Benefits and Compensation

Court Remands EEOC Wellness Rules, Finding No Support for 30% Threshold

A federal district court remanded the U.S. Equal Employment Opportunity Commission’s (EEOC) wellness program rules, finding it unclear how the rules’ 30% threshold met the Americans with Disabilities Act’s (ADA) requirement that wellness programs be “voluntary.”EEOC wellness rules

The EEOC “has failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels” in both the ADA and Genetic Information Nondiscrimination Act (GINA) rules it issued in 2016, according to the U.S. District Court in Washington, D.C. The court therefore granted AARP’s motion to send both rules back to the EEOC for reconsideration.

However, the court left the rules in place for the meantime, citing the “potentially widespread disruption and confusion” that could result from vacating them outright (AARP v. EEOC, CV No. 16-2113 (D.D.C. Aug. 22, 2017))


The ADA generally prohibits medical exams or inquiries that are not job-related, subject to certain exceptions including “voluntary” wellness programs. Likewise, GINA prohibits collecting employees’ genetic information, including family medical history, with an exception for voluntary wellness programs.

The rub has been exactly what would be considered a voluntary program. Originally, the EEOC simply stated that a wellness program is voluntary if the employer neither requires participation nor penalizes employees for nonparticipation. In 2016, responding to calls for greater clarification, the commission issued rules detailing the type and level of incentives that would be permissible.

Under these rules, a wellness program may impose a financial reward or penalty of up to 30% of the total cost of self-only health coverage, and still be considered voluntary. The rules were designed in part to harmonize with the wellness program rules of the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA).

AARP filed suit challenging the rules in October 2016. The organization’s main argument was that permitting 30% incentives was inconsistent with the “voluntary” requirements of the ADA and GINA, in that employees who could not afford to pay such an increase in premiums would effectively be forced to disclose their protected information when they otherwise would choose not to do so.

The court initially refused to grant AARP a preliminary injunction, finding that the group had not shown a threat of irreparable harm or a likelihood of success on the merits. However, this was before the court had a chance to review the administrative record.

Standard of Review

In its opinion, the court first reaffirmed that AARP had legal standing to challenge the rules on its members’ behalf. It then proceeded to consider the parties’ dueling motions for summary judgment on the merits.

Agency actions are entitled to a certain level of deference from courts. According to this court, however, they still must consider whether an agency:

  • Acted within the scope of its legal authority;
  • Explained its decision;
  • Relied on facts with some basis in the record; and
  • Considered the relevant factors.

The EEOC argued that both the ADA and GINA rules survived this deferential standard of review, but AARP countered that:

  1. The level of permitted wellness incentives was inconsistent with the meaning of the term “voluntary” used in the statutes; and
  2. The EEOC inadequately explained its decision to reverse its stance on incentives and adopt the 30% levels.

The Chevron Test

In evaluating an agency’s interpretation of a statute, courts follow the test the U.S. Supreme Court laid down in Chevron v. NRDC, 467 U.S. 837 (1984). If Congress spoke directly to the issue, the agency must follow that meaning, but “if the statute is silent or ambiguous as to the specific issue, the court must determine whether the agency’s interpretation is based on a permissible construction of the statute.”

In this case, it was uncontested that the law is ambiguous. Neither the ADA nor GINA defines the term “voluntary” or speaks to the level of permissible incentives, the court noted. Even under dictionary definitions, voluntary could mean either “free from coercion” or “without valuable consideration,” so the EEOC’s emphasis on the former meaning fell within the range of possible interpretations.

Proceeding to step two of the Chevron analysis, the court noted that it would defer to the EEOC’s chosen interpretation of “voluntary” if the agency offered a reasoned explanation for its decision. An agency’s interpretation need not be the only possible one, or even the most reasonable, but it must have examined the relevant data and drawn a rational connection between the facts found and the choice made.

ADA Rule

AARP did not dispute that some level of incentive might be permissible under the ADA, but argued that the level the EEOC chose was “too high to give employees a meaningful choice regarding whether to participate in wellness programs that require the disclosure of ADA-protected information.” AARP also faulted the EEOC’s justification for reversing its prior prohibition on financial incentives.

For its part, the EEOC offered three reasons for deciding to allow a 30% limit:

  1. This provision harmonizes the EEOC’s regulations with the HIPAA rules governing wellness programs, thereby furthering the goal Congress expressed in the ACA of inducing more individuals to participate in these programs.
  2. The 30% level is a reasonable interpretation of “voluntary” based on current insurance rates.
  3. A comment letter from the American Heart Association (AHA) endorsed the 30% level.

“The determination as to what level of incentive is ‘coercive’ is exactly the kind of agency judgment to which the courts should give some deference,” Judge John Bates wrote in the court’s opinion. “But in order to receive this deference, the agency’s chosen interpretation must be reasonable and must be supported by the administrative record.” Having now had the chance to review this record, the court found nothing to explain the EEOC’s conclusion that 30% was the appropriate measure of voluntariness.

