New EEOC Rules Leave Incentive-Based Wellness Programs in Question

New EEOC Rules Leave Incentive-Based Wellness Programs in Question

January 2, 2019

If you have a job or own a company, odds are that you or your employer offer some sort of wellness incentive program. According to a May 2018 survey by the National Business Group on Health and Fidelity Investments, 86 percent of employers offer financial incentives as part of well being platforms.1  However, incentive-based programs have been subject to recent litigation, leaving their future unclear.

These incentive-based wellness programs typically ask employees to submit private medical information and some even ask workers to undergo medical examinations, in exchange for a discount on premiums. While federal laws like the American with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) limit what medical and genetic information employers may request, they make exceptions for information requested as part of employee health programs. Notably, the exceptions only apply as long as participation is voluntary, leaving some uncertainty as to whether programs that offer significant financial incentives are still considered "voluntary" under the statutes.

As a result, in May 2016, the Equal Employment Opportunity Commission (EEOC) issued rules stating that an employer could use a penalty or incentive of up to 30 percent the cost of self-only coverage, without sacrificing the voluntariness of the program.

A few months later, the AARP filed a lawsuit, arguing that the EEOC’s rules ran afoul the ADA and GINA, because anyone who could not afford to pay an extra 30 percent of their premiums were essentially forced to disclose their confidential information, making the programs involuntary. The U.S. District Court for the District of Columbia agreed with the AARP, and in December 2017, vacated the rules, effective January 1, 2019.

Now, in response to the court's decision, the EEOC has issued new rules, removing the provisions that explicitly allowed incentives up to 30 percent. As such, employers are left with little guidance on the permissibility, or lack thereof, of incentive-based programs that provide significant financial discounts.

As things stand, nothing specifically prohibits employers from offering financial incentives as part of wellness plans – the EEOC simply removed the regulation that unambiguously allowed them. Accordingly, employers should continue to monitor any legal developments to ensure that their wellness plans comply with future regulations.

Should you have any questions or if you would like to discuss how the new EEOC rules will impact your company, please contact your regular Saul Ewing Arnstein & Lehr LLP labor and employment attorney.