Federal Judge Sends EEOC Back to the Drawing Board on Wellness Program Rules

Federal Judge Sends EEOC Back to the Drawing Board on Wellness Program Rules

On August 22, 2017, a federal judge ruled that the Equal Employment Opportunity Commission (EEOC) must redo two employer-sponsored wellness program regulations that they finalized in May of 2016.  Affected employers have been required to comply with these rules since the start of the 2017 plan year. To minimize workplace disruption, the judge elected to keep the standards in place temporarily, so no employer needs to change their plan right now.  However, the EEOC will have to revise the affected rules right away, meaning that requirements for many workplace wellness programs will shift in the year ahead.

The rules in question address how two longstanding federal laws, the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) impact certain types of wellness programs and place clear limits on the value of incentives these programs may offer employees.  The ADA regulation applies to all wellness programs that ask participants any disability-related questions or requires participation in any medical examination.  The GINA rules impact all wellness programs that include health-history questions, including those directed at spouses.  Both of the EEOC rules limit the value of financial incentives employers can provide to individuals and spouses for participating in these types of programs to 30 percent of the cost of a single employee premium each.  That value limit is different than other wellness program requirements related to the Affordable Care Act (ACA) statute and the Health Insurance Portability and Accountability Act (HIPAA), which allow wellness incentives of up to 30 percent of the employee’s total premium costs.  Also, the EEOC value limits apply to all kinds of plans, and the HIPAA and ACA rules just apply to those wellness programs that tie participation and health goals to health insurance premium incentives and discounts.

In October of 2016, the AARP filed a lawsuit against the EEOC, charging that their 30 percent of the individual premium incentive limit was too high.  They argued that people who choose not to participate due to concerns about disclosing medical and genetic information to their employers would be at a significant disadvantage.

The court did not conclude that the EEOC’s incentive limit of 30 percent of the individual premium level was too high, but it ruled that the participation incentive value limits imposed by the EEOC regulations were “arbitrary.”  The court then directed the EEOC to go back and revise their rules to provide adequate justification for what level of premium incentives make participation in a program still “voluntary.”  While the EEOC can appeal the ruling, the court made it clear that the EEOC still needs to act now to revise the current rules and provide a valid justification for its incentive limits, whatever they may be.

So what does this ruling mean for employers who administer wellness programs affected by the EEOC’s rules?  If a company already has a wellness program in place covered by the current ADA/GINA wellness program regulation, then the ruling does not change anything for the time being.  These employers must still limit the value of their wellness program incentives to 30 percent of the cost of the self-only premium for the employee and, if applicable, participating spouses.  They also must still provide employees with proper notification and privacy protections required by the current rules.  However, these businesses should know that the rules surrounding their programs and the value of the incentives they offer are going to change, most likely within the next year.

Kistler Tiffany Benefits will continue to monitor the progress that the EEOC makes on revising the wellness program rules this fall, and when any changes are finalized, we will inform you of any new deadlines and requirements and help you make any needed wellness program modifications in a timely fashion.