On December 20, 2018, the Federal Register published the final rule from the Equal Employment Opportunity Commission (EEOC) removing a portion of the Regulations Under the Americans with Disabilities Act (ADA) for wellness plans as it relates to employers incentivizing employees to respond to disability-related questions (health risk assessments) and/or undergo medical examinations, including biometric screenings such as weight, cholesterol, blood sugar, and blood pressure screenings. The disability questions and biometric screenings implicate the ADA and the Genetic Information and Nondiscrimination Act of 2008 (GINA) as part of the employer’s wellness program; however, it was previously held that the exception is if the inquiry/screening is voluntary.
So what changed? The initial ADA rule, published in 2016, capped incentives or penalties at 30% for wellness participants. This 30% cap, established by the EEOC, mirrored the cap allowable under the Health Insurance Portability and Accountability Act (HIPAA) which generally allowed the 30% cap but increased it to 50% for tobacco. The HIPAA wellness rules fell under the section of the Act which prohibits discrimination based on health related factors, but did permit some financial penalties/incentives as part of an employer wellness program. With the passing of the ADA rules in 2016, wellness plans had stability and they echoed, for the most part, HIPAA. The new final rule eliminated the section related to incentives altogether, neither permitting nor prohibiting their use. Once again, employers are left wondering if their wellness programs will meet a legal challenge.
The ADA wellness plan rule published in 2016, stated that employers’ use of “incentives (financial or in-kind) whether in the form of a reward or a penalty, will not render the program involuntary if the maximum allowable incentive available under the program does not exceed 30% of self-coverage only”. 29 CFR §1630.14(d)(3) (2016). This final rule flew in the face of over 15 years of litigation by the EEOC where the EEOC maintained that voluntariness meant employees should not be required to participate or be penalized if they wanted to keep their confidential information, confidential. For example, the EEOC challenged the “voluntariness” of the Honeywell, Inc. wellness plan in which the EEOC claimed that employees and dependents were forced to participate in the wellness program or face $2,500 in health insurance surcharges and give up the employer contributions to their HSAs.
However, the 30% cap established by the EEOC in 2016 was challenged by the AARP. AARP stated that the EEOC’s role was to protect vulnerable individuals and that under the ADA they failed with the 2016 final rule. Under the ADA and GINA, which was also implicated in the lawsuit, employers are generally forbidden to request employee and dependent medical data because Congress concluded that such queried information could result in employment discrimination. While a narrow exception existed under which information could be obtained in the context of wellness programs, the collection of such data must be strictly voluntary. AARP argued a blanket acceptance of a 30% reward or penalty without any underlying reasoning, is an unreasonable safe-harbor.
The court agreed with AARP and stated that the percentage derived was arbitrary and without “significant reasoning to justify the incentive limit adopted by ADA rule.” The case was remanded back to the EEOC for further justification of the 30% cap, but the EEOC did not make any further determinations and, in fact, told the court they would not get around to it until late 2019 with possible implementation set for the 2021 calendar year. The court thus vacated the 30% rule as of January 1, 2019, pending reissue of EEOC regulations. Now employers face possible litigation if the EEOC or employees potentially feel their wellness plan is not voluntary.
So employers are now, once again, faced with uncertainty when it comes to wellness plans that implicate GINA and ADA. While it is uncertain if the EEOC will aggressively pursue noncompliant plans as it did in the past or simply accept wellness plans that meet voluntariness and the 30% incentive/penalty threshold as their 2016 rule stated, we note the court’s ruling and the EEOC final rule did not remove the voluntary aspect or the notice and disclosure obligations with respect to wellness plans involving disability-related inquiries or medical examinations. Employees who wish to sue the wellness plan will generally have to go through the EEOC if they are implicating GINA or ADA. The lack of EEOC support, as in other arenas, while not fatal to a claim by a plaintiff in court, certainly is not helpful.
Employers are confronted with a dilemma to ride it out, establish wellness programs that do not request medical information or biometric screenings, remove all incentives as it relates to wellness programs, or forgo wellness programs altogether. In events where employers calculate the risk of maintaining their current wellness program plus incentives to participate in the health risk assessments and move forward with this approach, it would be appropriate for the plan to be compliant with nondiscrimination rules under the ADA and GINA, as well as be compliant with ACA and HIPAA wellness rules for offering incentives.