Employer Incentives for Wellness Programs in Limbo as EEOC Vacates 30% Rule

January 16, 2019

As of January 1, 2019, the EEOC removed from federal regulations a rule permitting an employer to incentivize employees to voluntarily disclose information protected by the Americans with Disabilities Act (“ADA”) and Genetic Information Nondiscrimination Acct (“GINA”) in connection with an employee-sponsored wellness program. This means that employers who offer wellness programs that incentivize employees to disclose medical information are now in legal limbo until the EEOC offers guidance on how employers may obtain relevant information to administer wellness incentive programs without running afoul of the law. Here is what happened:

The ADA and GINA are two federal laws which provide a variety of protections for employee health information. These laws protect against the disclosure of employee health and medical information, and they limit the types of questions an employer can ask about an employee’s medical status and history. Generally, employers may not compel employees to make disclosures of personal health information.

The law does, however, allow employers to encourage voluntary disclosures of such information to the extent employers do so in the context of administering a wellness incentive plan. In 2016, the EEOC issued a rule under the ADA and GINA which allowed employers to incentivize employees to disclose medical and health information without running afoul of the ADA and GINA so long as such disclosures were made in connection with an employer-sponsored wellness program and the incentive offered by the employee met EEOC standards. So long as the incentive offered by employers employees involves a reward of up to a 30% discount of the cost of self-only health insurance coverage, then the incentive would be considered a “voluntary” program rather than an unlawful “involuntary” requirement which would be prohibited by the ADA and GINA. If the incentive offered by the employer met the 30% limit (and the disclosure was made in connection with a wellness program) under the 2016 EEOC rule, the employee’s disclosure of health information would be considered “voluntary” and compliant with the ADA and GINA.

After the 2016 EEOC rule went into effect, the American Association of Retired Persons (“AARP”) filed suit against the EEOC in District of Columbia Federal Circuit Court. The AARP argued that the 30% incentive made the disclosure not merely “voluntary” to the extent there were employees who could not afford to pay the cost of coverage without the incentive. The AARP argued that employees who could not afford coverage without the 30% incentive discount would have no choice but to disclose ADA and GINA protected health information to the get the discount, effectively rendering the disclosure “involuntary” for the lower compensated workers. In 2017, the D.C. Circuit Court vacated the 2016 EEOC incentive rule, finding that it was arbitrary and capricious and not supported by adequate evidence, including how the EEOC chose 30% as the limit for an incentive to be voluntary. Rather than issue a revised rule or explain its prior incentive limits, the EEOC has decided to remove the incentive portion of the ADA regulations.

For 2019 and going forward, this means that employers who offer wellness programs that incentivize employees to disclose medical information are left in a legal limbo until the EEOC offers new guidance as to how large of an incentive employers may use without converting the requested disclosures from voluntary and lawful to involuntary and unlawful. Among their choices, employers could:

1) follow incentive rules for wellness programs set forth in other laws, for example the Affordable Care Act;

2) eliminate incentives for participation in wellness programs altogether; or

3) define through company policy and practice what is a voluntary disclosure by using self-created incentive limits.

Each of these options presents risks, the last being perhaps the most prone to legal challenge given the lack of outside guidance. Given these risks, employers would be well advised to reassess their wellness program incentives for 2019, even if they have not done so in the past. Employers should strongly consider consulting with legal counsel and/or group health insurance providers and agents as part of that process. Employers should also keep in mind that they must continue to comply with the other EEOC regulations concerning disclosure and use of employee medical and health information, as the sections of the federal regulations concerning wellness programs remain in effect. See 29 C.F.R. §1630.14.