Federal Court Says Employer’s All-or-Nothing Requirement that Employees Submit to Wellness Program or Lose Health Insurance is ADA-Safe
Last month, a district court in Wisconsin dealt a blow to the EEOC and the future of its proposed ADA wellness program regulations. In EEOC v. Flambeau, Inc., the court held that that an employer did not violate the Americans with Disabilities Act by requiring its employees to participate in a wellness program, including by undergoing health risk assessments and biometric screenings, as a precondition of participating in the employer’s health insurance plan.
The ADA, 42 U.S.C. § 12112(d)(4)(A), prohibits employers from requiring employees to submit to a medical exam and inquiring about employee disability, “unless such examination or inquiry is shown to be job-related and consistent with business necessity.” The wellness program at issue in Flambeau involved a health risk assessment that asked employees to answer questions about medical history, diet, mental health, and job satisfaction. The program also required employees to complete a biometric test, which was similar to a physical examination (i.e., blood pressure readings, height and weight measurement, blood draw).
The EEOC sued Flambeau after one of its employees lost his health insurance coverage because he failed to complete the wellness program by the deadline. The EEOC argued that Flambeau’s benefit plan violated the ADA, § 12112(d)(4)(A), because employee participation in the assessment and screening was required, not voluntary. Flambeau countered, arguing that the assessment and testing requirements are protected by the ADA’s safe harbor provision, 42 U.S.C. § 12201(c)(2), “which provides an exemption for activities related to the administration of a bona fide insurance benefit plan.”
The court sided with Flambeau, holding that Flambeau’s wellness program requirement was protected by the ADA’s safe harbor provision, because:
- The wellness program was a “term” of the health insurance plan. The wellness program is a “term” of Flambeau’s health insurance benefit plan because employees are required to complete it before enrolling in the plan. Flambeau sufficiently informed employees of this “term” in advance by distributing handouts explaining the wellness program requirement and including a catchall statement in the summary plan description that there might be additional enrollment requirements.
- The wellness program’s requirements were based on underwriting, classifying, or administering risks. The wellness program’s requirement that employees submit to health risk assessments and biometric screenings was protected by the ADA’s safe harbor provision because it was “based on underwriting risks, classifying risks, or administering such risks.” The information gathered from the assessments and screenings were analyzed by third party consultants to classify participant health risks, calculate Flambeau’s insurance costs for the year, and provide recommendations to Flambeau on how much it should charge participants for medications and preventative care. Flambeau used this third-party information to make informed decisions on whether to purchase stop-loss insurance. The court held that “[t]hese types of decisions are a fundamental part of developing and administering an insurance plan and therefore fall squarely within the scope of the safe harbor.”
- Flambeau’s reliance on the ADA’s safe harbor was not a subterfuge for disability discrimination. All Flambeau employees, regardless of disability status, had to participate in the wellness program to enroll in the health insurance plan. The court also noted that the EEOC had not pointed to any evidence that Flambeau used the results of the health risk assessments and biometric screenings “to make disability-related distinctions with respect to employees’ benefits.”
The Flambeau decision, while dismissive of the EEOC’s proposed wellness regulations, is both well-reasoned and welcome (at least to employers). While the court recognizes that the voluntary plan and bona fide plan exceptions overlap, the decision says nothing about the boundaries of each exception. In the preamble to its April 2015 proposed wellness rule, the EEOC claimed that “[r]eading the insurance safe harbor as exempting these [workplace wellness] programs from coverage would render the ‘voluntary’ provision superfluous.” That can’t be right. Had Congress intended this result, it would not have provided two, separate exceptions.
Flambeau, however, raises the opposite prospect: does the court’s holding mean that the bona fide plan exception has rendered the voluntary plan exception superfluous? We think not—although it’s a safe bet that the EEOC will make this argument on appeal. Wellness programs that are not based on “underwriting, classifying, or administering risks” must rely upon the voluntary wellness program exception to the ADA, not the bona fide plan exception. Should the courts agree with this approach, we suspect that most employers will likely choose to qualify their workplace wellness programs under the bona fide wellness plan exception.
We expect the EEOC to appeal this decision to the Seventh Circuit and will keep you posted on further developments.