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A Wellness Win for Employers, But Will it Last?

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As explained in our April 21, 2015 and May 9, 2015 blog posts, wellness programs that are part of a group health plan are subject to the HIPAA nondiscrimination rules, and other state and federal laws including, but not limited to the ADA, Title VII of the Civil Rights Act, and GINA.   Navigating the regulatory maze has been a challenge for employers, and the most recent struggles involve compliance with the ADA’s “voluntary” requirement. On December 30, 2015, the Federal District Court for the Western District of Wisconsin in Equal Employment Opportunity Comm’n v. Flambeau, Inc., bypassed the ADA’s voluntary rule and held that Flambeau’s wellness program complied with the ADA under an alternative exception –  the ADA’s safe harbor.

By way of background, the ADA generally prohibits employers from making disability-related inquiries or requiring medical examinations that are not job-related and consistent with business necessity, but provides exceptions for: (1) “voluntary” medical examinations; and (2) those that are based on “underwriting, classifying, or administering risk;” part of a “bona fide benefit plan;” and not used as a “subterfuge” to evade the purposes of the ADA (the “ADA’s safe harbor”).  The EEOC, however, has indicated in the various lawsuits it filed along with its proposed regulations that wellness programs cannot rely on the ADA’s safe harbor, but instead must comply with a voluntary standard – which had been largely undefined until the proposed regulations were issued on April 16, 2015.  Although these proposed regulations generally align with the HIPAA nondiscrimination rules, there are certain inconsistencies (e.g., whether participatory wellness programs are subject to a 30% limit on incentives) that employers should be aware of when designing their wellness programs.

In Flambeau, the EEOC alleged that because Flambeau required its employees to participate in a health risk assessment (“HRA”) and biometric screening in order to participate in the employer’s self-insured group health plan, Flambeau violated the ADA.  The Court denied the EEOC’s argument and held that:

  • The wellness program was voluntary because employees were not required to participate in the plan as a condition of their employment;
  • The wellness program was a term of Flambeau’s insurance benefit plan – despite the fact that it was not set forth explicitly in the plan’s SPD or the governing CBA – because employees had to participate in the wellness program before they could enroll in the plan and because Flambeau provided employees with adequate notice of the wellness program requirement;
  • The wellness program was “based on underwriting risks, classifying risks, or administering such risks” because Flambeau used the data to classify participant health risks and calculate projected insurance costs for the year; and
  • The wellness program was not a subterfuge to avoid the purposes of the ADA because it did not make any disability-based distinctions or discriminate against disabled individuals.

Although this can be read as an employer-friendly decision, employers may wish to proceed with caution when designing and implementing wellness programs.  First, although the Court was not deterred by the fact that Flambeau’s plan documents did not explicitly incorporate a wellness program, it would likely offer wellness programs greater protection under the ADA’s safe harbor if such language were in the employer’s plan document.  Second, one of the reasons the Court dismissed the EEOC’s position is because the agency’s regulations are currently proposed.  If and when the EEOC finalizes its rules, courts may afford more deference to the agency’s position.  Third, the EEOC has already appealed the District Court’s decision, and even if the Seventh Circuit upholds the Court’s ruling, it would not be binding in other Circuits.