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AARP v. United States Equal Employment Opportunity Commission

United States District Court, District of Columbia

August 22, 2017

AARP, Plaintiff,
v.
UNITED STATES EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Defendant.

          MEMORANDUM OPINION

          JOHN D. BATES, United States District Judge.

         This case concerns AARP's Administrative Procedure Act (APA) challenge to two regulations promulgated by the U.S. Equal Employment Opportunity Commission (EEOC) related to incentives and employer-sponsored wellness programs. See Regulations Under the Americans with Disabilities Act (“the ADA rule”), 81 Fed. Reg. 31, 126 (May 17, 2016); Regulations Under the Genetic Information Nondiscrimination Act (“the GINA rule”), 81 Fed. Reg. 31, 143 (May 17, 2016). In December 2016, this Court denied AARP's motion for a preliminary injunction to stay applicability of the rules, and the new regulations became applicable on January 1, 2017. See generally AARP v. EEOC, 226 F.Supp.3d 7 (D.D.C. 2016) (AARP I). EEOC has now filed [31] a motion to dismiss/motion for summary judgment, and AARP has filed [35] a cross-motion for summary judgment. For the reasons that follow, EEOC's motion to dismiss/motion for summary judgment will be denied, and AARP's motion for summary judgment will be granted.[1]

         I. BACKGROUND

         This case deals with the incentives-financial or otherwise-that may be offered to employees in connection with employer-sponsored wellness programs, which have become popular in many work places in the last several years as a means of promoting employee health and reducing healthcare costs. The central issue here results from the tension that exists between the laudable goals behind such wellness programs, and the equally important interests promoted by the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). EEOC is tasked with reconciling these competing concerns, and this case arises out of its most recent attempt to do so.

         In its previous opinion, the Court discussed at length the complex regulatory and statutory framework that governs this case; thus, a shorter review will suffice here. See AARP I, 226 F.Supp.3d at 11-15. Wellness programs are regulated in part by the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act (ACA), as well as by HIPAA's implementing regulations. HIPAA prevents health plans and insurers from discriminating on the basis of “any health status related factor, ” but allows covered entities to offer “premium discounts or rebates” on a plan participant's copayments or deductibles in return for that individual's compliance with a wellness program. See 29 U.S.C. § 1182(b)(2)(B); 26 U.S.C. § 9802(b); 42 U.S.C. § 300gg-4(b). A “reward” or incentive may include a discount on insurance costs or a penalty that increases the plan participant's costs because of non-participation in the wellness program. See 26 C.F.R. § 54.9802-1(f)(1)(i). The ACA's amendments to HIPAA, and the accompanying implementing regulations, allow plans and insurers to offer incentives of up to 30% of the cost of coverage in exchange for an employee's participation in a health-contingent wellness program, a kind of wellness program in which the reward is based on an insured individual's satisfaction of a particular health-related factor. See Incentives for Nondiscriminatory Wellness Programs in Group Health Plans (“the 2013 HIPAA regulations” or “2013 HIPAA rule”), 78 Fed. Reg. 33, 158, 33, 180. Neither the ACA nor the 2013 HIPAA regulations impose a cap on incentives that may be offered in connection with participatory wellness programs, which are programs that do not condition receipt of the incentive on satisfaction of a health factor. Id. at 33, 167.

         However, because employer-sponsored wellness programs often involve the collection of sensitive medical information from employees, including information about disabilities or genetic information, these programs often implicate the ADA and GINA as well. As both the ADA and GINA are administered by EEOC, this brings wellness programs within EEOC's purview. The ADA prohibits employers from requiring medical examinations or inquiring whether an individual has a disability unless the inquiry is both job-related and “consistent with business necessity.” 42 U.S.C. § 12112(d)(4)(A). But the ADA makes some allowances for wellness programs: it provides that an employer may conduct medical examinations and collect employee medical history as part of an “employee health program, ” as long as the employee's participation in the program is “voluntary”. Id. § 12112(d)(4)(B). The term “voluntary” is not defined in the statute. Similarly, GINA prohibits employers from requesting, requiring, or purchasing “genetic information” from employees or their family members. Id. § 2000ff-1(b). The definition of genetic information includes an individual's genetic tests, the genetic tests of family members such as children and spouses, and the manifestation of a disease or disorder of a family member. See id. § 2000ff(4)(A). Like the ADA, GINA contains an exception that permits employers to collect this information as part of a wellness program, as long as the employee's provision of the information is voluntary. Id. §§ 2000ff-1(b)(2)(A)-(B). Again, the meaning of “voluntary” is not defined in the statute.

