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Wellness Litigation Update

Employee Benefits

Wellness programs have seen increased popularity over the last several years. As a result of changes brought about as part of the Affordable Care Act (ACA) employers are expanding their wellness offerings.

According to M3’s inaugural Wellness Trend Report, 77% of M3’s client base offers a wellness program to their employees. While the increase in popularity is a welcome advancement in employee benefit offerings, the regulations and laws governing wellness plans are still developing. For this reason it is important for employers to fully understand how the various laws and regulations affect, or in some instances, conflict with respect to their wellness plan designs.

77% of M3’s client base offers a wellness program to their employees.

— M3’s Wellness Trend Report

Several recent legal actions filed against Wisconsin and Minnesota-based employers by the Equal Employment Opportunity Commission (EEOC) may have future impacts on wellness plan design and incentives. These cases highlight a conflict between the ACA and the ADA, two separate federal laws that are designed to determine how wellness program plan design may or may not discriminate according to those laws.

Wellness Plan Litigation Update

The EEOC has recently filed several lawsuits challenging the legality of certain wellness plan designs under the Americans with Disabilities Act (ADA). The EEOC (the agency charged with enforcing the ADA and other anti-discrimination laws) has taken issue with ACAs expansion of wellness programs, claiming that what the ACA regulations permit may be outside the scope of what is allowed under the ADA.

Under the ADA, it is unlawful for an employer to discriminate against employees on the basis of a disability, which includes discrimination in the provision of health insurance. As part of this prohibition, the ADA limits when an employer may make “disability-related inquiries” and when an employer may ask employees to submit to medical examinations.

In general, such inquiries are only permitted as a part of a voluntary wellness program. According to the EEOC, a wellness plan is only voluntary if employees are neither required to participate, nor penalized for non-participation. At issue in each of the lawsuits is whether the challenged plans incentive/penalty structures run afoul of the ADA’s voluntariness mandate.

Two of the three lawsuits have been filed against Wisconsin companies, and the other against a Minnesota employer.

In both Wisconsin cases, EEOC v. Flambeau, Inc., No. 3:14-00638 (W.D. Wis. 2014), and EEOC v. Orion Energy Systems, Inc., No. 1:14-01019 (E.D. Wis. 2014), the EEOC claims that their programs violated the ADA because they required employees to submit to involuntary medical examinations as part of a health risk assessment. In both programs the incentives/penalties were dramatic (e.g., full coverage of premiums for participation and full payment of premiums for non-participation – plus penalties).

The EEOC’s most recent lawsuit against Minnesota-based Honeywell is challenging its participation based wellness program. The Honeywell program was pretty straight forward, and in short offers financial inducements (via self-funded HRA contributions) for employee (and spouse) participation in biometric screening, as well as, surcharges for non-participation.

What does this mean for Employers?

As it stands, the conflict between the ACA and ADA regulations governing wellness plans remains undetermined. With ACA, Congress looked to provide employers with expanded options in wellness plan design including financial incentives. With the ADA, Congress looked to limit employers’ ability to make certain disability-related inquiries of their employees. The courts will have to decide the interplay between these two laws and how to reconcile the dual aims of Congress in enacting the ADA and the ACA.

The EEOC has recently stated that they anticipate the release of regulatory guidance on this subject by February 2015. In the meantime, employers may see increased and continued scrutiny from the EEOC; and, as was the case with Honeywell, employee claims of discrimination, which may trigger EEOC investigation. As a result, employers with wellness plans that carry heavy incentives/penalties should re-evaluate whether those structures would be perceived as truly voluntary by employees.

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