The ruling in the AARP v. EEOC case may be detrimental to employers and their healthcare plans because the EEOC may either reduce the percentage of its allowable inducement (or penalty) below 30% of the employee cost for participation in any employer-sponsored “wellness” program to be considered voluntary or possibly return to its former position that any reward or penalty renders participation involuntary.

The Americans with Disabilities Act (ADA) permits an employer to conduct voluntary medical examinations including voluntary medical histories, including health risk assessments, as part of an employee health program. The Genetic Information Nondiscrimination Act (GINA) also permits the voluntary collection of genetic information. Prior to May 2016 when the EEOC issued its “wellness regulations,” the EEOC’s position was that the ADA also prohibited penalizing or rewarding any employee for completing a health risk assessment that sought medical or disability-related inquiries or participating in any health insurance program, such as a “wellness” program, on the grounds that the reward for doing so rendered participation involuntary. On May 16, 2016 when the EEOC passed its “wellness” regulations, the EEOC concluded that the ADA would not be violated if any incentive or penalty for participation in a “wellness” program was valued at 30% of the employee-cost of plan participation or less. We addressed the EEOC’s 2016 regulations in this blog post.

The AARP’s lawsuit against the EEOC alleged that employees who cannot afford to pay a 30% increase in premiums will be forced to disclose their protected information on health risk assessments or participate in the “wellness” programs when they would otherwise choose not to do so, thereby rendering the award for participation or penalty for refusal to participate involuntary and, thus, prohibited by the ADA. The AARP also alleged that the incentives allowed by the “wellness” regulations were inconsistent with its previous position on incentives.

The 36 page opinion is lengthy but, in short, the D.C. Circuit Court concluded neither the ADA nor GINA defined the term “voluntary” and that the statutes were ambiguous on this point. The federal court went on to conclude that the EEOC’s definition of voluntary in its “wellness” regulations as a 30% employee cost or less for providing medical information as part of a “wellness” program was unreasonable and not adequately explained. The EEOC’s reliance on the Health Insurance Portability and Accountability Act (HIPAA) was unjustified because: 1) HIPAA was promulgated to prevent health insurance discrimination and does not contain an explicit voluntary requirement as ADA and GINA do; and 2) HIPAA expressly permits use of any amount of incentives for participation in “wellness” programs, only applying the rule that the reward may not exceed 30% of the employee and dependents’ total cost of healthcare coverage if the “wellness” program requires satisfaction of a health-related factor to receive the award. Nor was the Court persuaded by the EEOC’s reliance on what it termed current insurance rates to justify the 30% incentive level when the regulation did not elaborate on what those rates are, how the EEOC evaluated them or what bearing they have on the voluntary aspect crucial to the analysis.

For several years prior to the EEOC’s May 15, 2016 regulations, employers, plan administrators, health insurers and brokers hoped that the EEOC would reconcile its position with the Affordable Care Act and HIPAA, which expressly permitted employers to monetarily incentivize employees to participate in wellness programs. While the EEOC’s “wellness” regulations were replete with a number of caveats and conditions, they did at least determine that providing a reward for participation was no longer proof that participation was involuntary. The D.C. District Court’s August 24, 2017 ruling has the potential to result in a setback on the EEOC’s step forward towards that goal.

The opinion can be accessed in its entirety here.

On Monday, September 19, the U.S. District Court for the Eastern District of Wisconsin issued an opinion finding that penalizing an employee by requiring the employee to pay the entire premium for participation in an employer’s healthcare plan if the employee refused to complete a voluntary health risk assessment to participate in the employer’s wellness program did not violate the Americans with Disabilities Act (ADA). E.E.O.C. v. Orion Energy Systems, Inc., C.A. No. 14-CV-1019. The Equal Employment Opportunity Commission (EEOC) takes the position in this case and generally that incentives or penalties can convert voluntary participation in completing a health risk assessment or participating in a wellness program to involuntary or mandatory participation in violation of the ADA, which prohibits an employer from demanding that an employee complete medical examinations or inquiries that are not job-related or consistent with business necessity.  The Court held that the employee was faced with a choice of taking the penalty or participating and, while that was a hard choice, it was nonetheless a choice.