         Thus, while HIPAA and its implementing regulations expressly permit the use of incentives in wellness programs, uncertainty existed as to whether the “voluntary” provisions of the ADA and GINA permit the use of incentives in those wellness programs that implicate ADA- or GINA-protected information. EEOC previously took the position that in order for a wellness program to be “voluntary, ” employers could not condition the receipt of incentives on the employee's disclosure of ADA- or GINA-protected information. See EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations, No. 915.002 (July 27, 2000), 2000 WL 33407181, at *16-17; Regulations Under the Genetic Information Nondiscrimination Act of 2008 (“the 2010 GINA rule”), 75 Fed. Reg. 68, 912, 68, 935 (Nov. 9, 2010), codified at 29 C.F.R. § 1635. However, in 2016 EEOC promulgated new rules reversing this position. Those are the rules at issue in this case. The new ADA rule provides that the use of a penalty or incentive of up to 30% of the cost of self-only coverage will not render “involuntary” a wellness program that seeks the disclosure of ADA-protected information. See ADA Rule, 81 Fed. Reg. at 31, 133-34. Likewise, the new GINA rule permits employers to offer incentives of up to 30% of the cost of self-only coverage for disclosure of information, pursuant to a wellness program, about a spouse's manifestation of disease or disorder, which, as noted above, falls within the definition of the employee's “genetic information” under GINA.[2] See GINA Rule, 81 Fed. Reg. at 31, 144. Unlike the 2013 HIPAA regulations, which place caps on incentives only in health-contingent wellness programs, the incentive limits in the new GINA and ADA rules apply both to participatory and health-contingent wellness programs.

         AARP filed this suit on behalf of its members in October 2016, challenging both rules under the APA, 5 U.S.C. §§ 702-06. AARP argues principally that the 30% incentives permitted by the new rules are inconsistent with the “voluntary” requirements of the ADA and GINA, and that employees who cannot afford to pay a 30% increase in premiums will be forced to disclose their protected information when they otherwise would choose not to do so. AARP sought a preliminary injunction, which the Court denied, finding that AARP had associational standing, but that it had not at that stage shown either irreparable harm or a likelihood of success on the merits. See AARP I, 226 F.Supp.3d at 15, 20-26. Because of the short timeline on which the motion for a preliminary injunction was briefed and decided, the administrative record was not then available for the Court's review. The administrative record has now been produced, EEOC has now moved to dismiss for lack of jurisdiction, and both parties have also moved for summary judgment.

         II. DISCUSSION

         EEOC asks the Court to revisit its ruling regarding AARP's standing, again challenging AARP's status as a membership organization, and arguing that Declarant A, the member-declarant on whom the Court relied in finding that AARP had standing at the preliminary injunction stage, lacks standing based on new factual information that was not previously available. See Gov't Mot. for Summ. J. [ECF No. 31] at 10-15. EEOC also argues that the new rules survive the deferential standard of review afforded agency decisions in APA cases, and therefore asks for summary judgment in its favor. See, e.g., id. at 15. AARP counters that the incentives allowed by the new rules are inconsistent with the meaning of “voluntary” as used in the statutes, and that EEOC failed to adequately explain its departure from its previous position on incentives. See Pl.'s Mot. for Summ. J. [ECF No. 35-1] at 1, 24, 39. The Court will address each issue in turn.

         A. Standing

         EEOC has filed a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1), arguing that AARP has not sufficiently established that it has associational standing to bring suit on behalf of its members in this case. A plaintiff “bears the burden of showing that he has standing for each type of relief sought.” Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). A lack of standing constitutes “a defect in [the Court's] subject matter jurisdiction.” Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). In evaluating a motion to dismiss under Rule 12(b)(1), a court must take as true all factual allegations in the complaint. See, e.g., Jerome Stevens Pharm., Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253-54 (D.C. Cir. 2005). However, in considering jurisdiction, the court “may also consider matters outside the pleadings, and may rest its decision on its own resolution of disputed facts.” Advance Am. v. Fed. Deposit Ins. Corp., ___ F.Supp.3d ___, 2017 WL 2869918, at *2 (D.D.C. July 5, 2017) (citing Herbert v. Nat'l Acad. of Sci., 974 F.2d 192, 197 (D.C. Cir. 1992)).

         In order to successfully assert associational standing, AARP must show that: (1) at least one of its members would have standing to sue in his or her own right; (2) the interests it seeks to protect are germane to its purpose; and (3) neither the claim asserted nor the relief requested requires the participation of an individual member of the organization in the suit. Hunt v. Wash. State Apple Advert. Comm'n, 432 U.S. 333, 342-43 (1977). As noted above, the Court found in its previous opinion that AARP has standing to bring this suit. See AARP I, 226 F.Supp.3d at 16-20. However, EEOC asks the Court to revisit its finding that AARP is a “membership organization” that may assert associational standing, and also raises arguments based on new information about Declarant A that it claims undermines Declarant A's standing. See Gov't Mot. for Summ. J. at 10-15. The Court will accordingly revisit these issues.

