TO: Clients of Brown & Brown Insurance Services of California

RE: Wellness Programs after AARP v. EEOC

This update is part of a Brown & Brown series summarizing new guidance issued in connection with the Patient Protection and Affordable Care Act (also known as the ACA or Health Care Reform), as well as other federal laws impacting employer-provided health benefits. We are joining forces with our business partner, the law firm of Miller Johnson, to provide these updates to you.

In August 2017 the decision in AARP v. EEOC found the EEOC’s regulations regarding ADA- and GINA-compliant wellness programs to be “neither reasonable nor supported by the administrative record.” Later, the court ordered those regulations be vacated effective January 1, 2019. Many expected the EEOC to issue revised regulations. However, it is now clear that the EEOC will not issue revised regulations before January 1, 2019. The purpose of this Monthly Update is to provide employers with various design strategies in 2019 (and beyond) for their wellness programs, to the extent they are subject to the ADA and GINA.

Highlights: • If the EEOC issues revised regulations (and there is no promise that it will), those regulations will be issued in proposed form (i.e., not binding) and will not be issued before January 1, 2019. Because of the procedural requirements applicable to these regulations, the revised regulations, if any, are unlikely to be effective before 2021. • Without EEOC regulations, it is unclear what level of incentive (or penalty) imposed under a wellness program that is subject to the ADA or GINA is permissible. • The design of an employer’s wellness program in 2019 will largely depend on the employer’s risk tolerance.

Background: Before we further explain various wellness program designs under the ADA and GINA, it is important to understand how the ADA and GINA applies to wellness programs. Americans with Disabilities Act Under the Americans with Disabilities Act (“ADA”), an employer may “not require a medical examination and shall not make inquiries as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.” 42 U.S.C. 1211(d)(4)(A). However, an employer “may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site. 42 U.S.C. 1211(d)(4)(B) (emphasis added).

A health risk assessment (“HRA”) is a medical history under the ADA. Similarly, a biometric screening is medical examination under the ADA. In other words, the ADA prohibits employers from using an HRA or biometric screening unless the HRA or biometric screening is voluntary.

Genetic Information Nondiscrimination Act Under the Genetic Information Nondiscrimination Act (“GINA”), it is an “unlawful employment practice for an employer to request, require, or purchase genetic information with respect to an employee or family member of the employee.” 42 U.S.C. 2000ff-1(b). GINA provides an exception to the prohibition on requesting genetic information where “health or genetic services are offered by the employer, including such services offered as part of a wellness program,” but only where “the employee provides prior, knowing, voluntary, and written authorization.” 42 U.S.C. 2000ff-1(b)(2)(A),(B).

“The manifestation of a disease or disorder in family members” of an employee, which— oddly—includes an employee’s spouse, is genetic information of the employee under GINA. Since an HRA or biometric screening of an employee’s spouse will often contain information regarding “the manifestation of a disease or disorder” in the employee’s spouse, GINA generally prohibits an employer from requesting this information, unless it satisfies GINA’s voluntary exception related to wellness programs.

Voluntary A key component of any permissible wellness program under the ADA or GINA is that any HRA or biometric screening must be voluntary. Clearly, it is a violation of the ADA or GINA for an employer to require an employee (or the employee’s spouse) to complete an HRA or biometric screening as part of its wellness program. Since employers cannot make HRAs or biometric screenings mandatory, many employers offer incentives for employees and their spouses to complete an HRA or biometric screening. Other employers penalize employees and spouses who fail to complete an HRA or biometric screening. (An incentive or penalty is really two different sides of the same coin.)

EEOC Enforcement Actions The Equal Employment Opportunity Commission (“EEOC”)—which has the jurisdiction to enforce both the ADA and GINA—takes the position that when incentive (or penalty) becomes so large (or severe), that a wellness program (that includes an HRA or biometric screen) is not “voluntary,” even if it is not “mandatory.”

EEOC v. Flambeau, Inc. The EEOC challenged a wellness program’s compliance with the ADA in which an employer conditioned participation in its group health plan on an employee completing an HRA. See EEOC v. Flambeau, Inc., 845 F.3d 941 (7th Cir. 2017). Because the Court of Appeals for Seventh Circuit resolved this lawsuit on another issue, it never reached a decision regarding whether this wellness program failed to meet the ADA’s voluntary requirement. Id.