The Court also issued other findings, most notably that voluntary wellness programs are not protected by the ADA’s “safe harbor” provision. The Court held that the EEOC acted within its authority in publishing a regulation that excludes wellness programs from the “safe harbor” provision relating to insurance under ADA which permits employers to draft their health insurance plans as they see fit as long as the plan is not a subterfuge for discrimination.

In holding that wellness programs are unrelated to the basic underwriting and risk classification protected by the ADA’s safe harbor, the Court declined to adopt the holdings of Seff v. Broward County, 691 F.3d 1221 (2012) and EEOC v. Flambeau, Inc., 131 F. Supp. 3d 849 (W.D. Wis. 2015).  The Court reasoned that Orion did not use any information obtained through the wellness program to impact its underwriting such that Orion could not contend that its wellness program fell within the ADA’s safe harbor.  Assuming Orion had done so, using information obtained from its wellness program to impact the underwriting of its healthcare plan would have surely violated a number of federal laws, including Genetic Information Nondiscrimination Act (GINA), the Health Insurance Portability and Accountability Act (HIPAA), and the ADA.  However, the Court stated, “[b]y applying the safe harbor provision to employer wellness programs, the ADA would not prevent employers from requiring medical examinations as a condition to participate in its wellness programs so long as the exams pertain tangentially to health.” Id. at p. 17.

The Court’s opinion was issued after hearing both parties’ cross motions for summary judgment. Although the Court granted summary judgment to the employer on the EEOC’s claim that the wellness program violated the ADA because it was not voluntary, other causes of action alleged, such as the former employee’s retaliation claim for being terminated, were not dismissed and, thus, the case will proceed on those causes of action.

The EEOC issued its Final Rules on how the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) apply to wellness programs employers offer that request health information from employees and their spouses.[1] The main issue at stake was whether such wellness programs, that require disability-related inquiries and/or genetic information as part of a wellness program, are still voluntary and not mandatory if they offer employees incentives for participating.  (If the information is mandated, then it will be in violation of the ADA and GINA.)

Although the EEOC’s Final Rules are very similar to the proposed rules issued in 2015, the most notable changes are the following:

  • All wellness programs must comply with GINA and the ADA whether part of a group health plan or not (addressing the interpretation that the Proposed Rules applied only to group health plans).
  • The insurance safe harbor is not available to wellness programs. (The ADA contains a safe harbor provision for bonafide benefit plans based on underwriting, classifying or administering risks as long as the safe harbor provision is not used as a subterfuge to evade the purposes of the ADA. The purpose of the safe harbor provision is to permit development and administration of benefit plans using accepted principles of risk assessment.)
  • Notice requirements apply to wellness programs separated from a group health care plan if the program solicits disability-related information or requires medical exams. The Notices must inform employees that the program is voluntary, and advise them what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure. (effective for plan years beginning on or after January 1, 2017). The EEOC published a sample Notice form – https://www.eeoc.gov/laws/regulations/ada-wellness-notice.cfm.

The EEOC specifically stated that the courts wrongfully applied the ADA’s safe harbor provision to two wellness programs in two cases, Seff v. Broward Count[2]y and EEOC v. Flambeau, Inc[3]., because neither employer used the wellness program data to determine insurability or calculate insurance rates, nor was there any evidence that the surcharge employed in both cases was based on actual risks that non-participating employees imposed. The Florida District Court in Seff held that the wellness program requiring completion of health risk assessments and biometric testing offered by the employer at issue did not violate the ADA and, in fact, fell under the ADA’s safe harbor provision.  The Wisconsin District Court granted summary judgment against the EEOC in Flambeau, holding that the employers’ requirement that employees complete health risk assessments and biometric testing if they desired to participate in the group healthcare plan fell within the ADA’s safe harbor and did not violate the ADA.

The EEOC did not change its position that wellness programs requesting disability-related information or medical exams must be voluntary. Programs are voluntary if the employer does not require employees to participate; does not deny or limit coverage under any of its plans to non-participating employees; does not take adverse action, interfere with or retaliate against the non-participating employee; and provides notice to employees about what information is collected, how it will be used and with whom it will be shared, how it will be kept confidential, explains the restrictions on uses and disclosures, and explains the methods employed to prevent improper disclosure.  A participant cannot be required to share medical information in order to participate in the wellness program.

