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Wellness Program Developments

Employers that offer health-focused wellness programs to their employees have had a lot to think about since the Equal Employment Opportunity Commission (EEOC) issued final regulations in May 2016, applying the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) to employer-sponsored wellness programs (collectively, the EEOC Wellness Regulations). Such employers initially had to evaluate whether their wellness programs were subject to the ADA rules, the GINA rules, or the full scope of the EEOC Wellness Regulations and, if so, implement changes for compliance effective with the January 1, 2017, plan year (for calendar-year programs).

Unfortunately, the dust hasn’t yet settled for health-focused wellness programs—two additional developments this fall will give employers more to think about going forward:

AARP v. United States Equal Employment Opportunity Commission – D.C. Circuit Remands EEOC Wellness Regulations for Further Consideration.

In the fall of 2016, the American Association of Retired Persons (AARP) brought a lawsuit challenging the EEOC Wellness Regulations. AARP’s primary argument was that the EEOC acted against Congress’ intent and failed to articulate reasonable justifications for adopting regulations that allow “voluntary” employer wellness programs to offer incentives of up to 30 percent of the cost of employee-only health plan coverage for an employee (or spouse, as applicable) to provide certain types of health information through workplace wellness programs. 

In fact, the D.C. Circuit found the EEOC’s determination that 30 percent is the appropriate limit to apply to incentives under “voluntary” employer wellness programs to be “neither reasonable nor supported by the administrative record.” The D.C. Circuit was not swayed by the EEOC’s arguments, namely that the 30 percent incentive limit was intended to align with the regulations governing wellness programs under the Health Insurance Portability and Accountability Act of 1996 (HIPAA); that the 30 percent incentive limit was reasonable based on “current insurance rates”; and that the EEOC relied on comment letters in setting the incentive limit at 30 percent. Instead, the D.C. Circuit found flaws in the EEOC’s assertions, pointing out that HIPAA is based on different policy considerations than the ADA or GINA and suggesting that the EEOC didn’t respond meaningfully to the comments it received on the proposed regulations. 

The D.C. Circuit remanded the EEOC Wellness Regulations to the EEOC for further consideration, but left the EEOC Wellness Regulations in effect in their current form while the EEOC revisits the rules. The EEOC recently stated that it anticipates issuing proposed amendments to the EEOC Wellness Regulations by August 2018 and final amendments to the EEOC Wellness Regulations by October 2019. 

Acosta v. Macy’s, Inc. – Department of Labor Seeks to Enforce Violations of HIPAA Wellness Program Regulations

A recent complaint brought by the Department of Labor (DOL) against Macy’s, Inc. is a reminder to employers that the EEOC Wellness Regulations aren’t the only rules that may impact an employer’s ability to offer a workplace wellness program. In Acosta v. Macy’s, Inc., the DOL alleges that Macy’s, Inc. sponsored a workplace wellness program to target tobacco use, which failed to comply with the HIPAA requirements applicable to wellness programs that offer employees (and/or dependents) incentives for satisfying a standard related to an employee’s (and/or dependent’s) health status. 

The Macy’s wellness program (Program) required employees who enrolled in the Macy’s group health plan to pay a monthly premium surcharge unless an employee certified that he or she (and the employee’s enrolled dependents) had not used tobacco products for the six-month period prior to the certification. The Program began in 2011 and has been updated and refined over the past six years, and the DOL alleges that the Program violated the HIPAA rules in each iteration: 

  • Failure to offer a reasonable alternative standard (RAS). For the first several years of the Program, employees were not notified of their right to earn the Program incentive by completing a RAS, and no RAS was offered in connection with the Program. The DOL alleges this violated the HIPAA rules. 

  • Failure to provide full reward for completion of RAS. The Program added a notice requirement and offered employees the option to agree, upon enrolling in health plan coverage for a plan year, that they would complete a tobacco cessation program in order to have the tobacco premium surcharge removed prospectively. However, no retroactive adjustments to premium payments were made to remove the premium surcharge for employees who successfully completed a tobacco cessation program. The DOL alleges this violated the HIPAA rules.1 

  • Failure to offer a RAS that is not completion of the same standard initially required. In its current iteration, the Program allows an employee to earn the full Program reward for the plan year by completing a RAS. However, the RAS permitted is described as “working towards the original standard of being tobacco free” by completing a tobacco cessation program. The DOL alleges this violates the HIPAA rules. 

The DOL’s complaint characterizes the alleged violations as both violations of the HIPAA wellness program rules and fiduciary breaches by Macy’s—including breach of the Employee Retirement Income Security Act of 1974’s exclusive benefit rule, fiduciary self-dealing, and causing the Macy’s health plan to engage in transactions that constituted a transfer of plan assets to (or use of plan assets by) a party in interest. 

Acosta v. Macy’s, Inc. is still in the early stages and it remains to be seen how the DOL’s allegations will be viewed by the court. However, employers should take note of the fact that the DOL is seeking to enforce the HIPAA wellness rules and that now may be a good time to review workplace wellness programs for potential HIPAA compliance concerns. In particular, employers who offer wellness programs with a tobacco use prevention component would be well served to seek legal review of the program terms in light of the issues raised in the DOL’s complaint. 

1 Note that, based on current DOL guidance, it is permissible for a wellness program to offer employees the opportunity to earn a pro-rated wellness program reward by enrolling in a tobacco cessation program mid-plan year, as long as employees also are offered the opportunity to earn the full wellness program reward by enrolling in a tobacco cessation program in connection with annual enrollment. See, FAQs about Affordable Care Act Implementation (Part XVIII) and Mental Health Parity Implementation, Q8 (January 9, 2014).

© 2022 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume VII, Number 284

About this Author

Monica Novak employee benefit plans and executive compensation lawyer Faegre Drinker Biddle

Monica A. Novak assists clients with a range of employee benefits matters, including health and welfare benefits, tax-qualified retirement plans and nonqualified plans. She routinely counsels clients regarding the design, implementation and administration of benefit plans to ensure consistency with plan terms and compliance with the Internal Revenue Code and ERISA requirements, as well as the requirements under Health Care Reform.

Employee Benefits

Monica assists clients with the design, implementation and administration of employee...