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Current Updates and Legal Developments Healthcare SE 2019

April 18, 2019 (14 min read)



EFFECTIVE JANUARY 1, 2019, REGULATIONS ISSUED by the Equal Employment Opportunity Commission (EEOC) concerning incentive-based workplace wellness programs are rescinded, leaving employers without guidance until at least June.

By way of background, in May 2016, the EEOC had finalized regulations explaining how employers could provide financial and other incentives to employees for answering disability-related questions and taking medical exams or having their spouses provide information about current or past health status. The EEOC designed the regulations to promote workplace wellness without running afoul of the Americans with Disabilities Act of 1990 (ADA) (Pub. L. No. 101-336, 104 Stat. 327 (July 26, 1990)) or the Genetic Information Nondiscrimination Act (GINA) (Pub. L. No. 110-233, 122 Stat. 881 (May 21, 2008)).

Under the final ADA regulation, employers could offer wellness programs asking questions about health or including medical examinations in exchange for incentives of up to 30% of the total cost of the employee’s “self-only” health insurance plan. The final GINA regulation applied the same maximum incentive for information provided by employees’ spouses. The EEOC also claimed that the rules complied with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. No. 104-191, 100 Stat. 2548 (Aug. 21, 1996)).

In October 2016, the American Association of Retired Persons (AARP) brought suit on behalf of its members, arguing that the regulations (81 Fed. Reg. 31,126> and 81 Fed. Reg. 31,143) violated the ADA and the GINA provisions requiring that the disclosure of health information to an employer be “voluntary,” and that employees who would not otherwise choose to do so would be forced to disclose information to take advantage of the health coverage costs offered by the wellness programs.

According to the regulations, “in order for the participation in an employee health program to be voluntary, a covered entity may not require employees to participate, deny access to health coverage for nonparticipation, generally limit coverage under its health plans, take any other adverse action, or retaliate, interfere with, coerce, intimidate, or threaten an employee who does not participate or fails to achieve certain health outcomes, and must provide a notice clearly explaining what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure.”

In August 2017, U.S. District Judge John Bates of the U.S. District Court for the District of Columbia ruled that the EEOC had failed to justify the 30% figure and ordered it to reconsider it “in a timely manner.” AARP v. United States EEOC, 267 F. Supp. 3d 14 (D.D.C. 2017). However, the court found that vacating the regulations altogether would cause “widespread disruption and confusion.”

The AARP subsequently moved for vacatur of the regulations and Judge Bates granted the motion in December 2017, setting an effective date of January 1, 2019. He directed the EEOC to issue a notice of proposed rulemaking by August 2018. AARP v. United States EEOC, 292 F. Supp. 3d 238 (D.D.C. 2017).

In January 2018, Judge Bates granted a motion by the EEOC to partially vacate the December 2017 order by removing the August 2018 rulemaking deadline. AARP v. United States EEOC, 2018 U.S. Dist. LEXIS 27317 (D.D.C. 2018).

In October 2018, the EEOC indicated that new rules would not be promulgated until June 2019, at the earliest. On December 20, 2018, the agency published notices of its intent to rescind the ADA and GINA regulations as of January 1, 2019.

The Meaning of “Voluntary”

The ADA and the GINA generally prohibit employers from asking employees about their and their families’ health unless the questions are “voluntary.” However, the laws don’t define the word “voluntary,” which had left employers in a difficult situation if they wanted to implement wellness programs. The Affordable Care Act of 2010 (ACA) (Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010)) amended HIPAA to allow employers to raise or lower their employees’ health insurance premiums by 30% if they participated in wellness programs, but it wasn’t until the EEOC finalized its regulations in 2016 that employers had some certainty about what they were permitted to do under the ADA and GINA.

Employers offer wellness programs to encourage workers to invest in their health and to save on the cost of insurance, among other reasons. However, with the incentive provisions of the rules vacated, employers are at some risk of EEOC action or private suits challenging their existing programs as coercive. These types of suits were filed in the years prior to the 2016 rules.

Takeaways for Employers in the Interim

Now that the EEOC has offered an opinion as to what it perceives to be voluntary, employers are in a better position to make judgment calls when assessing their current incentive programs. As long as employers’ programs are in line with the 2016 rules, experts say it is unlikely that the EEOC will sue them for coercive policies. It helps that Judge Bates left untouched other sections of the law that help employers ensure that they are not forcing workers to take part. These include provisions about confidentiality requirements, the methods employers use to communicate with workers, and how programs are designed to make employees healthier. Employers can look to the vacated guidelines as a framework, and now must carefully take into consideration what is “voluntary” under the ADA.

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ON MARCH 28, 2019, A FEDERAL JUDGE IN WASHINGTON, D.C. rejected a significant provision in a Trump administration regulation on association health plans, “Definition of ‘Employer’ Under Section 3(5) of ERISA—Association Health Plans” (Final Rule) (29 C.F.R. 2510). In New York v. United States Dep’t of Labor, 2019 U.S. Dist. LEXIS 52725 (March 28, 2019).