EEOC v. Orion Energy Systems, Inc. Similarly, the EEOC challenged a wellness program’s compliance with the ADA in which an employer conditioned the employer’s subsidy towards the cost of coverage under its group health plan on an employee completing an HRA. EEOC v. Orion Energy Systems Inc., 208 F.Supp.3d 989 (E.D. Wis. 2016). The District Court for the Eastern District of Wisconsin held that this wellness program was voluntary under the ADA. In that decision, the court stated, Orion’s wellness initiative is voluntary in the sense that it is optional. An employee is not required to participate in the program and is instead given a choice: either elect to

complete the HRA as part of the health program or pay the full amount of the health benefit premium. A corporation is not required to fully pay for an employee's health insurance—indeed, it is not required to provide health insurance at all—and it is not unlawful to give an employee a choice regarding her health benefits provided the choices are among lawful alternatives. There may be strong reasons to comply with an employer's wellness initiative, and the employee must balance the considerations in deciding whether to participate or not. But a hard choice is not the same as no choice. [Id at 1001 (quotations and citations in original are omitted).] Uncertainty Both of these cases were decided in the Seventh Circuit (which includes Illinois, Indiana and Wisconsin). They are not binding precedent in the other circuits. In light of the uncertainty created by the absence of regulations and the lack of consistent case law, employers must fend for themselves when designing ADA- and GINA-complaint wellness programs beginning in 2019. Next Steps for Employers Below are three suggested wellness program design strategies that depend on an employer’s risk tolerance:

Conservative There are two conservative approaches. The first is to eliminate any HRA or biometric screenings from your wellness program. Using this design, the wellness program is no longer subject to the ADA or GINA. Employers may find that they are able to achieve the same level of success with a wellness program that is only subject to the regulations under the Health Insurance Portability and Accountability Act (“HIPAA”) and the ACA. For example, you could use an activity-based outcome wellness program (such as an exercise program) with incentives (or penalties) tied to employees reaching certain exercise goals. Of course, you should make sure that these wellness programs comply with rules under HIPAA and the ACA.

The second conservative method is to remove any incentive (or penalty) tied to completing an HRA or biometric screening. Employers that find value in providing HRAs and biometric screenings (for reasons such as earlier detection of diseases and management of chronic conditions) may opt to continue offering no-cost HRAs and biometric screenings to their

employees with no incentive or penalty tied to participation. This design is still subject to EEOC jurisdiction (because it uses an HRA or biometric screening), but—with no incentive or penalty—the wellness program is clearly voluntary.

Moderate There are also two moderate approaches. The first is to continue to comply with the EEOC’s vacated regulations with respect to the amount of the incentive or penalty tied to participation in an HRA or biometric screening. The second is to comply with the wellness program regulations under HIPAA and the ACA.

While the limits on incentives under the EEOC’s vacated regulations and HIPAA/ACA are similar (30%), there are important differences.1 Most importantly, under the EEOC’s vacated regulations, the 30% limit is based on the total cost of employee-only coverage under the employer’s least expensive medical plan. Under HIPAA and the ACA, the 30% limit is based on the total cost of coverage under the medical plan and, to the extent any of the employee’s dependents can also participate in the wellness program, the coverage tier in which the employee enrolls (otherwise, it is based on the employee-only coverage tier).

While it is impossible to predict the actions of the EEOC, we feel confident that, without its own regulations, the EEOC would not take enforcement action against a wellness program that complied with the limits under HIPAA and the ACA. We feel even more confident that the EEOC would not take enforcement action against a wellness program that complied with its vacated regulations (the EEOC did vigorously defend those regulations in the lawsuit brought by the AARP).

Employers should be aware, however, that just because the EEOC doesn’t take enforcement action against a wellness program, that doesn’t prohibit a participant from bringing a lawsuit against the employer on the basis that the wellness program violates the ADA or GINA. (However, the possibility of a participant lawsuit may be minimal if there are few changes in the employer’s wellness program from 2018 to 2019.)

1 Under HIPAA and the ACA, a wellness program can use incentives or penalties up to 50% to the extent that the wellness program contains a tobacco-cessation based component.

Aggressive Aggressive employers will view the decision in AARP v. EEOC as an opportunity to design wellness programs without limitation (e.g., similar to the wellness programs used by Flambeau, Inc. and Orion Energy Systems, Inc.), to the extent that the wellness programs are not subject to HIPAA or the ACA (i.e., they are participation-based).

Employers with only employees in Illinois, Indiana and Wisconsin may find additional comfort in this approach based on the decision in EEOC v. Orion Energy Systems, Inc. (Having said that, the EEOC’s regional office that has been most active in challenging wellness programs is the regional office that has jurisdiction in these same states.)

Despite Orion’s success, we expect that the EEOC will continue to challenge wellness programs that use incentives (or penalties) that—in the EEOC’s view—are so extreme that they cause the wellness program to be “involuntary” under the ADA and GINA, even though participation is not “mandatory.” Conclusion We are aware that many employers are in the midst of considering wellness program design changes for 2019. Unfortunately, employers will have to make decisions without EEOC guidance. Without guidance, how an employer makes these decisions will largely result on the employer’s risk tolerance.

We will continue to keep you updated, not only of any additional EEOC guidance, but also of any EEOC enforcement actions challenging the “voluntariness” of employer wellness programs. As always, contact your Brown & Brown Account team if you have any questions.

The information provided in this legislative update for our clients and colleagues is for general guidance only and is not intended to be, and does not constitute, tax or legal advice. We recommend that you consult with your tax and legal advisors for the interpretation or application of any laws for your particular circumstances and situation.