The U.S. Equal Employment Opportunity Commission, warning of "significant disruptive consequences," urged a Washington federal judge not to toss out the agency's disputed workplace wellness rules as companies set in place their health insurance plans for 2018.

In a dispute with the AARP in the U.S. District Court for the District of Columbia, the EEOC argued this week in court filings that the wellness rules should not be vacated before allowing the agency to revisit and revise them. The agency said it would be unable to complete its review by the end of the year.

Last month, U.S. District Judge John Bates sided with the AARP in its lawsuit challenging the EEOC’s workplace wellness rules. The regulations allow employers to incentivize or penalize employees for programs targeted at improving employees’ health and therefore lowering companies’ insurance costs. Bates did not vacate the rules; instead, he sent them back to the EEOC for a second look.

Bates must now decide whether to scrap the rules entirely or keep them in place to give the agency a chance to revise the rules. Two law firms cited by the EEOC in court papers this week—Alston & Bird and Epstein Becker & Green—argued in comments about the rules that companies need six months' notice to change plans and as many as 170,000 enrollment guides would have to be tossed and re-done in a short window.

The AARP sued the agency in October, after the EEOC changed its wellness program rules. The group argued the new policy was not justified and violated federal discrimination laws by allowing employers to illegally access private health information.

The AARP, which lobbies on behalf of nearly 38 million people age 50 and older, also alleged the 30 percent limit on health care cost incentives was too high of a penalty for non-participating workers. The court agreed, but did not vacate the rules.

Bates said in his ruling that it would be too “disruptive” to immediately eliminate the rules and instead gave the EEOC a chance to “address the rules’ failings in a timely manner.”

The AARP argued for the rules to be thrown out immediately and suggested the court could stay any mandate until 2018. Alternatively, AARP lawyers said, Bates could issue a "prospective injunction" against enforcement of the rules effective Jan. 1, 2018.

"Both approaches would prevent further harm to employees who will otherwise face involuntary disclosure through wellness programs in 2018, and would give employers certainty about the status of the rules as they finalize their 2018 plans," Dara Smith of the AARP Foundation Litigation wrote in court papers on Aug. 30.

EEOC: Don't 'pull the rug out'

U.S. Justice Department lawyers, representing the EEOC, stressed that because employers have generally negotiated their health insurance plans for 2018 and are preparing to begin open enrollment in weeks, vacating the rules at this late date would be “extraordinarily disruptive to employers and employees alike.”

“What clearly would expose employers to liability is vacating the rules upon which they have relied in designing their 2018 health plans, when it is now too late to change them,” Justice Department lawyers wrote in their papers. “To pull the rug out from under employers at this late date would be manifestly unfair.”

The agency argued that courts have full power to send rules back for further consideration "without vacating a rule where vacatur would unduly disturb settled expectations and cause chaos."

The government also argued the rules do not require employers to offer incentive-based programs. If employers are concerned that a program might expose a company to liability, they can choose to not offer the program, according to the government's court filing.

The EEOC argued that before open enrollment opens in the fall, 170,000 enrollment guides must be printed for distribution. The agency cited several stakeholders’ comments, submitted after the EEOC first published the proposed rules.

According to Epstein Becker, “the employer planning for this fall’s open season for the 2016 plan year is essentially complete. An effective date before Jan. 1, 2017, would likely require employers to drop their wellness programs because they would have insufficient time to bring them into compliance.” The firm continued: “It would be impractical to have plans attempt to redesign their programs during or after the open enrollment period to comply with new rules from the EEOC.”

The firm also argued it would be unfair to individuals who may have chosen health insurance providers based on available wellness programs that may become unavailable if they are forced to comply prematurely with the EEOC’s final rule.

Alston & Bird said employers “often rely on wellness program vendors to design and implement wellness programs, and must finalize such programs well in advance of their effective date to allow for the calculation of premiums and annual enrollment in the health plan.” The firm requested that companies be given six months' notice before rule changes take effect.

Instant Insights /

EEOC warns of 'chaos' if workplace wellness rules are tossed out

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