EEOC Challenges Wellness Programs

March 13, 2015

Employers are becoming increasingly interested in workplace wellness programs such as wellness screenings, onsite clinics, healthier food options in cafeterias and vending machines, and more opportunities for physical activity to improve employee health. The Affordable Care Act (ACA) contains provisions that support wellness programs as a means of reducing chronic disease and controlling healthcare costs.

The Equal Employment Opportunity Commission (EEOC) recently filed lawsuits in Wisconsin and Minnesota alleging that employers violated the Americans with Disabilities Act (ADA) and/or the Genetic Information Nondiscrimination Act (GINA) through the implementation of wellness programs.

Wellness Programs Under the ACA

The ACA provides for two types of wellness programs: participatory and health-contingent. Participatory wellness programs are open to all “similarly situated individuals” (i.e., all employees and dependents, if offered), and the conditions for obtaining a reward are not based on an individual satisfying a health standard. Common examples of participatory wellness programs include the reimbursement of fees for gyms or health clubs, smoking cessation programs (without regard to success or failure), and programs that provide incentives to complete health risk assessments or biometric screenings (without regard to results). The ACA does not limit the value of rewards given for taking part in a participatory wellness program.

Health-contingent wellness programs require an individual to perform an activity or satisfy a standard related to a health factor to obtain a reward. There are two types of health-contingent wellness programs. Activity-only health-contingent wellness programs require only the performance or completion of an activity. These programs can be differentiated from participatory wellness programs by asking whether the requirement is medically inappropriate for anyone. If the answer is yes, the program is probably an activity-only health-contingent wellness program.

Outcome-based health-contingent wellness programs require individuals to achieve a particular health factor result to obtain a reward. Examples of this type of program include rewarding employees for not smoking (or imposing a surcharge on employees who smoke) or providing incentives or failing to impose surcharges for attaining certain results on a biometric screening, such as having a body mass index below 30.

Outcome-based health-contingent wellness programs must meet several standards to be ACA-compliant. They must (1) allow employees to qualify for the reward at least once per year, (2) be designed to improve health and prevent disease without being overly burdensome, (3) provide a reasonable alternative to comply, and (4) limit rewards to 30 percent of the total cost of participation in a nontobacco health-contingent wellness program and 50 percent of the total cost of participation in a health-contingent wellness program designed to prevent or reduce tobacco use.

Employers have been seeking guidance from the EEOC on how the ADA and GINA will apply to wellness programs. The EEOC has yet to issue any guidance.

Lawsuits Filed by the EEOC

The ADA prohibits employers from conducting involuntary medical exams of employees unless the exams are job-related and consistent with business necessity. To be job-related and consistent with business necessity, a medical exam generally must be intended to determine whether an employee can perform the essential functions of the job or whether the job would pose a direct threat to the health and safety of the employee or others. GINA prevents employers from penalizing or rewarding employees to obtain medical information about the health or medical history of their family members.

The EEOC has filed three lawsuits against employers regarding wellness programs. According to the EEOC, the programs required employees to submit to involuntary medical exams or disclose medical information about family members. In EEOC v. Flambeau, Inc., a Wisconsin case, the agency claims that Flambeau’s wellness program required employees to submit to biometric testing and a health risk assessment. If employees failed to submit to the tests, their medical insurance could be cancelled or they could be required to pay the full premium to retain coverage. Flambeau denies the EEOC’s claims in their entirety. According to Flambeau, its wellness program was a bona fide benefit plan under the ADA and the biometric testing and health risk assessments were voluntary.

In EEOC v. Orion Energy Systems, another Wisconsin case, the agency alleged that Orion Energy Systems violated the ADA by requiring employees to submit to medical exams and inquiries that were not job-related and consistent with business necessity as part of its wellness program. Orion denied the claims and asserted that its wellness program was a bona fide benefit plan and that the health risk assessments and fitness components were voluntary.

In EEOC v. Honeywell, a Minnesota case, Honeywell instituted a wellness program that provided incentives for employees to participate in biometric testing by depositing money into a health savings account and imposing surcharges for employees’ (and their spouses’) failure to participate in the testing. The EEOC claims that the penalties rendered the biometric screenings involuntary medical exams in violation of the ADA. The EEOC also alleges that the surcharges imposed on employees’ spouses who did not participate in the biometric screenings violated GINA’s prohibition on offering inducements or imposing penalties on employees to obtain medical information about the health or medical history of their family members.

Honeywell denies the EEOC’s claims and asserts that no employee has ever been denied healthcare coverage or disciplined in any way because of a voluntary decision to not participate in its wellness program. The company claims its wellness program fully complies with the requirements of the ACA. Because the wellness program complies with the ACA, there is a potential conflict between the ACA, the ADA, and GINA. In November 2014, a Minnesota trial court denied the EEOC’s request to enjoin (stop) Honeywell’s wellness program, stating it was not ready to make “even a preliminary determination” about the conflict-of-laws question. The court’s decision means Honeywell may implement its wellness program as planned and the lawsuit will continue.

The primary issue in the lawsuits is whether wellness programs that comply with the ACA can be out of compliance with other federal laws such as the ADA and GINA. Because the EEOC did not issue guidance on the intersection of the laws before filing suit, employers will have to wait until the lawsuits are decided to know whether their wellness programs are compliant.

Bottom Line

At this time, there is no clear guidance for employers other than “beware.” Employers should take a careful look at their wellness programs to determine whether there are potential problems with the ADA or GINA and assess their risk level. Some employers are suspending implementation of their wellness programs. Some employers that have not yet instituted wellness programs are taking a “wait and see” approach given the recent lawsuits and lack of guidance. The fact that lawsuits have been filed means that employers likely will receive guidance from the courts, not the EEOC.

This article, originally titled “EEOC Does Not Have a Heart When it Comes to Wellness Programs,” was featured in the February 2015 issue of the Wisconsin Employment Law Letter, which is edited by Axley Brynelson Attorney Michael Modl and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.