The programs also must be reasonably designed to promote health and must not be a subterfuge for disability discrimination, meet certain notice requirements to employees, and limit the amount of incentives that may be offered for participation. In order to be reasonably designed, the collected information must address conditions identified through follow-ups with the participating employees, whether by providing information or advice, or creating programs to address the conditions identified and improve health.

Incentives up to 30% of the total cost of self-only coverage under the health care plan may be offered for participation in a wellness program. The Final Rules include guidance on how to calculate the cost of health care coverage for purposes of complying with the limitations on incentives effective for plan years beginning on or after January 1, 2017. If the employee does not participate in the group health plan, the employer may use the cost of single coverage if there is only one plan or the cost of the least expensive plan if there is more than one plan.  If an employer has no health care plan, then the employer must calculate wellness program’s incentives to be 30% or less of the cost of self-only coverage for a 40 year old non-smoker under the second lowest cost Silver plan available through the Marketplace in the same location as the employer’s principal place of business.

GINA will be violated if an employer imposes a penalty on the participating employee or spouse for failing to achieve a certain health outcome. The maximum incentive for spousal participation is $1800, effective January 1, 2017.

Other useful information on these new rules can be found here:

Small Business Fact Sheets:
https://www.eeoc.gov/laws/regulations/facts-ada-wellness-final-rule.cfm https://www.eeoc.gov/laws/regulations/facts-gina-wellness-final-rule.cfm

EEOC Q&A: https://www.eeoc.gov/laws/regulations/qanda-ada-wellness-final-rule.cfm

 

 

[1] Unless otherwise indicated, the rules apply effective immediately.

[2] Seff v. Broward County, 2011 U.S. Dist. LEXIS 44807 (S.D.Fla., April 11, 2011).

[3] E.E.O.C. v. Flambeau, Inc., 2015 WL 9593632, *1 (W.D. WI., December 31, 2015).  See our blog titled “A Win For Wellness” posted on February 9, 2016.

The EEOC’s thwarting of otherwise compliant wellness programs under the auspices of the Americans with Disabilities Act (ADA) is a bone of contention for many in our industry, me included. So I was intrigued to learn that a Wisconsin federal district court recently ruled that an employer may require mandatory participation in its wellness program as a condition of participating in the employer’s group health plan under the ADA’s safe harbor provision.

The employer, Flambeau, Inc., required participants to complete a health risk assessment and engage in biometric screenings in order to be eligible to participate in the company’s group health plan. The health risk assessment requested information about medical history, diet, mental, social health and job satisfaction. The screenings included blood draws, blood pressure screenings, and height and weight measurements, and other tests similar to a routine physical examination. The data gathered was used to design the plan and determine premium levels. When an employee who was previously enrolled failed to undergo the required testing, his insurance was discontinued and he was offered COBRA coverage. (The employee declined COBRA because it was too expensive and filed a complaint with the EEOC and the DOL.  He was later permitted to enroll after negotiations with the DOL, but he was required to undergo the screenings to do so.)

The EEOC brought suit against Flambeau in September 2014 under the ADA’s prohibitions against requiring employees to undergo medical testing, alleging that the program violated the ADA because the health risk assessment and screenings were mandatory instead of voluntary. As a reminder, the EEOC sued two other employers back to back in 2014, Orion Energy Systems, another Wisconsin company, and Honeywell International.  EEOC’s August 2014 suit against Orion contended its wellness program violated the ADA by requiring an employee to participate in the wellness program, charging a higher monthly health insurance premium and fining the employee $50 for any refusal to participate.  EEOC’s suit against Honeywell in October of the same year alleged its wellness program violated the ADA because it required employees participating in the group health plan to complete biometric screenings and refrain from tobacco use or complete a tobacco cessation program.  Failure to do so resulted in surcharges to the employee.  The EEOC’s suit against Flambeau was the second of three suits filed by EEOC in 2014 challenging employers’ wellness programs under the ADA. See prior HSB Blogs, “Wellness Programs, Part One and Part Two” and “Long Awaited Guidance from the EEOC Regarding Wellness Programs.”[1]