         1. Membership organization

         EEOC contends that AARP does not have “members” on whose behalf it can assert associational standing. The Court analyzed this issue at length in its previous opinion, and observed that the associational standing caselaw is unclear as to what, exactly, constitutes a “membership” organization. AARP I, 226 F.Supp.3d at 16. In Hunt, the Supreme Court identified several criteria that should be used to determine whether a non-membership organization sufficiently represents its constituents' interests to be able to bring suit on their behalf. These “indicia of membership” are: whether the members play a role in selecting the organization's leadership, guiding the organization's activities, and financing the organization's activities. Hunt, 432 U.S. at 344-45. Some courts have held that these criteria do not apply to “traditional” membership organizations, but no court has precisely defined what that means. See, e.g., Brady Campaign to Prevent Gun Violence v. Salazar, 612 F.Supp.2d 1, 29 (D.D.C. 2009) (“The inquiry into indicia of membership . . . is necessary only when an organization is not a “traditional membership organization.” (internal quotation marks omitted)). The Court therefore assumed in its previous opinion that the Hunt indicia of membership criteria applied here and found that AARP satisfies these indicia of membership. EEOC challenges this finding, but presents no new facts or law that would call the Court's previous decision into question. See Gov't Mot. for Summ. J. at 10-13.

         EEOC argues first that AARP is not a membership organization because it has no “members” within the meaning of D.C. law governing non-profit corporations. See id. at 10 (citing D.C. Code § 29-401.02(24)). But EEOC cites no authority suggesting that state corporations law is dispositive or even relevant to the associational standing inquiry. See, e.g., Citizens Coal Council v. Matt Canestrale Contracting, Inc., 40 F.Supp.3d 632, 640 (W.D. Pa. 2014) (noting that lack of voting rights was not sufficient to defeat associational standing); Concerned Citizens Around Murphy v. Murphy Oil USA, Inc., 686 F.Supp.2d 663, 675 (E.D. La. 2010) (noting that “[c]orporate formalities and formal membership structure are not constitutional requirements for associational standing”). The Court will not disturb its prior ruling on this basis.

         EEOC next argues that AARP has not shown that it is a membership organization because it has not shown that Declarant A serves on AARP's Board of Directors, serves on a policy committee, or has ever completed an AARP survey, factors that the Court previously identified in finding that AARP satisfied the indicia of membership criteria. See AARP I, 226 F.Supp.3d at 17; see also Gov't Mot. for Summ. J. at 11-12. Unless Declarant A can show that he participates in these activities, the argument goes, he is not a member and AARP has failed to show that it has associational standing. See U.S. Chamber of Commerce v. EPA, 642 F.3d 192, 199 (D.C. Cir. 2011) (“When a petitioner claims associational standing, it is not enough to aver that unidentified members have been injured. Rather, the petitioner must specifically identify members who have suffered the requisite harm.” (emphasis added) (internal citation and quotation marks omitted)). But EEOC's argument appears to go more towards how active a member Declarant A is in AARP, not whether he is a member. Declarant A has as much right to participate in the activities that the Court identified as any other member of AARP, and courts do not appear to analyze to what extent an identified member partakes in membership activities in determining whether an organization has associational standing.

         However, the Court acknowledges, as it did in its previous opinion, that whether AARP satisfies the indicia of membership criteria is a close question here. See AARP I, 226 F.Supp.3d at 17-18. AARP's members play less of a role in the running of the organization than do members of organizations who, for example, directly elect their leadership and hold regular general membership meetings. See, e.g., ACLU of Nebraska, https://www.aclunebraska.org/en/2017- board-director-elections (noting that “[a]ll ACLU members in Nebraska have been mailed a ballot for our Board of Directors Election”); Constitution of the NAACP, at 3-4, http://www.naacp.org/wp-content/uploads/2016/11/Constitution-eff.-Oct-2016-1.pdf. But AARP members are not akin to Netflix subscribers, i.e., mere “customers, ” as EEOC suggests, nor does AARP fit the mold of those organizations whom courts have consistently found may not assert associational standing. See, e.g., Gettman v. Drug Enf't Admin., 290 F.3d 430, 435 (D.C. Cir. 2002) (readers of magazine were not members for associational standing purposes); Fund Democracy LLC v. SEC, 278 F.3d 21, 25-26 (D.C. Cir. 2002) (past work with groups of individual investors did not render the investors “members” of Fund Democracy); Am. Legal Found. v. FCC, 808 F.2d 84, 89-90 (D.C. Cir. 1987) (viewers who regularly watch the news were not members of media watchdog group for associational standing purposes); Conservative Baptist Ass'n of Am. v. Shinseki, 42 F.Supp.3d 125, 134 (D.D.C. 2014) (individual members of congregation were not members of an association made up exclusively of churches); Wash. Legal Found. v. Leavitt, 477 F.Supp.2d 202, 210-11 (D.D.C. 2007) (members of a mailing list, without more, did not constitute members for purposes of associational standing). AARP lies somewhere in between these two poles.

