Well, Well, Wellness: DC Court Strikes Down EEOC Rules on Corporate Wellness Programs

When is a financial incentive in an employee-sponsored wellness program so high that employees can’t afford not to participate—rendering the program no longer voluntary? Well (pun intended), the District Court for the District of Columbia believes that the EEOC doesn’t know (yet). In the last 15 years or so, many employers started wellness programs to promote worker health and reduce healthcare costs. As an incentive to getting people into the gym and having their health monitored, employers would usually offer financial or other incentives to employees who participate. Just how much of an incentive is okay was the question before the court.

What’s Wrong with Promoting Healthy Employees?

What makes wellness programs potentially controversial is that they almost always require employees to undergo medical examinations and to allow their employers access to sensitive medical and genetic information. Under both the ADA and GINA, an employer can only conduct medical exams and collect certain medical information as part of a “voluntary” employee health program. Of course, neither statute defines the term “voluntary.” Here’s the question:

When does a financial incentive for participating in a wellness program get so high that it actually acts as a penalty against those that don’t participate—and makes the program essentially involuntary?

There has been some litigation trying to figure out where that point is.

As we reported in 2015, the EEOC proposed regulations trying to answer the voluntariness question. The regulations provided that an employer can use a penalty or an incentive of up to 30 percent of the cost of self-only coverage without rendering a wellness program “involuntary” under the ADA and GINA. Those regulations went into effect in the spring of 2016.

In October 2016, the AARP filed suit against the EEOC arguing that the 30 percent incentive was inconsistent with the “voluntary” requirements of the ADA and GINA. Employees who could not afford to pay a 30 percent increase in premiums would be forced to disclose protected medical information that they otherwise would not choose to disclose. The AARP did not dispute that some level of incentives might be permissible under the statutes, it just argued that the EEOC’s 30 percent standard was not supportable.

Is the Rule Supported?

As an agency action, the EEOC’s regulations are challenged under an “arbitrary and capricious” standard. The court looks to see if an agency acted within its legal authority; whether the agency explained its decision; whether the facts on which the agency relied have some basis in the record; and whether the agency considered the relevant factors. Since neither the ADA nor GINA defined “voluntary,” the court looked to see if the EEOC’s interpretation of the term had a reasoned explanation. The court evaluated numerous reasons that the EEOC gave for the picking the 30 percent level, but ultimately decided that the EEOC failed to provide any study, analysis or evidentiary basis for selecting that number. The court went on to note that the EEOC “does not appear to have considered any factors relevant to the financial and economic impact the rule is likely to have on individuals who will be affected by the rule.” The court concluded that the EEOC failed to adequately explain the decision to construe the term “voluntary” to permit the 30 percent incentive level in the rules.

So What Happens Now?

This is where it gets interesting. After blasting the EEOC for failing to provide any support for the 30 percent rule, the court could have simply vacated the rule completely. Instead, the court notes that since the rules took effect in 2016, many 2017 employer wellness plans were designed with the 30 percent voluntariness regulation in mind. If the court vacated the rule, those employers, and their employees, could be punished for relying on the EEOC standard. Medical information already disclosed under those programs cannot be made confidential again by the wave of the vacatur wand. In the end, while very disturbed by the EEOC’s lack of support for the rule, the court found that the concerns were outweighed by the “disruptive consequences” that were likely to result from vacating the rule at this time. Instead, the court gave the EEOC another chance to reconsider (and possibly support) the rule.

In the end, therefore, it appears that the EEOC put forth an unsupported rule that is ultimately left standing due to circumstances. If you are an employer that has a wellness program using the 30 percent cost standard, go forward and keep an eye out for further guidance (and maybe the AARP’s appeal of this decision). If you are an employer thinking about putting a wellness program in place, you may want to wait to see how the courts handle this.

