Wellness Programs: Uncertainty with EEOC Incentive Maximums

 January 15 2018     Diane Cross
By now, many employers are familiar with the 2016 final regulations from the Equal Employment Opportunity Commission (EEOC) regarding wellness programs. As part of the final rules, employers were provided with welcomed guidance and clarification for designing compliant wellness program incentives. Specifically, the EEOC provides that wellness programs subject to the American with Disabilities Act (ADA) or Genetic Information Nondiscrimination Act (GINA) must limit incentives to 30% of the cost of employee-only coverage. For reference, examples of wellness programs subject to ADA and GINA include programs with a health risk assessment, biometric testing, or a physician’s office visit – generally any program that asks a medical or “disability-related” inquiry. Effective January 1, 2017, employers have been designing their wellness programs under this guidance; however, there may be a change in the near future as a result of the court’s decision in AARP v. U.S. Equal Employment Opportunity Commission.

Current Wellness Program Incentive Regulations

Wellness programs vary greatly and are regulated by several federal agencies, including Health Insurance Portability and Accountability Act (HIPAA), ADA, and GINA. The EEOC provides rules related to ADA and GINA, while the Department of Labor, Internal Revenue Service and Department of Health and Human Services issue HIPAA and ACA regulations. For further information regarding HIPAA, ADA and GINA, and how they regulate wellness programs including current incentive regulations, see Legislation Impacting Wellness Design.

AARP v. U.S. Equal Employment Opportunity Commission
In August 2017, the EEOC was ordered to reconsider ADA and GINA’s 30% incentive maximum per the court in AARP v. EEOC. At issue in the AARP v. EEOC case was that the 30% incentive affects the “voluntary” requirement of the ADA and GINA, with AARP arguing that a 30% incentive effectively forces individuals to participate. The court directed the EEOC to reconsider its rules under ADA and GINA, stating that the EEOC’s basis for determining the 30% incentive maximum was not well-reasoned, that the EEOC failed to support that the 30% penalty would not render participation involuntary. Further, the Court rejected the EEOC’s reasoning that using 30% as the incentive maximum was to align with HIPAA, where there is not a voluntary requirement.

Most recently, the Court ruled on a motion in December 2017 to amend the August ruling. Now, the Court has vacated the EEOC regulations that allow a maximum wellness program penalty/incentive of 30% with an effective date as of January 1, 2019.

What Does This Mean for Employers?

Importantly, the court’s order is not a final decision on wellness incentive maximums under the EEOC. Rather, the court deferred back to the EEOC to re-evaluate with new regulations to be issued by the EEOC no later than August 2018.  Employers should be aware that incentive limitations may be impacted beginning 2019 – but for now, no change is required as the EEOC regulations in their current form are still in effect.  We will continue to monitor this case and provide updates accordingly. Please contact your HORAN representative with questions.