Court Tackles EEOC’s Wellness Program Regulations

by Nexsen Pruet, PLLC

Nexsen Pruet, PLLC

Wellness programs have been on a pendulum over the past decade, swinging back and forth from “yes you can” to “no you can’t.”  However, since the Patient Protection and Affordable Care Act guidance specifically authorizing, enhancing and promoting these programs – which soon was followed by the long-awaited Equal Employment Opportunity Commission regulations permitting wellness programs under the American’s with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) -- employers thought they finally were on firm ground. 

But then the AARP took possession of the ball and ran it into the end zone.  

The AARP brought an action in the D.C. District Court alleging a penalty or reward in the amount of 30 percent of the cost of employee-only coverage is too much.  As a result, the EEOC argued that the 30 percent level has the potential to make participation in a wellness program mandatory, rather than voluntary.  

As we have discussed at length in our prior publications addressing wellness programs [include link], employers are permitted under the ADA to conduct medical examinations and collect employee medical data as long as the employee’s participation in the program is “voluntary.”  Thus, in AARP v. EEOC the court needed to evaluate whether the commission’s interpretation of the term “voluntary” to mean up to a 30 percent reward or penalty was a reasonable interpretation of the statute. No. 16-2113 JDB, 2017 WL 2614430 (D.D.C. Aug. 22, 2017).

The court concluded it was not.  

After promptly rejecting all the reasons proffered by the EEOC in support of the rule, the court found that “the agency does not appear to have considered any factors relevant to the financial and economic impact the rule is likely to have on individuals affected by the rule.” Id. at *12. The court agreed with AARP that a 30 percent difference in premium costs could potentially have a significant impact on individuals who are in lower-income families – yet the EEOC never evaluated this empirical data. So how could the EEOC have concluded the 30 percent level gave people the freedom to say yes or no? Further, because the Health Insurance Portability and Accountability Act (HIPPA) regulations do not impose a “voluntary” requirement, justifying the 30 percent level by analogy to what is allowed under HIPAA did not support the EEOC’s argument.

The court also evaluated the rule under GINA.  For the same reasons the rule failed under the ADA, the court found the rule failed under GINA.  The 30 percent reward or penalty had the potential to force the disclosure of spousal genetic information.

To vacate or not to vacate – that became the question.  At a time when we understand how a fumble can create “significant disruptive consequences,” this court was asked to consider the same. See id. at *17. Would voiding the EEOC’s rules produce “disruptive consequences” to the employers and employees who relied upon them?  The court concluded it would.  The court reasoned that, without the EEOC’s rules, employees presumably would be forced to repay rewards, and employers would be forced to repay penalties. This unwinding action is likely not feasible for many and would be an administrative nightmare. 

So, instead of ordering a delay of game, the court sent the EEOC back to the drawing board to reconsider its rules in light of this opinion.  Will wellness programs be sacked?  Only time will tell. 


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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