What’s Up With Wellness Programs Anyway?My personal interest in employer wellness programs increased a few months ago when my wife and I were offered significant health insurance premium savings through her employer by participating in such a program. We completed health risk assessments, answered questions about tobacco use, and had various measurements taken. We now have our own web pages that we can review to see our problem areas (mine looks pretty good except for this “body mass index” thing). I became curious about where these types of wellness programs now stand legally. Shortly thereafter, on April 20, 2015, the EEOC published notice of its new rule concerning wellness programs and the ADA. So now we know. I will give the highlights of the new rule below after a little history.

Recall that the ADA, passed in 1990, prohibits post-employment medical examinations unless based upon “business necessity.” Because of this ADA restriction and because most wellness programs involve examinations and questions about various health issues, the EEOC does not like wellness programs very much. In fact, the EEOC filed three fairly high-profile lawsuits against companies (we blogged about this last year) with wellness programs even before it published the new proposed regulations. So, the question for employers primarily has been how to offer one of these programs (and help curtail escalating health care costs and improve employee health) without running afoul of the ADA.

I think the new proposed EEOC regulations help significantly. This is both because the regulations provide guidance (rather than just waiting for what comes out of various lawsuits involving issues unique to those cases) and because the regulations seem to balance the ADA’s restrictions with common wellness programs components fairly evenly.

Here are the highlights:

  1. Wellness programs must be designed and implemented to promote good health practices and prevent disease. In other words, they cannot just be about finding out about health problems but doing nothing about them.
  2. The programs must be voluntary. No denials of coverage or any employee discipline are allowed.
  3. While financial incentives (like my wife’s premium discount) are allowed, they cannot exceed 30 percent of the cost of coverage.
  4. On the incentives issue, employees with disabilities must be offered reasonable accommodations to enable those employees to earn the incentives if they are not otherwise able.
  5. Medical information, of course, must be kept confidential in independent, secure files.
  6. Finally, a specific notice or disclosure must be provided informing employees of the types of medical information that will be obtained and what it will be used for.

The comment period on the proposed rule is open until June 19.

Resources:

EEOC’s Notice of the Proposed Rulemaking on the ADA and Wellness Program Programs

Text of the Proposed Rule

Minnesota Judge Issues Blow to EEOC’s Challenge to Corporate Wellness ProgramCan an employer require employees to undergo biometric testing or suffer penalties under their health benefit plan as part of a corporate wellness program? On November 3, U.S. District Judge Ann Montgomery refused to grant the EEOC’s petition for a temporary restraining order prohibiting Honeywell International, Inc. from continuing such a practice—so maybe.

Under Honeywell’s plan, employees must undergo screening for blood pressure, HDL and total cholesterol, glucose, and height, weight and waist circumference. The blood draw also checks for nicotine or cotitine. If an employee (or their spouse—if participating in family health coverage) refuses to undergo the biometric test, the employee loses Honeywell’s health savings account contributions, and pays a $500 general surcharge and a $1,000 tobacco surcharge. It is important to note that the penalties are not related to an employee’s test results. An employee is penalized only for refusing to participate. Honeywell stated that the purpose of the biometric testing is to provide employees with information to help them make better health decisions; the company never actually sees the test results. Honeywell also noted that the Affordable Care Act expressly encourages corporate wellness programs.

On October 27, 2014, the EEOC filed a Petition claiming that Honeywell’s plan included an unlawful medical examination that violated the Americans With Disabilities Act and the Genetic Information Nondiscrimination Act.  The EEOC sought a TRO forcing Honeywell to stop imposing any penalty or cost upon an employee who declined to participate in the biometric testing. Judge Montgomery denied the EEOC’s request to immediately stop the testing and penalty provisions, holding that Honeywell could refund any penalties that were improperly collected if she ultimately ruled in the EEOC’s favor. The lawsuit will now proceed without an injunction.

This suit is the third by the EEOC challenging corporate wellness programs around the country. Employers should be aware that the EEOC is focusing on any medical testing of employees that is connected to penalties under a health benefit system. In this case, it was not alleged that there would be any dismissal of an employee for failing to participate in the biometric tests, but instead only possible extra costs under the plan. Again, Honeywell can continue its wellness program but the EEOC’s lawsuit challenging the program will also continue.