Benefits and Compensation

Court: Employers Can Condition Health Benefit on Wellness Participation

An employer may require its workers to participate in a wellness program in order to receive health insurance benefits, a federal district court has ruled, dismissing a lawsuit brought by the U.S. Equal Employment Opportunity Commission.

Granting summary judgment for the employer, the U.S. District Court for the Western District of Wisconsin said it disagreed with the EEOC’s allegations that such a requirement runs afoul of the Americans with Disabilities Act. The case is EEOC v. Flambeau, Inc., No. 14-cv-638 (W.D. Wis. Dec. 30, 2015).

Background

Flambeau, Inc., a plastics manufacturer, decided to condition the provision of health insurance benefits on employees’ participation in a wellness program.

The program consisted of (1) a health risk assessment that evaluated a worker’s medical history, diet, mental and social health and job satisfaction; and (2) a biometric screening that involved height and weight measurements, a blood pressure test and a blood draw. The employer only received the results in aggregate and used the information to estimate the cost of insurance, set premiums, evaluate the need for stop-loss insurance and adjust co-pays for preventative exams and certain prescription drugs, according to court documents.

And while participation in the program was not mandatory for continued employment, the employer offered health insurance only to those workers who participated.

After an employee complained to the EEOC, the commission filed suit, alleging that the requirement violated the ADA. The law generally prohibits medical exams unless they are job-related or consistent with business necessity (42 U.S.C. §12112(d)(4)(A)), but provides an exception for voluntary wellness programs. By withholding health insurance, Flambeau had rendered the program involuntary, the commission alleged.

Employers “can’t compel participation in medical tests or questions that are not job-related and consistent with business necessity by cancelling coverage or imposing enormous penalties such as shifting 100 percent of the premium cost onto the back of the employee who chooses not to participate,” said John Hendrickson, an EEOC regional attorney, announcing the suit in 2014. “Having to choose between complying with such medical exams and inquiries, on the one hand, or getting hit with cancellation or a penalty, on the other hand, is not voluntary and not a choice at all.” The commission first announced this position in a 2009 informal discussion letter.

In response, Flambeau argued that its program fell within the ADA’s safe harbor for activities related to the administration of a bona fide insurance benefit plan. The law states that it “shall not be construed to prohibit or restrict [employers] from establishing, sponsoring, observing 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” (42 U.S.C. § 12201(c)(2))

Its wellness program requirement constituted a “term” of its health insurance plan and was included in the plan for the purpose of underwriting, classifying and administering health insurance risks, Flambeau argued.

Court Weighs in

The court agreed with Flambeau. “[T]he protections set forth in the ADA’s safe harbor enable employers to design insurance benefit plans that require otherwise prohibited medical examinations as a condition of enrollment,” it said.

Flambeau’s requirement meets the safe harbor’s criteria, the court determined. The program is clearly a “term” of the company’s insurance benefit plan and is based on “underwriting risks, classifying risks, or administering such risks.”

And while employers may not use the safe harbor to skirt the ADA’s nondiscrimination requirements, that was not the intent of Flambeau’s requirement, the court said.

The court also noted that while the question had not yet been addressed in its circuit, the 11th U.S. Circuit Court of Appeals reached a similar conclusion in Seff v. Broward County, Florida, 691 F.3d 1221 (11th Cir. 2012). In that case, the appeals court held that a $20 surcharge per biweekly paycheck on employees who did not complete a health risk assessment did not violate the ADA because it was part of a bona fide benefit plan.

Pending Regulations

The EEOC asked the court to consider regulations it proposed in April 2015 which state that the commission “does not believe that the ADA’s ‘safe harbor’ provision applicable to insurance, as interpreted by the court in Seff … is the proper basis for finding wellness program incentives permissible.” (80 Fed.Reg. 21659)

The court said that it is not bound by proposed regulations and that even if it were, the rules only address the safe harbor’s application to wellness program incentives. “It says nothing about the safe harbor’s applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer’s health plan,” the court said, granting summary judgment for the employer.

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