The Equal Employment Opportunity Commission has rescinded regulations — effective Jan. 1 — under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) related to the use of financial incentives in employer-sponsored wellness programs. The EEOC’s action should prompt employers to review their employer wellness programs, particularly if a program offers financial incentives.
The Commission’s latest action leaves no express guidance as to whether a financial incentive component of an employee wellness program complies with the ADA and GINA laws.
This development continues the complex compliance history of employer wellness programs that began with passage of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). That law generally prohibited group health plans from discriminating based on health factors, but created an exception for programs related to health promotion and disease prevention.
When regulators (the departments of Health and Human Services, Labor and Treasury) promulgated a final rule implementing this provision, they limited wellness incentives tied to health factors to 20 percent of the total cost of coverage. This level was intended to avoid “rewards or penalties so large as to deny coverage or create too heavy a penalty” on individuals who do not meet the requisite standards.
The Affordable Care Act offered support for the development and expansion of health incentives in a variety of ways, including by lifting the ceiling on health-contingent wellness incentives to 30 percent (close to $1,800 annually for an average employee-only plan) and inviting regulators to increase the ceiling to 50 percent if appropriate. In a 2013 final rule, regulators preserved the 30 percent ceiling as a general matter, but allowed it to rise to 50 percent for programs targeting tobacco use.
The ADA and GINA regulations, which were issued by the EEOC in 2016, addressed how those two laws apply to employee health programs. The now-rescinded portion of regulations had set limits on incentives that could be offered by wellness programs that required employees to answer disability-related questions or undergo medical exams to earn a reward or avoid a penalty.
Arguing that the rules were inconsistent with 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 American Association of Retired Persons (AARP) filed a lawsuit against the EEOC. The court ultimately sided with AARP and held that the EEOC did not provide sufficient reasons justifying the financial incentive rules. In late 2017, the court set aside the existing rules effective Jan. 1, 2019, providing the EEOC with the opportunity to develop revised rules. Although the EEOC previously indicated that it would issue a notice of proposed rulemaking, it simply removed those portions of the regulations instead.
Because of this action, employers are left with no express guidance as to whether their current programs comply with the ADA or GINA. Employers with wellness programs that include financial incentives should consult with legal counsel in light of this new development.