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.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.