Flambeau defended the EEOC’s claims, contending the ADA’s safe harbor provision protected its wellness program. The safe harbor provision permits bona fide benefit plans to underwrite, classify or administer risks as they see fit as long as the safe harbor provision is not used as a subterfuge to evade the purposes of the ADA.[2]  The purpose of the safe harbor provision is to permit development and administration of benefit plans using accepted principles of risk assessment.  Flambeau moved for summary judgment and the district court granted the motion, dismissing the EEOC’s case on the grounds that the ADA safe harbor protected Flambeau’s wellness program.  The court held that the safe harbor exemption was a separate exemption from the ADA’s voluntariness standard such that it applied regardless of the mandatory nature of the requirements. Specifically, the court stated, “the protections set forth in the ADA’s safe harbor enable employers to design benefit plans that require otherwise prohibited medical examinations as a condition of enrollment without violating the ADA.”[3]  The federal appellate court upheld the district court’s ruling.

The Flambeau case is a comforting balm to employers who use wellness programs to address rising healthcare costs and wellness program providers. However, it is one of several cases in a fluid area of the law.  Employers are well-advised to keep abreast of and tread carefully around these developing issues.

[1] https://www.scemployersblog.com/category/wellness/

[2] 42 U.S.C.S. §12201(c).

[3] E.E.O.C. v. Flambeau, Inc., 2015 WL 9593632, *1 (W.D. WI., December 31, 2015).

The EEOC has issued its long-awaited guidance on wellness programs and what is considered involuntary under the ADA.  The EEOC is the administrative agency charged with enforcing the ADA.  It issued a Notice of Proposed Rule Making (NPRM) of Proposed Rules on April 16 that provides guidance on the extent to which the ADA permits employers to offer incentives to employees who participate in wellness programs part of a group health plan. The Human Resource and Group Health Insurance Industries have been troubled by the EEOC’s approach to an employers’ use of incentives or penalties and what it considered “voluntary” participation in the context of wellness programs. In the Proposed Rule, the EEOC states: “[t]he Commission concludes that allowing certain incentives related to wellness programs, while limiting them to prevent economic coercion that could render provision of medical information involuntary, is the best way to effectuate the purposes of the wellness program provisions of  [the ACA and ADA].”

The Proposed Rule provides definitions of what the EEOC considers voluntary under the ADA, still requiring that employees not be required to participate.  The EEOC permits incentives or penalties that do not exceed thirty (30%) percent of the employee-only cost of the program.  The Proposed Rule also requires specific notice requirements to employees and special rules regarding confidentiality.

nosmokingA significant development is that tobacco incentives or penalties must be limited to 30% of employee-only health care coverage costs, rather than the 50% allowed by HIPAA and the ACA, if the tobacco-related wellness program involves disability-related inquiries or medical examinations.  The EEOC specifically stated that asking an employee if they still use tobacco is not a disability-related inquiry while a biometric exam to test for tobacco use is.  Many Employers and Plan Administrators already have programs that issue a 50% surcharge for tobacco users.  How can the EEOC’s provision be reconciled with what HIPAA and the ACA already allow? How will the EEOC’s new limit on incentives for participation in wellness programs that ask disability-related inquiries or require medical examinations affect the ACA’s tobacco incentive?

833112_20794558Prior to the EEOC’s lawsuit against Orion Energy Systems, Inc., filed on August 20, 2014 in  federal court in Green Bay, WI, the EEOC had only commented on the validity of wellness programs under the ADA twice and then only in its informal discussion letters.[1] The EEOC maintained in both of its informal discussion letters that mandatory participation in either completing health risks assessments or a wellness program violates the ADA while voluntary participation does not.   The EEOC reasoned that mandatory participation would require a disabled employee to share information of his or her medical condition, something that employers are not permitted to do unless the health-related questions are job-related and consistent with business necessity.  The EEOC also commented that surcharges for nonparticipation or reward for participation commute a voluntary program to involuntary status.   After the passage of the Affordable Care Act (ACA), the EEOC held a public forum to explore wellness programs and the legality of surcharges or rebates for participation under the ADA in May 2013, acknowledging that the ACA and HIPAA already permit employers to charge premium variances for participation in wellness programs and tobacco use.  The EEOC advised it intended to issue guidance following the forum, but it has not done so to date.  Possibly this lawsuit is its response.