U.S. District Judge John Bates found that language in the Department of Labor’s (DOL) regulation permitting small businesses and self-employed individuals to band together for the purpose of buying health insurance on the large-group market functions as an unlawful and clear “end-run” around the Affordable Care Act (ACA) (Pub. L. No. 111-148, 124 Stat. 119 (2010)). Judge Bates also found that the rule misrepresents the meaning of the term “employer” as it is used in the Employee Retirement Income Security Act (ERISA) (29 U.S.C.S. § 1001, et seq.), and that it constitutes an attempt to unlawfully expand the term’s meaning in violation of the Administrative Procedure Act (5 U.S.C.S. § 706).

The ruling came in a lawsuit against the DOL brought in July by the attorneys general of California, Delaware, Kentucky, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Virginia, Washington, and Washington, D.C., alleging that the rule violates the “text, structure and purpose” of the ACA and is premised on a misreading of ERISA. Judge Bates ruled that the attempted expansion of the term “employer” disregards the ACA’s “careful statutory scheme distinguishing rules that apply to individuals, small employers and large employers.” By allowing unrelated small employers (or self-employed individuals) to form associations to offer health coverage to their members, they could avoid certain ACA requirements contrary to Congressional intent.

“For decades,” the judge explained, DOL has only permitted “bona fide associations” of employers “with close economic and representational ties to their employer members” to be considered “employers” under ERISA, and therefore empowered to purchase large-group insurance on the market for their employees. The 2018 Final Rule flouts this requirement, he said. The purpose, he found, is to permit small businesses and some individuals “to avoid the healthcare market requirements imposed by the ACA,” which the law does not allow. In fact, Judge Bates noted, the President himself directed that the DOL design the Final Rule to accomplish this very result and acknowledged that its purpose was to avoid the stringent rules of the ACA, as evidenced by the language in his executive order directing the DOL to promulgate what became the Final Rule. 82 Fed. Reg. 48,385 (Oct. 12, 2017).

The judge remanded the rule to the DOL to permit the agency to try to address the possible severability of the invalidated portion.

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AS BRIEFING GOT UNDERWAY IN THE U.S. COURT OF Appeals for the Fifth Circuit in the appeal from a Texas judge’s decision striking down the Patient Protection and Affordable Care Act (ACA), the U.S. Department of Justice on March 25 notified the court’s clerk of the government’s opinion that the ruling should be upheld and its intent to file a brief to that effect. Texas v. United States, No. 19-10011 (5th Cir.).

“The Department of Justice has determined that the district court’s judgment should be affirmed. Because the United States is not urging that any portion of the district court’s judgment be reversed, the government intends to file a brief on the appellees’ schedule,” the letter stated.

U.S. Judge Reed O’Connor of the Northern District of Texas ruled Dec. 14, 2018 that as a result of a provision contained in the Tax Cuts and Jobs Act of 2017 (TCJA) (115 P.L. 97) effectively reducing to zero the ACA’s individual mandate tax penalty as of Jan. 1, 2019, the individual mandate is no longer a valid exercise of Congress’ taxing power. Further, the judge said, the individual mandate is inseverable from the remainder of the ACA, rendering the entire statute invalid. Texas v. United States, 2018 U.S. Dist. LEXIS 211547 (Dec. 14, 2018).

The ruling came in a suit filed by a group of Republican state attorneys general challenging the constitutionality of the ACA. Democratic attorneys general from 16 states and the District of Columbia intervened and ultimately appealed to the Fifth Circuit.

In their opening brief, the appellant states argued that the plaintiffs below lack standing, that the individual mandate is constitutional, and, alternatively, that the individual mandate is severable from the remainder of the ACA.

In a separate brief, the House of Representatives, as intervenor, echoed the arguments advanced by the appellant states.

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IN A COORDINATED EFFORT, TWO AGENCIES WITHIN THE Department of Health and Human Services (HHS) on February 11 proposed rules to enhance the interoperability of electronic health information (EHI) and improve access to, and the quality of, information needed by consumers to make informed healthcare decisions.

The proposed rules are aimed at clarifying and implementing provisions in the 21st Century Cures Act of 2016 (Pub. L. No. 114-225, 130 Stat. 1033 (Dec. 13, 2010)) related to interoperability, information blocking, and certification of health information technology developers.

The first proposed rule, “21st Century Cures Act: Interoperability, Information Blocking, and the ONC Health IT Certification Program”,, issued by the Office of the National Coordinator for Health Information Technology (ONC), would implement “certain provisions of the Cures Act, including conditions and maintenance of certification requirements for health information technology (health IT) developers under the ONC Health IT Certification Program, the voluntary certification of health IT for use by pediatric healthcare providers, and reasonable and necessary activities that do not constitute information blocking.”

