A federal district court vacated the U.S. Equal Employment Opportunity Commission’s (EEOC) rules on how employers’ wellness programs must comply with the Americans with Disabilities Act (ADA) and Genetic Nondiscrimination Act (GINA).
District Judge John Bates had remanded the rules to the EEOC in August, finding that the agency had not adequately justified its dollar limits for wellness incentives under the underlying statutory requirements that wellness programs be “voluntary.” At that time, Bates declined to vacate the rules outright.
On December 20, however, after reviewing the EEOC’s proposed schedule for revising and reissuing the rules, Bates reconsidered and decided to vacate them, effective January 1, 2019. The existing rules therefore will continue to apply in 2018.
Bates’ order, granting a motion by plaintiff AARP to amend his original judgment, calls for the EEOC to provide a schedule for reviewing its rules by March 30, 2018, and to issue any new notice of proposed rulemaking by August 31, 2018 (AARP v. EEOC, CV No. 16-2113 (D.D.C. Dec. 20, 2017)).
Background
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.
Under the EEOC rules, issued in May 2016, 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 EEOC countered that harmonizing its regulations with the HIPAA rules governing wellness programs would further the goal Congress expressed in the ACA of inducing more individuals to participate in these programs, and that the 30% level was a reasonable interpretation of “voluntary” based on current insurance rates.
In its August opinion, however, the U.S. District Court found nothing in the record to explain the EEOC’s conclusion that 30% was the appropriate measure of voluntariness.
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. “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 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’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.
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. Among other things, the court noted that “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.”