Nothing in the ADA prohibits an employer from including a mandatory wellness program in its welfare benefit plan because the inclusion of such a program in no way impacts the employee’s job or any accommodation the employee may need to perform that job.  The medical questions prohibited by the ADA are those associated with employment decisions about an employee’s ability to do a particular job, not an employee’s participation in the employer’s healthcare coverage.  Furthermore, those same employees have likely already provided the same medical information required by a wellness program in order to participate in any healthcare offered by the employer.  The confidentiality tied to information provided by an employee for purposes of health care coverage also applies to information provided for the purpose of participating in a wellness program, and the employer does not have access to that information.  Employers, especially self-funded plans, could build a wall between the two functions (employment hiring, placement and promotions separate from benefit plans and enrollment) to avoid further ADA scrutiny.

[1] EEOC Informal Discussion Letter: ADA: Health Risk Assessments, August 10, 2009;

EEOC Informal Discussion Letter: ADA & GINA: Incentives for Workplace Wellness Programs, June 24, 2011.

812863_90858969I disagree with the EEOC –  an employer does not violate the Americans with Disabilities Act (ADA) by offering health insurance premium discounts to those who participate in its wellness program.

Orion Energy Systems, Inc., a publicly traded company based in Manitowoc, WI, was sued by the EEOC on August 20, 2014, in an action pending in federal court in Green Bay, WI.  The EEOC has alleged that the company violated the ADA in requiring their employee to participate in its wellness program, and then charging her a higher monthly health insurance premium and fining her $50 for refusing to participate.  The EEOC contends that her ultimate termination was due to her failure to participate in the wellness program.  The EEOC also sought to enjoin the employer from requiring employees to respond to medical or disability-related questions on the Health Risks Assessments (HSA).

Followers of this intriguing issue also know of the 2011 opinion from a federal court in Florida that upheld the validity of a wellness program that imposed a $20 bi-weekly surcharge on employees who did not participate in the wellness program.  The program only required participants to provide a blood sample for glucose and cholesterol tests without regard to the outcome of those tests.   The court held that the wellness program, designed to mitigate risks so that employees could get involved in their own healthcare, was permissible under the ADA.

I don’t agree with the EEOC that an employer violates the ADA if it discounts health insurance premiums for those employees who participate in an employer’s wellness program. The ADA contains a safe harbor provision for bonafide benefit plans based on underwriting, classifying or administering risks as long as the safe harbor provision is not used as a subterfuge to evade the purposes of the ADA.[1]  The purpose of the safe harbor provision is to permit development and administration of benefit plans using accepted principles of risk assessment.

Is it not an accepted principle of risk assessment for a wellness program to reward employees who participate so as to mitigate the insured risk?  If acceptable and not meant as a subterfuge for discrimination against the disabled, then the practice of imposing surcharges on nonparticipants or rewards for participants should not violate the ADA.  The ADA is meant to protect employees who are disabled by requiring employers to accommodate their disability assuming the employee can perform the essential functions of the job.  The ADA does not pertain to the type of healthcare coverage an employer offers to its employees.

Besides, the Affordable Care Act (ACA) and interpretive regulations[2] permit employers to monetarily incentivize employees to participate in wellness programs and penalize those employees who smoke by permitting premium surcharges, in addition to meeting certain requirements under the ACA and Health Insurance Portability and Accountability Act (HIPAA).

The United States Supreme Court has also spoken, stating that employers are free to design employee welfare benefit plans as they choose.  Black & Decker v. Nord, 538 U.S. 822 , 832 (2004), cert. denied, 543 U.S. 815 (2004)(“employers have large leeway to design disability and other welfare plans as they see fit”).

So then, aren’t employers legally permitted to design and implement wellness programs imposing surcharges and rewards without violating the ADA?

[1] 42 U.S.C.S. §12201(c).

[2] 29 CFR §2590.