Wellness Programs Violate ADA, Claims EEOC in Lawsuits

The Chicago office of the Equal Employment Opportunity Commission (“EEOC”) has filed two lawsuits in recent months, both claiming that a wellness program is not voluntary. In EEOC v. Flambeau, Inc.(filed September 30, 2014), the EEOC alleges that Flambeau, Inc.’s wellness program violates the Americans with Disabilities Act (“ADA”) by shifting the entire premium cost of medical coverage to an employee after the employee failed to complete a health risk assessment (“HRA”) and a biometric screening. The attorney for the EEOC’s Chicago district stated, “Having to choose between complying with such medical exams and inquiries, on one hand, or getting hit with cancellation or a penalty, on the other hand, is not voluntary and not a choice at all.”   

Similarly, in August, the EEOC filed suit in Wisconsin against Orion Energy Systems, Inc. for allegedly shifting the entire cost of an employee’s medical coverage from the company to the employee, because the employee failed to participate in a wellness program. In that suit, the EEOC alleged that the employer first made the employee pick up the entire cost of her health care premiums, and ultimately fired her for complaining about the increased premium. The wellness program, which consisted of a medical history and blood work, was participation-based (in other words, the employee did not have to meet a certain health goal—she only had to complete the screening to avoid the penalty). The complaint alleges that the medical exam and health questionnaire “were not voluntary and therefore were not permitted [because the employee] was subjected to a financial penalty and subsequently fired for not participating in the program.”

The EEOC’s position in these suits contradict both the regulations under the Health Insurance Portability and Accountability Act (“HIPAA”) promulgated jointly by the Department of Labor, Department of Health and Human Services, and the Treasury Department, as well as the Patient Protection and Affordable Care Act (“PPACA”). Specifically, the EEOC’s suits do not recognize that financial penalties (by the way, we prefer to call them “rewards” for employees who participate, rather than “penalties” for those who don’t) are allowed under the HIPAA regulations and PPACA. For “health-contingent” wellness programs, the regulations permit rewards of up to 20% of the total cost (employer plus employee portions) of coverage under the plan. PPACA raised this limit to 30% in 2014 (and to 50% for wellness programs designed to prevent or reduce tobacco use). Further, for “participatory” wellness programs, there is no limit on the amount of financial reward that may be provided.

“Participatory” wellness programs are programs whose requirements are satisfied simply by participating: no particular health outcome is needed to receive the reward. Examples of participatory wellness programs, as set forth in the regulations, include a diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes. On the other hand, “health-contingent” wellness programs condition obtaining a reward on satisfying a standard related to a health factor (such as not smoking, attaining certain results on biometric screenings, or meeting targets for exercise). 

In both Flambeau and Orion, the EEOC seems to take the position that financial rewards/penalties are not allowed at all under wellness programs. Indeed, both suits appear to involve wellness programs that are participatory only—that is, if the employees at issue in the lawsuits had simply participated in the screenings, they would have received the wellness program reward. The employees didn’t have to meet certain health thresholds. Under the HIPAA regulations, and under PPACA, this type of program should be able to impose any level of financial reward/penalty. (And even if the programs were health-contingent - for example, if the employees had to meet a certain BMI or cholesterol level to receive the reward - the existing guidance would still allow for a reward up to an amount equal to 30% of the cost of the plan.)

In the complaints, the EEOC emphasized that the wellness program requirements were not “job related and consistent with business necessity.” This is the standard for many complaints under the ADA. However, if this becomes the standard for wellness programs, what wellness programs could possibly pass this test? Wellness programs are designed to keep health plan costs down by rewarding healthy behaviors. They are designed for health plan sustainability and health promotion. They are not generally job-related. It is troubling that the EEOC, without having provided formal guidance, is filing suits against employers that appear to be complying with existing regulations. The EEOC has stated that it intends to issue wellness program regulations in 2014 under the ADA and the Genetic Information Nondiscrimination Act of 2008 (“GINA”). Written guidance from the EEOC will be welcome, as it appears that the EEOC is already enforcing these unknown rules (note that the EEOC had previously informally indicated that an HRA would be considered “voluntary” and thus compliant with the ADA if the benefit offered in exchange was not more than a 20% discount on the total cost of coverage). 

In this period of wellness plan design uncertainty, employers should continue to make sure that their health-contingent programs provide a reasonable alternative standard for obtaining the reward for individuals for whom it is unreasonably difficult, due to a medical condition, to satisfy the standard, or for whom it is medically inadvisable to attempt to achieve the standard. Also, keep in mind that all wellness programs must comply with GINA, which prohibits group health plans from discriminating based on genetic information, and from collecting such information.   

In the meantime, we encourage employers with wellness programs to keep a close eye on this issue. We will keep you up-to-date on new developments.