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Davis Brown Employment and Labor Law Blog

Update on Employer Wellness Incentives - January 8, 2018

Employers sponsoring wellness plans may see changes to the regulations authorizing these programs over the next year in light of a recent federal district court decision.


Last summer, a federal district court created uncertainty for employers when it ruled portions of the EEOC’s wellness regulations - allowing employers to incentivize employees for participation in bona fide wellness programs - were arbitrary and capricious. 

The court case was brought by AARP. AARP believes the regulations violate requirements in the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”) that medical examinations and inquiries regarding an employee’s medical history as part of an employee health plan be “voluntary.”  The regulations allow for a 30% reduction in health plan costs for employees who participate in employer wellness programs. According to the AARP, that 30% reduction in health plan costs renders the plan involuntary.

The court ruled in favor of AARP finding the EEOC failed to justify that incentives and penalties of up to 30% of the cost of the employee’s health coverage complies with the ADA’s “voluntary” requirement for employee health plans.  

To avoid massive disruption to employer plans for 2018, the court declined to invalidate the rules entirely. Instead, they ordered the EEOC to issue revised rules. In response, the EEOC released the following proposed timeline committing to implementing new rules no later than 2021.

AARP was not pleased with this long timeline and asked the court to alter its ruling.

On December 20, 2017, the court agreed to alter the ruling, invalidating the EEOC regulations, but with an effective date of January 1, 2019 giving the EEOC time to finalize new rules and employers time to comply. 

Do I need to restructure my wellness program?   

Not all employer wellness programs would need to be changed under the court’s ruling. The issue being challenged by AARP pertains to the ADA’s voluntary requirement for medical examination and medical inquiries and tying a reward of up to 30% of the cost of the employee’s health insurance to participating in these exams or medical history inquiries. Programs which tie a monetary incentive to answering a health risk questionnaire or participating in a health screening are impacted.  

Wellness programs that do not tie a monetary incentive to health screenings or medical inquiries (such as programs that reward participation in health education) are not impacted.  Programs which offer medical screenings but do not provide a financial incentive in connection with the medical screenings should also be allowable.