.

This resolution is particularly significant for California employers who risk unlimited exposure if they do not restructure their wellness programs in advance of January 2019.

Legislative Changes Looming

Employers should keep an ear to the ground for legislation that may further adjust wellness programs. In March 2017, House Representative Virginia Fox of North Carolina introduced H.R. 1313, the Preserving Employee Wellness Programs Act. The new bill has yet to come before the Senate. The bill, if passed into law, would allow employers to impose penalties of up to 30% of the total cost of the employee’s health insurance on employees who do not provide genetic information to participate in an employer-sponsored wellness program. The bill would thereby weaken the role of the EEOC’s oversight over genetic discrimination in wellness programs.

Workplace Solutions

California employers should know that the decision rolling back the EEOC regulations can threaten the viability of their wellness programs. Employers should now assess the extent to which their wellness programs provide incentives for divulging medical information, and decide whether those incentives, in light of the evolving case law, are defensible as being truly “voluntary.” Given the litigious nature of the Golden State, animated by the incentive of unlimited damages, California employers should be especially wary of programs that use financial incentives or penalties to encourage wellness program participation. Cautious employers should start the new year with a fresh look at the incentives built into their wellness programs and take steps to revise them as necessary.

Happy New Year!

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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