August 27, 2014

Last week, the Equal Employment Opportunity Commission (the “EEOC”) filed a lawsuit against an employer under the Americans with Disabilities Act (“ADA”) related to its maintenance of a wellness program.  Although far from a death knell for wellness programs, employers should nevertheless take note of the EEOC’s attempted enforcement in this case when considering program design.

Background.  Under the final regulations on wellness programs issued under the Health Insurance Portability and Accountability Act (“HIPAA”), employers may offer employees rewards for participation in a wellness program, with certain limits on the maximum amount of a reward.  The amount of this maximum depends on the design of the program.  For example:

• Participatory Wellness Programs.  No reward maximum applies with respect to a program that does not require an individual to meet a standard related to a health factor, such as participation in biometric testing or completion of a health risk assessment (“HRA”), regardless of results.
• Health-contingent Wellness Programs.  A program that requires that individuals satisfy a standard related to a health factor in order to obtain a reward, such as granting a reward based on the results of biometric testing, or for not smoking, cannot offer a reward greater than 30% (or 50% for smoking cessation programs) of the total annual cost of employee and employer premiums.

Even if a wellness program complies with HIPAA and the applicable limits on the amount of rewards, it must also comply with the ADA, which generally limits an employer’s ability to conduct medical examinations and disability-related inquiries unless participation is “voluntary.”

The EEOC’s Current Lawsuit.

• In 2009, a Wisconsin employer instituted a wellness program in which 100% of an employee’s premiums for employee-only coverage would be paid by the employer if the employee completed an HRA.
• An employee refused to participate in the wellness program and, after objecting to the program, the employee was reprimanded and subsequently terminated the following month, allegedly as a result of her failure to participate in the wellness program.
• The EEOC’s complaint alleges that (i) participation in the wellness program was not voluntary, and hence forbidden under the ADA, and (ii) the employer’s intimidation and later termination of the employee was also wrongful under the ADA.

What Does the Lawsuit Mean for Employers?

• The facts of this case are unusual since the employee’s termination rather than the employer’s wellness plan design, appears to be the likely force behind the EEOC’s complaint.
• Further, the amount of the reward under the employer’s program (100% of employee premiums), although arguably permitted under the HIPAA rules, is not typical of the modest incentives offered under most employers’ wellness programs.
• Accordingly, it seems unlikely that this case represents the EEOC’s opening salvo in a war against all reasonably designed wellness programs.
• Even if the EEOC wishes to pursue these types of claims, the Eleventh Circuit Court of Appeals has provided a mechanism to uphold these types of wellness plans.
  • A 2012 Eleventh Circuit Court of Appeals decision suggests that the portion of the EEOC’s complaint pertaining to the voluntary nature of the program may eventually be dismissed if it is deemed to be part of a “bona fide benefit plan,” which the Eleventh Circuit held was generally exempt from the ADA’s prohibition against medical examinations and inquiries.
• The current EEOC case should still serve as a cautionary tale against instituting extreme or cutting-edge wellness program designs.
• Even though HIPAA may permit plan designs that provide compelling carrots (or sticks) for participating or maintaining certain health outcomes, if they are overly punitive in nature, employers risk possible scrutiny by the EEOC or claims by employees.

Contact Information.  For more information from Mazursky Constantine, please contact Amy Heppner (404.888.8825), Kelly Meyers (404.888.8838).  For information from VCG Consultants, please contact Leslie Schneider (770.863.3617).