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Legal Developments

Court Draws a Line Between ‘Voluntary’ and ‘Coercive’

A federal court ruled the EEOC failed to justify its reasoning for wellness rules that coerce workers into disclosing health and genetic information.
By: | August 30, 2017 • 3 min read

Dealing a blow to wellness regulations issued last year by the EEOC, the U.S. District Court, District of Columbia ruled that the regulations, which permit the use of significant financial incentives for employees to participate in workplace wellness programs, are arbitrary and capricious. The case is AARP v. EEOC, No. 16-cv-2113 (D.D.C. 08/22/17).

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The issue in dispute is whether the rules violate Americans with Disabilities Act and Genetic Information Nondiscrimination Act provisions protecting employees from involuntary disclosure of their health and genetic information. The rules allow wellness programs to collect protected information from participants. AARP argues that some of the financial incentives offered to employees make participation coercive rather than voluntary.

U.S. District Judge John Bates determined that the EEOC failed to adequately justify its conclusion that programs offering incentives of up to 30 percent of the cost of an employee’s individual health insurance coverage for participation are “voluntary.”

AARP, an advocacy group for individuals aged 50 and older, sued the EEOC last October, claiming that the 30 percent incentive permitted by the rules is too high to give employees a meaningful choice regarding whether to participate in wellness programs. and that the EEOC did not adequately explain how it determined the 30 percent incentive level.

In ruling on AARP’s motion for summary judgment, the court explained that, pursuant to Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984), it would defer to the EEOC’s chosen interpretation of the term “voluntary” if the agency “offered a reasoned explanation for its decision.” The court was concerned principally with “ensuring that [the EEOC] has ‘examined relevant data and articulated a satisfactory explanation for its action’” and that its “’decision was based on a consideration of the relevant factors.’”

The court also found “little evidence” that the EEOC “actually analyzed any factors that might be relevant to the economic “coerciveness” of the incentive level.

The EEOC put forth three reasons for why it determined that the term “voluntary” permits incentives up to 30 percent. First, the agency contended that it wanted to “harmonize” its regulations with the Health Insurance Portability and Accountability Act. The court noted, however, that the commission did not explain “why it makes sense to adopt wholesale the 30 percent level in HIPAA, which was adopted in a different statute based on different considerations and for different reasons,” particularly when the term “voluntary” is not included in the relevant provisions of HIPAA.

Moreover, the court concluded, the agency’s interpretation is, in fact, inconsistent with HIPAA. The court found, therefore, that the EEOC’s argument that it adopted the 30 percent level to “harmonize” with HIPAA did not support its interpretation of the term “voluntary.”

Second, the EEOC stated that the 30 percent level was based on “current insurance rates.” The court rejected this argument, finding it “utterly lacking in substance.” A review of the administrative record, the court stated, revealed no study or analysis of “current insurance rates” or how they relate to the voluntary disclosure of information in wellness programs.

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Finally, the EEOC asserted that it relied on comment letters in making its determination. The court found the only comment letter identified by the EEOC to be “unpersuasive,” particularly given that the majority of comment letters opposed the chosen incentive level. Acknowledging that the agency is entitled to rely on some comments and not others, the court explained that the agency must nonetheless “explain why it chose to rely on certain comments rather than others.”

The court also found “little evidence” that the EEOC “actually analyzed any factors that might be relevant to the economic “coerciveness” of the incentive level.

Noting the disruption vacating the rules would cause to employers and employees alike, the court instead ordered the EEOC to review and reconsider the regulations while they remain in effect. The EEOC is to file a status report proposing a schedule of review by Sept. 21.

Christina Nevins, Esq., is the disability legal editor at LRP Publications. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]