         But as the Court previously recognized, the associational standing cases are not specific about what it means for members to “play a role in” the leadership of an organization, the financing of an organization, or in guiding the activities of an organization. AARP members play a role in all of these activities, even if they could play a stronger role, and EEOC has once again failed to point to any cases that would suggest that what AARP members do is insufficient to establish associational standing. Without more, the Court is wary of a ruling that would bar not only AARP from asserting associational standing, but also bar other repeat litigators whom courts have routinely held are able to assert associational standing as “traditional membership organizations.” See, e.g., Friends of the Earth, Inc. v. Laidlaw Envt'l Servs. (TOC), Inc., 528 U.S. 167, 181-84 (2000); Am. Trucking Ass'n v. Fed. Motor Carrier Safety Admin., 724 F.3d 243, 247 (D.C. Cir. 2013); WildEarth Guardians v. Jewell, 738 F.3d 298, 305-07 (D.C. Cir. 2013). Accordingly, the Court will not disturb its prior ruling regarding AARP's status as a membership organization.

         2. Individual member's standing to sue

         In order to assert associational standing, AARP must show that one of the members it purports to represent would have individual standing to challenge the ADA rule and the GINA rule. See Nat'l Biodiesel Bd. v. EPA, 843 F.3d 1010, 1015 (D.C. Cir. 2016). The Court previously found that Declarant A would have standing with respect to both rules. AARP I, 226 F.Supp.3d at 18-19. EEOC now argues that Declarant A would not have standing to sue, based on new information about the collective bargaining agreement between Declarant A's union and his employer. EEOC has learned that the agreement in force for 2015-17 provided that the employer would pay an additional one percent of health insurance premiums for individuals who disclose confidential health information through completing a health risk assessment, and an additional one percent for those individuals who participate in biometric screenings. See Gov't Mot. for Summ. J. at 13-14. That agreement also included a disease management program for one disease, in which all plan participants were eligible to participate, but Declarant A's spouse does not have the condition covered under the original agreement.[3] However, the agreement stated that additional disease management programs were under consideration.

         After the current round of briefing ended, EEOC learned that this collective bargaining agreement was renewed through 2020. See Notice of Factual Development [ECF No. 41-1] at 2; Hrg. Tr. [ECF No. 45] at 37:10-13. The renewed agreement took effect on July 1, 2017 and maintains the incentive levels for completing the HRA and participating in biometric screening, but now adds incentives for plan participants, including spouses, to participate in additional disease management programs for certain diseases. Those who participate will have their co-payments waived on certain medications. Declarant A's spouse informed AARP counsel that she has one of the conditions covered by the new incentive program. See Pl.'s Resp. to Notice of Factual Development [ECF No. 42] at 1-2; see also Hrg. Tr. at 11:19-13:8, 29:25-30:4.

         With respect to the ADA rule, EEOC argues that because Declarant A's collective bargaining agreement only imposes incentives of 2%, Declarant A may not challenge the “full extent” of the ADA rule, which allows incentives of up to 30%. EEOC additionally points out that AARP has conceded that some level of incentives would be permissible, i.e., consistent with the ADA's voluntariness requirement. See Gov't Reply [ECF No. 38] at 11. Therefore, Declarant A would at most only be able to challenge a 2% incentive limit.

         But the government's approach-parsing standing to challenge the rule by the particular incentive level-makes little sense. Under EEOC's approach, only someone whose employer has adopted an incentive level of 30% would have standing to challenge the rule. See Gov't Reply at 11. Yet the provision of the ADA rule that AARP-with the help of Declarant A-challenges permits employers to offer incentives (or impose penalties) of up to 30% of the cost of self-only coverage. EEOC does not appear to disagree that Declarant A would have standing to challenge “part” of the rule, because his employer does impose a 2% incentive for participation in its wellness program. But it is unclear to the Court how Declarant A could challenge part of the rule without challenging all of it. Presumably, if the Court were to find that a 2% incentive limit was arbitrary and capricious or otherwise inconsistent with the ADA, ...


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