By Katherine Kelton, Esq., and David Anderson, Ph.D., L.P.

No doubt you’ve read in the press recently that a lawsuit filed by the AARP, challenging the Equal Employment Opportunity Commission’s (EEOC) 2016 regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA), may require significant changes in the way some companies structure their well-being programs. For a detailed look at the history of how these rules combine with HIPAA to govern well-being programs today, check out StayWell’s earlier white paper on this topic.

The ADA and GINA protect employees’ health and genetic information from being used or disclosed in a way that could be discriminatory, including at work or for insurance coverage. At question in AARP v. EEOC are portions of the EEOC's workplace well-being regulations, in place since 2016, that let employers collect such information as long as it is provided by participants in a voluntary well-being program. Those regulations allow employers to offer financial incentives to encourage program participation in an amount up to 30 percent of the cost of self-only health care coverage. In its lawsuit, AARP argues that these incentives penalize employees who refuse to disclose medical and genetic information through wellness programs at work. Therefore, wellness programs offering financial incentives cannot be considered voluntary given the financial burden this additional premium cost could place on some individuals.

As of our last update, the courts determined that the EEOC’s definition of “voluntary” needed clarification, but left it to the agency to go back to the drawing board. The AARP, not satisfied with the EEOC’s proposed timetable for new regulations, pressed the courts to take more definitive action. In a December 20, 2017 ruling, the court agreed, ordering that the wellness program incentive regulations would be vacated effective January 1, 2019. While current plans call for the EEOC to issue a draft of new regulations by August 31, 2018, it is likely we won’t see final rules until October 2019. We will know more in March 2018 when the EEOC is required to provide a status report to the court and AARP on its review of the rules.

In the meantime, this ruling, combined with the time it will take to implement any new regulations, leaves much uncertainty in the coming years for companies that have incorporated financial incentives, such as health plan premium reductions, into their well-being programs. In this post, we’ll look more closely at how we got to this point, and share StayWell’s views on these changes, as well as fundamental changes we see coming in well-being programs in the future.

The Evolution of EEOC Rules

AARP challenged these EEOC regulations, arguing that the EEOC failed to consider the impact on consumers or to provide any evidence that 30 percent was a reasonable definition of “voluntary.” AARP contended that many employees cannot afford to forego a 30 percent reduction in in their health care premiums or co-insurance (i.e., absorb a 30 percent penalty) and, therefore, would in effect be coerced into participating in a program that required them to disclose personal health information about themselves and/or their spouses.

The judge ruled in favor of AARP, agreeing that the EEOC failed to provide evidence that a 30 percent cap is a reasonable definition of a “voluntary” well-being program. This ruling was also influenced, in part, by the judge’s observation that the EEOC appeared to have ignored comments submitted by various organizations, pointing out that the alternative to participating in a well-being program at the 30 percent incentive threshold was close to a two-fold increase in the cost of insurance coverage for many employees.

At the time of the ruling, the court chose not to vacate the regulations, noting that employers and participants had been subject to the 30 percent limit for eight months, striking down the rules mid-year would cause significant disruption. However, the court directed the EEOC to reconsider the regulations, while offering no specific timetable for the EEOC to issue revised rules.

In September 2017, the EEOC filed a status report with the court stating that the agency did not intend to issue new proposed regulations until August 2018, did not intend to issue final rules until August 2019, and did not expect the new rules to take effect until early 2021. AARP again sought relief from the court, challenging the timeliness of the new proposed regulations and requesting that the incentive rules be stricken effective January 1, 2018.

In a December 20, 2017 opinion, the court found that the EEOC’s proposed timetable to reissue new regulations was not timely enough, and vacated portions of the rules addressing well-being program incentives effective January 1, 2019. The court also ordered the EEOC to provide a status report to the court and AARP on its review of the rules by March 30, 2018, and to issue any notice of proposed rulemaking by August 31, 2018.

What Next?

We encourage you to discuss the specific impact of this ruling on your well-being program with your legal counsel. In the meantime, because the EEOC’s existing regulations remain in effect for now, employers may continue offering incentives of up to 30 percent of the cost of employees’ self-only health care coverage until January 1, 2019. It is expected that the EEOC will provide further direction through a revised definition of incentives that would ensure “voluntary” well-being programs under the ADA and GINA. However, again, those final regulations are not expected until October 2019. Because of this uncertainty, it is important to carefully monitor this evolving situation and begin considering alternatives for 2019 and beyond as we wait for these issues to be resolved.

It is important to also be aware that wellness programs that rely on non-financial, “intrinsic” incentives such as contests and challenges supported by nominal rewards, non-monetary recognition or charitable contributions based on individual or group performance can proceed as planned. These types of incentives were not invalidated by this ruling, and there is no indication that such rewards will be challenged in this process.

An Opportunity for Fundamental Change and Innovation in Well-Being Programs

Creativity will be essential to maintain and grow current participation levels while relying less on financial incentives. Fortunately, StayWell research and decades of experience at the worksite have clearly demonstrated that best practices such as a supportive culture and effective communications substantially increase wellness program participation regardless of what incentives are offered.

Within the context of the full range of best practices available to employers, we see this as an opportunity to refocus well-being strategies on enhancing participant experience and success by providing greater access and convenience, more interactive and engaging products, greater emphasis on intrinsic motivators, and more focus on social connectedness and data-driven personalization. Integrated into a work culture that encourages and supports healthy lifestyles, we believe this broader approach will yield greater long-term impact on both employee and organizational performance.

Through our peer-reviewed research and market experience, we’ve identified 9 best practices that are instrumental in increasing program engagement, outcomes and value:

  1. Strong senior management support
  2. Comprehensive program design
  3. Integrated incentives
  4. Integrated, comprehensive communication strategy
  5. Dedicated onsite program management staff
  6. Multiple program modalities
  7. Population-based, awareness-building activities
  8. Biometric screenings
  9. Vendor integration

You can read more about these best practices in this research brief.

The most effective well-being programs leverage the science of behavior change to inspire and support employees in living healthier lives. While we encourage the EEOC to consider rules that continue allowing employers reasonable flexibility to use financial incentives in helpful and supportive ways, we believe the time has come for employers to more fully tap the power of culture to enhance employee well-being, and for the industry to renew its focus on creating innovative solutions so engaging that employees will participate and make healthy changes with no need for financial inducements.

We will be closely following the EEOC’s actions, and plan to keep you apprised of issues that could impact your programs. Don’t hesitate to reach out to us directly if you have questions or want to explore ways to implement our 9 best practices into your well-being program.