Court Vacates Incentive Provisions of EEOC’s Wellness Rules, Effective 2019

The U.S. District Court for the District of Columbia, in AARP v. EEOC, has vacated the incentive provisions of the Equal Employment Opportunity Commission’s wellness regulations, although the effective date of its order will be delayed until January 1, 2019.

In May 2016, the EEOC issued regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) regarding healthcare wellness programs that may require employees to disclose protected health information. Under these regulations, employers may provide limited incentives to employees or inducements to their spouses for answering disability-related questions or undergoing medical examinations as part of a voluntary, reasonably designed wellness program in order to earn a reward or avoid a penalty. The regulations provided that the use of a penalty or incentive of up to 30% of the cost of self-only coverage does not render “involuntary” such a program.

The regulations were challenged by the AARP, and in a prior ruling that we discussed in our August 2017 E-Update, the District Court found that the EEOC “failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels in both the ADA and GINA rules.” The court remanded the rule to the EEOC for reconsideration, but declined to vacate the incentive provisions because it believed such action would have “significant disruptive consequences” given that they had already been in effect for eight months.

Now, however, the court has reconsidered its earlier refusal to vacate the incentive provisions, but delayed the vacatur until January 1, 2019 in order to give employers time to adjust the design of their yearly wellness plans, which would not have been possible with an early 2018 effective date. The court, which clearly believes that the EEOC will revise the incentive provisions of the rules, also encouraged the EEOC to expedite its rulemaking process.