In addition, the proposed rule would modify the ONC Health IT Certification Program in order to “advance interoperability, enhance health IT certification, and reduce burden and costs.”

The proposed rule has been published at 84 Fed. Reg. 7,424.

The second proposed rule, issued by the Centers for Medicare & Medicaid Services (CMS), is entitled “Medicare and Medicaid Programs: Patient Protection and Affordable Care Act; Interoperability and Patient Access for Medicare Advantage Organizations and Medicaid Managed Care Plans, State Medicaid Agencies, CHIP Agencies and CHIP Managed Care Entities, Issuers of Qualified Health Plans in the Federally-Facilitated Exchanges and Health Care Providers.” It was published in the Federal Register on March 4 at 84 Fed. Reg. 7,610

CMS said in a summary that it is “committed to solving the issue of interoperability and achieving complete access to health information for patients in the United States healthcare system” and is “taking an active approach to move participants in the healthcare market toward interoperability and the secure and timely exchange of health information.” The regulation targets Medicare and Medicaid programs, the Children’s Health Insurance Program, and issuers of qualified health plans.

The proposed rule is aimed at making patient data “more useful and transferable through open, secure, standardized, and machine-readable formats while reducing restrictive burdens on healthcare providers.”

Comments on the proposed CMS rule can be filed electronically, by regular mail, or by overnight delivery, and must be received by 5 p.m. on May 3.

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A FEDERAL JUDGE IN PHILADELPHIA HAS ISSUED A nationwide injunction against enforcement of regulations that would expand the categories of employers who can refuse to provide contraceptive coverage to employees on religious or moral grounds Commonwealth of Pennsylvania v. Trump, 2019 U.S. Dist. LEXIS 6161 (E.D. Pa. Jan. 14, 2019). The ruling by U.S. Judge Wendy Beetlestone of the Eastern District of Pennsylvania blocks enforcement of two regulations that would have taken effect on Jan. 14. Religious Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 83 Fed. Reg. 57,536 (Nov. 15, 2018) and Moral Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act, 83 FR 57,592. While religious organizations were already exempted from the obligation to provide coverage, the new regulations would apply to non-religious employers, including publicly-traded companies.

The regulations, issued by the U.S. Departments of Health and Human Services (HHS), Labor and the Treasury, and finalized in November 2018, stem from an executive order issued in May 2017 by President Donald J. Trump directing federal agencies to consider issuing amended regulations to address “conscience-based objections” to a provision in the Patient Protection and Affordable Care Act (ACA) (Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010)) requiring employers to provide no-cost birth control coverage to employees. “Promoting Free Speech and Religious Liberty,” Exec. Order No. 13798, 82 Fed. Reg. 21,675 (May 4, 2017).

The Commonwealth of Pennsylvania and the State of New Jersey challenged the rules and moved for preliminary injunctive relief.

Granting the motion, Judge Beetlestone said that the regulations exceed the scope of the authority granted to the three agencies under the ACA. “The fact that there is no religious or moral exemption in the explicit text of the statute, while there is an exemption for grandfathered health plans, militates against finding that Congress authorized the Agencies to create any additional exemptions,” the judge held. “Indeed, that interpretation is supported by the legislative history, given that, in 2012, Congress explicitly rejected an attempt to add to the ACA an exemption similar to that contained in the Final Rules.”

The judge also rejected the government’s contention that the exemptions are permissible under the Religious Freedom Restoration Act (42 U.S.C.S. §2000bb), saying that the statute “explicitly provides a private cause of action” and “commits to the courts the task of determining whether generally applicable laws violate a person’s religious exercise.”

Judge Beetlestone found further that Pennsylvania and New Jersey have demonstrated the requisite likelihood of irreparable harm in the absence of injunctive relief. Specifically, she said, the states have produced evidence that they will have to provide contraceptive services via state-funded programs to women left without coverage. In addition, the states have shown that enforcement of the regulations will cause harm to their interest in protecting the safety and well-being of their citizens, including women who might face unwanted pregnancies as a result of the regulations. “The negative effects of even a short period of decreased access to no-cost contraceptive services are irreversible,” the judge said.

Finally, the judge said, a nationwide injunction is the most effective way to provide complete relief to the two states. “An injunction limited to the Third Circuit, for example, would fail to account for the thousands of Pennsylvania and New Jersey citizens that commute to neighboring or nearby states outside the Third Circuit for work,” the judge said. “Similarly, an injunction covering the surrounding states would not account for the fact that the States draw out-of-state students from across the nation.”

The ruling came just a day after a federal judge in Oakland, California, issued a similar order covering 13 plaintiff states (California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Vermont, Virginia, and Washington) and the District of Columbia. California v. HHS, 2019 U.S. Dist. LEXIS 6554 (N.D. Calif. Jan. 13, 2019).

Both decisions are expected to be appealed, regardless of whether the preliminary injunctions are made permanent, with the U.S. Supreme Court widely predicted as the ultimate destination for the issue.

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