Federal Court Rejects EEOC’s ADA Challenge to Wellness Exams
January 12, 2016
Just before the end of 2015, a federal district court in Wisconsin delivered good news to employers who utilize wellness examinations as part of their health insurance programs. Use of wellness exams has been hotly contested by the Equal Employment Opportunity Commission (“EEOC”), and while the district court’s decision is not the final say on the matter, it provides some welcomed good news for employers as we begin 2016.
The employer, Flambeau, Inc., established a wellness program in fall 2010. In 2011, the first year the program was in place, the company offered employees a $600 credit if they participated in the wellness program’s two components: a health risk assessment, which consisted of a questionnaire about the employee’s medical history, diet, health, and job satisfaction, and a biometric test, which involved height and weight measurements, a blood pressure test, and a blood draw. Flambeau compiled the information and provided it to consultants who used the information to estimate the cost of insurance, set premiums, adjust certain co-pays, and make other determinations regarding stop-gap insurance.
In 2012 and 2013, however, the company eliminated the $600 credit and made participation in the wellness program a precondition of receiving health insurance from the company. One employee participated in the wellness program in 2011, receiving the credit, but then failed to complete the program in 2012 by the requisite deadline. In response, the company discontinued the employee’s insurance and extended the option of COBRA coverage to the employee, who in turn refused to enroll in COBRA and filed a complaint with both the Department of Labor and the EEOC.
After negotiations with the Department of Labor, the company offered to place the employee back on its insurance plan, and the employee agreed. However, the EEOC sued the company on behalf of the employee. The case, EEOC v. Flambeau, Inc., was heard in the United States District Court for the Western District of Wisconsin and was a case of first impression in the Seventh Circuit (covering Illinois, Indiana, and Wisconsin).
The EEOC argued that the company’s requirement that employees participate in the wellness program as a precondition of receiving health insurance violated the American with Disabilities Act’s (“ADA”) prohibition on mandatory employee medical examinations that are neither job-related nor consistent with business necessity. In response, the company argued that the requirement to participate in the wellness program was protected by the ADA’s “safe harbor” provision in 42 U.S.C. § 12201(c)(2), which states in pertinent part that the ADA does not prohibit or restrict an employer from establishing or administering “the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.” The wellness program, the company contended, was a “term” of its health plan because its consultants used the data from the tests in connection with decisions about the health plan’s offerings. Thus it was being collected for the purpose of underwriting, classifying, and administering the company’s health insurance risks.
In its ruling, the court agreed with the company and found that the wellness program fell under the ADA’s safe harbor provision. Rejecting the EEOC’s argument that the wellness program could not be part of the health plan because it was not contained in either the summary plan description or the collective bargaining agreement with the employees, the court reasoned that “it is difficult to fathom” how the wellness program could not be a term of the plan if employees were required to complete it to enroll in the plan. Furthermore, the evidence showed that the company’s consultants used the information from the wellness program to classify risks and calculate the insurance costs for the upcoming year. Although the EEOC argued that the wellness program information was not “necessary” to make these determinations, the court was not swayed, noting that the EEOC could offer no authority for its position.
Of the other arguments put forward by the EEOC, one is of particular note. The court found the EEOC’s proposed regulations from April 2015, which stated that the ADA’s safe harbor provision was not a basis for making wellness programs permissible under the ADA, to be unpersuasive. The court reasoned that the proposed regulations speak only to “wellness program incentives,” and therefore they were not applicable to a situation where a wellness program was used to administer and underwrite insurance costs.
The decision provides some clarification for employers on how to utilize wellness programs in connection with health plans. And while this decision is good news for employers, it will not be the last word on the issue. It is likely that the EEOC will appeal this decision, and the Seventh Circuit may have a different opinion on matters. Moreover, while this decision will almost certainly be cited by other federal courts around the country, there is no guarantee another court would reach the same conclusion. The law surrounding wellness programs will continue to grow and change in coming years, and employers should be careful to not be caught unawares by the developments.
