January 20, 2016
Authored by: Serena Yee
The U.S. Equal Employment Opportunity Commission (“EEOC”) has steadfastly maintained that any wellness program that is not voluntary violates the Americans With Disabilities Act (“ADA”). In 2014, the Chicago District Office of the EEOC filed lawsuits against Orion Energy Systems, Honeywell International, Inc. and Flambeau, Inc. alleging that their respective wellness programs were not voluntary since employees who refused to complete a health risk assessment and/or biometric screening were financially penalized. In a case of first impression in the Seventh Circuit, the U.S. District Court for the Western District of Wisconsin granted summary judgment on December 31, 2015, in favor of the defendant in EEOC v. Flambeau.
Flambeau implemented a wellness program for 2011 in which employees who completed both a health risk assessment and biometric testing received a $600 credit. The health risk assessment included questions about the employee’s medical history, diet, mental and social health and job satisfaction. The biometric testing was similar to a routine physical exam involving (among other things) height and weight measurements, a blood pressure test and a blood draw. For 2012 and 2013, Flambeau eliminated the $600 credit and instead made completion of the health risk assessment and biometric testing a condition to enrolling in its health plan.
ADA Safe Harbor
Section 12112(d)(4)(A) of the ADA prohibits employers from requiring medical examinations and inquiries that are not job-related or consistent with business necessity. However, Section 12201(c)(2) of the ADA also provides that nothing in Title I of the ADA shall be construed to prohibit or restrict a covered person from establishing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks or administering such risks that are based on or not inconsistent with state law (the “Bona Fide Plan Safe Harbor”). Flambeau argued that its wellness program fell within this safe harbor. This was the same defense successfully raised by the defendant in Seff v. Broward County.
The EEOC argued that the Bona Fide Plan Safe Harbor is inapplicable and that the only exception to the ADA prohibition on required medical examinations for wellness programs is the exception under Section 12112(d)(4)(B), which permits medical examinations which are part of a voluntary employee health program (“Voluntary Program Exception”). The EEOC reasoned that application of the Bona Fide Plan Safe Harbor to Flambeau’s wellness program requirement would render the Voluntary Program Exception irrelevant.
In disagreeing with the EEOC’s rationale the Court described the Bona Fide Plan Safe Harbor as providing an exception for medical examinations that are tied to employers’ insurance plans which is in contrast to the Voluntary Program Exception which permits medical examinations that are part of an employee health program regardless of whether the employer sponsors any sort of employee benefit plan. Accordingly, a stand-alone wellness program cannot avail itself to the Bona Fide Plan Safe Harbor but it may qualify for the Voluntary Program Exception. The Court acknowledged that in some instances there may be overlap but held that just because a wellness program might fall within the scope of the Voluntary Program Exception does not mean that it cannot also be protected under the Bona Fide Plan Safe Harbor.
In considering whether Flambeau’s wellness program satisfied the conditions of the Bona Fide Plan Safe Harbor, the Court held that wellness program was clearly a term of the employer’s benefit plan. The Court stated that first and foremost, the EEOC’s entire claim is premised on its allegation that employees were required to complete the wellness program before they could enroll in the plan. Further, the Court noted that Flambeau had distributed handouts to its employees informing them of the wellness program requirement and scheduled the health risk assessments and biometric testing to coincide with the health plan’s open enrollment period. The Court held that the fact that neither the summary plan description nor the collective bargaining agreement identifies the wellness program requirement was not dispositive of whether the wellness program was a term of the benefit plan since such documents do not establish the terms of the actual benefit plan. The Court did note, however, that the plan’s summary plan description explained that participants would be required to enroll in the manner and form prescribed by defendant which put employees on notice that there might be additional enrollment requirements not spelled out in the summary plan description.
In determining that the wellness program requirement was intended to assist Flambeau with underwriting, classifying or administering risks associated with an insurance plan, the Court relied on the undisputed evidence establishing that defendant’s consultants used the information gathered through the wellness program to identify common health risks and medical conditions among enrollees and project Flambeau’s cost of providing insurance in order to make recommendations regarding participant premiums contribution amounts and the purchase of stop loss coverage.
The final issue addressed by the Court was the EEOC’s contention that Flambeau’s implementation of the wellness program was actually a subterfuge to evade the purposes of the ADA, which is expressly prohibited under the safe harbor. Citing Section 12101(b)(1) of the ADA, the Court noted that the purpose of the ADA is not to prohibit employers from asking for medical and disability-related information; but rather, its purposes is to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities. The Court explained that a benefit plan term does not operate as a subterfuge unless it involves a disability-based distinction that is used to discriminate against disabled individuals in a non-fringe benefit aspect of employment. The Court determined that Flambeau’s wellness program did not involve any such distinction or relate to discrimination in any way since all employees that wanted coverage had to complete the wellness program before enrolling in the group health plan. Further there was no evidence that Flambeau used the information from the wellness program to make any disability-related distinctions with respect to employees’ benefits.
The Court held that the protections set forth in the ADA share harbor enable employers to design insurance benefit plans that require otherwise prohibited medical examinations as a condition of enrollment without violating Section 12112(d)(4)(A) of the ADA. The impact of Flambeau on the pending wellness cases and the EEOC’s proposed rule on wellness programs remains to be seen but employers should be encouraged by the outcome of this case. It is uncertain whether the EEOC will appeal the Court’s decision, but further confirmation of the availability of the protections of ADA’s Bona Fide Plan Safe Harbor to wellness programs would be welcome news to employers since it would provide another means of structuring their wellness programs to comply with the ADA.