Harmonization with HIPAA

While harmonization with the HIPAA/ACA rules is a reasonable goal in the abstract, the court found two flaws in the EEOC’s underlying reasoning. “The first is that Congress chose the 30% number in a different context: HIPAA is intended to prevent insurance discrimination, and unlike the ADA—or GINA—does not contain an explicit ‘voluntary’ requirement with respect to wellness programs,” Bates wrote. Because HIPAA targets wellness programs that might discriminate based on an employee’s health, its incentive limits do not apply to merely “participatory” programs that do not risk discrimination.

“Thus, HIPAA does not address, for example, whether employers can require participation in certain wellness programs or require the disclosure of certain information pursuant to a wellness program,” Bates wrote. “But the ADA does address this, at least with respect to disability information.”

A statute’s purpose is key to the Chevron analysis, and EEOC does not appear to have considered the purpose of the ADA vis-à-vis HIPAA here, or the way in which the 30% incentive level operates in the context of the ADA,” Bates continued. “EEOC does not explain why it makes sense to adopt wholesale the 30% level in HIPAA, which was adopted in a different statute based on different considerations and for different reasons.”

The second problem with the EEOC’s justification, the court added, was that the ADA rule’s 30% threshold is actually not consistent with HIPAA. Not only does the EEOC’s limit apply to participatory wellness programs, unlike its HIPAA counterpart, but the ADA calculates the 30% level differently.

“EEOC has thus achieved, at best, only partial consistency with HIPAA for only a minority of wellness programs,” Bates wrote. “Nowhere in the final rulemaking does EEOC explain why or how the incentive level it adopted, which differs from the approach taken in HIPAA, is consistent with its stated goal of harmonizing its regulations with HIPAA, or conversely, why it ultimately concluded that a departure from the HIPAA regulations was necessary or appropriate.”

“EEOC’s argument that it adopted the 30% level to harmonize its regulations with HIPAA, therefore, cannot support EEOC’s interpretation of the term ‘voluntary,’” Bates concluded.

Other Arguments

The court also rejected the EEOC’s two remaining arguments. “EEOC’s argument about current insurance rates appears to be utterly lacking in substance based on a review of the administrative record,” Bates wrote. “Indeed, EEOC conceded at oral argument that the administrative record contains no study or analysis of these ‘current insurance rates’ or how they relate to the voluntary disclosure of information in wellness programs.”

The court accorded the AHA’s comment letter little weight because it did not explain why 30% was an appropriate measure of voluntariness, and because most other stakeholders criticized 30% as either too low or too high.

“Significantly, the Court can find nothing in the administrative record—or the final rule—to indicate that the agency considered any factors that are actually relevant to the voluntariness question,” such as the likely financial impact on affected individuals, Bates continued.

“For example, commenters pointed out that, based on the average annual cost of premiums in 2014, a 30% penalty for refusing to provide protected information would double the cost of health insurance for most employees,” Bates explained. “The agency did not consider the distributional impacts of the rule and what impact income level would have on whether an incentive as a given percentage of premium costs would be coercive for an employee.”


The court found similar flaws in the rationale for the GINA rule’s 30% threshold. The GINA rule created an exception from the act’s general prohibition on collecting health information on an employee’s family members, by allowing a 30% incentive for disclosing a spouse’s (but not children’s) health information.

AARP argued that it was impermissible to give one type of genetic information more protection than another in this manner. The court did not agree that the EEOC lacked discretion to do so, but was troubled by the agency’s rationale.

“EEOC concluded that there was less risk of employer discrimination based on the disclosure of a spouse’s medical history, because the spouse’s history does not reveal actual genetic information about the employee,” Bates wrote. But he found that this premise, while logical, ignored the potential for discrimination based on dependents’ insurance costs to the employer.

Moreover, as with the ADA rule, “the administrative record contains no explanation how EEOC concluded that the 30% level was the appropriate measure for voluntariness or is consistent with GINA’s statutory requirement that the disclosure of information be voluntary,” Bates continued. The agency’s failure to analyze the economic coerciveness of such incentives is particularly glaring in the GINA context, he added, because the spousal incentives allowed by the GINA rule could be “stacked” onto the 30% incentives allowed by the ADA rule for disclosing the employee’s own health information.

Rules Not Vacated

The court therefore concluded that, because the ADA and GINA rules lacked a reasoned explanation, they were “arbitrary and capricious” under the Administrative Procedure Act and must be sent back to the EEOC for reconsideration. However, the court declined to vacate the rules out of concern for the potential consequences.

“Employer health plans for the year 2017 were undoubtedly designed in reliance on these rules, which have now been ‘applicable’ for eight months,” Bates noted. “It is far from clear that it would be possible to restore the status quo ante if the rules were vacated; rather, it may well end up punishing those firms—and employees—who acted in reliance on the rules.”

Parties’ Reactions

The court’s decision “is a tremendous victory for workers,” said Lisa Marsh Ryerson, president of the AARP Foundation, in a statement. “No one should be coerced into revealing personal health information in the workplace under a wellness program.”

The EEOC, for its part, is “assessing the impact of the court’s decision and order, and options with respect to these regulations going forward,” according to a statement from Acting Chair Victoria Lipnic.

David Slaughter David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

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