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Benefits Law Advisor

Look Beyond the ACA Wellness Regulations When Designing Your Program, EEOC Sues Employer Over Its Program

The EEOC could sue my company over the wellness program that is part of our medical plan?

Yes, that agency recently sued an employer in Wisconsin claiming the penalty the employer imposed for nonparticpation in its program was too significant, causing the medical inquiries under the program to be involuntary for purposes of the Americans with Disabilities Act (ADA). EEOC v. Orion Energy Systems, E.D. WI, filed August 20, 2014). Our Disability, Leave & Health Management Blog looks more closely at the EEOC’s theories for liability. It is also important to remember the Affordable Care Act (ACA) rules for wellness programs.

Many employers are in the process of reviewing their medical plans in preparation for the upcoming open enrollment season for 2015. The focus is largely on ACA compliance, in particular the employer shared responsibility penalties. But, as wellness programs have increasingly become a feature of medical plans, employers need to also be reviewing the ACA wellness program regulations, as well as the other laws that may affect their wellness program design and administration, such as the ADA.

Features of the wellness program challenged by the EEOC. According to the EEOC’s complaint, the employer paid 100% of the health insurance premiums for employees who participated in its “voluntary” wellness program. If the employee chose not to participate, the employee paid 100% of the premiums. The program had two components: (i) employees completed a Health Risk Assessment (HRA), which seems to have included having blood work done, and (ii) a “fitness” component involved completing a medical history questionnaire and then using the employer’s range of motion machines. The complaint also alleges that there was a $50 “penalty” for not participating in the fitness component of the wellness program.

ACA Issues. Enforcement of the ACA regulations is outside the EEOC’s jurisdiction, but it is important to remember some key provisions of the ACA regulations that became effective this year for wellness programs:

  • The new regulations raise the maximum permissible reward offered in connection with a health-contingent wellness program to 30 percent. This amount is raised to 50 percent for programs that seek to reduce tobacco use.
  • Health contingent programs can come in two forms: “outcome based” and “activity-only.”
  • Outcome-based wellness programs, in general, reward employees for meeting certain goals, such as lowering their body mass index or cholesterol, or quitting smoking. A reasonable alternative standard must be provided for all individuals who do not meet the outcome-based standard, to ensure that the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status.
  • Activity-only wellness programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, although a particular outcome is not required. Activity-only programs require that a reasonable alternative standard for obtaining the reward be provided to individuals for whom it would be unreasonably difficult due to a medical condition or medically inadvisable to meet the existing standard.
  • Program descriptions must describe the availability of the reasonable alternatives available.

For more information about these rules, including a free 90-minute webinar, go to our wellness program resource center.