Recent federal court action has called to question federal regulations related to requirements for wellness programs that ask participants questions about their health or require medical exams. This update is intended to provide some background and guidance on these regulations. Since the issue is complex, it is beneficial to first provide some history and the backdrop related to federal wellness rules. This is an important update so please review it thoroughly.
Background on EEOC Wellness Rules In 2016, the federal Equal Employment Opportunity Commission (EEOC) issued final regulations addressing the extent to which certain wellness programs could offer incentives for participation and still satisfy requirements related to the Americans with Disabilities Act (ADA) exception for voluntary employee health programs. In general, the EEOC and ADA rules largely impact only those employers and plan sponsors that have wellness plans that ask medical questions (i.e. health risk appraisals, etc.) and/or require one to get an exam (i.e., bio-metric screenings, physical exams). Here are links to the Conner Strong & Buckelew regulatory updates we issued at the time related to the 2016 EEOC rules: 2016 Update and 2016 Notice Update.
Legal Challenges and Impact for 2019 and Beyond
In August of 2017, the American Association of Retired Persons (AARP) challenged the 2016 final EEOC/ADA regulations as being discriminatory. The court sided with the AARP and found that the EEOC’s interpretation of the term “voluntary” was neither reasonable nor supported by the administrative record. In the ruling, the court ruled that the EEOC failed to adequately establish that a 30% incentive did not render a wellness program involuntary. That is, the court rules that the EEOC/ADA regulations were really not “voluntary” at all. The court initially declined to vacate the rules and instead remanded them to the EEOC for reconsideration. Here is a link to our regulatory update on this issue at the time of the court’s ruling: 2018 Update.
In response to the court’s decision, the EEOC filed a status report advising the court that any substantively amended rules to the wellness would likely not be applicable until the beginning of 2021. As a result of the EEOC’s position, the court concluded that the proper remedy was to vacate the incentive provisions of the regulations as of January 1, 2019. As a result, until January 1, 2019 and subject to further action by the court or EEOC, the incentive provisions of the regulations remain in effect. Furthermore, in light of the court’s ruling, it appeared that new wellness guidelines would be issued and that the current rules in effect would no longer be allowed. The EEOC was expected to issue new updates to address the court’s directive and presumably create new standards around the 30% incentive rule and the use of health related question screenings for 2019. However, the EEOC has still yet to issue any revised regulations even though most employers and plan sponsors are far along with their 2019 wellness planning. In fact, the EEOC has publicly announced that they have no date as to when new rules are expected to be published.
Next Steps for Employers and Plan Sponsors for Wellness Plans in 2019
As a result of all of these actions, it is entirely possible that there will be no clear resolution to the wellness regulations in time for employers and plan sponsors to amend their plans and programs in time for 2019. As such, employers and plan sponsors will need to make a decision as to whether they should continue with their current wellness programs or modify their plans. Absent guidance from the EEOC, it is unknown whether 2019 premium differentials caused by a participant’s refusal to be screened could survive an employee legal challenge. As a result of this confusion, the AARP/EEOC ruling affects any employer or plan sponsor intending to sponsor a wellness program for 2019 that asks participants to answer health-related questions or undergo medical testing.
Therefore, it appears more likely there will be no resolution in time for 2019 wellness program planning. In the meantime, possible next steps for employers and plan sponsors for 2019 could include:
Continuing all current operations in good faith due to the absence of clear regulations and being prepared to amend and correct plans in place if enforcement becomes an issue or if the EEOC issues guidelines after 2019 plans are in place. For example, a group could remain status quo and simply refund contributions collected that are no longer allowed to correct the issue if required.
Continuing with current wellness programs with an understanding of the potential risk of EEOC enforcement or private legal action, but continue following the present-day EEOC regulations (even though they will be vacated as of January 1, 2019) including incentive limits and the provision of separate wellness program notices.
Revising wellness programs to tie all incentives to other wellness initiatives that are not subject to EEOC rules, such as tobacco surcharges with no medical testing, participatory programs like gym use or outcome-based programs with no medical tests like walking programs. This is another safe option that likely complies with the court’s action.
Postponing any new wellness programs subject to ADA being added or amended until 2020 in the hope that new regulations will be issued by then.
Discontinuing wellness programs that require participants to answer health-related questions (i.e., complete a health appraisal) or undergo medical testing (i.e., bio-metric screenings or exam) in order to receive an incentive. This action would comply with the court’s intended ruling, at least for now.
Unfortunately, there is no clear path forward with respect to the best options for 2019. Employers and plan sponsors should review this issue with counsel to determine the approach and path that best meets the organization’s interests and potential risk-tolerance. The industry is optimistic that new regulations will be issued with safe-harbor guidelines to protect employers and plan sponsors since there is such ambiguity at this time. We will issue an update as soon as new guidance is published. In the interim, please contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220 with any questions.