With final ADA and GINA wellness program regulations expected this year from the Equal Employment Opportunity Commission (EEOC), 2016 looks to be an important year for regulation of these programs. However, program features like health risk assessments (HRAs) and biometric screenings have already become popular components of employer-sponsored health plans. In many cases, employers incentivize employees to participate through premium discounts, reductions in cost sharing or other inducements. In a recent case, an employer went a little further, designing its self-funded plan to be available only to those employees who participated in an HRA and biometric screenings (regardless of the results). Challenged by the EEOC, this employer prevailed under the Americans With Disabilities Act’s “safe harbor” exception. EEOC v. Flambeau, Inc., W.D. Wis., No. 3:14-cv-00638 (12/31/15).
In 2011, Flambeau, Inc. provided a $600 credit to employees enrolled in its health plan who participated in its HRA and biometric screening features. In the following two years, the company eliminated the credit and conditioned health plan enrollment on participation in the HRA and biometric screening. The company used aggregate information obtained from the wellness program to establish premium contributions, assess the need for stop-loss insurance, adjust co-pays, and sponsor other programs designed to address the risks identified in the wellness program aggregate data.
The “Safe Harbor”
According to the EEOC, Flambeau, Inc.’s wellness program violated the ADA because it required employees to complete medical examinations – the HRA and screenings – in order to enroll in its medical plan. The EEOC based its complaint on Section 12112(d)(4)(A) of the ADA which prohibits an employer from requiring a medical examination unless such examination is shown to be job-related and consistent with business necessity.
The District Court disagreed and found, as Flambeau, Inc. argued, that such programs are protected by the ADA’s “safe harbor” for insurance benefit plans set forth in ADA Section 12201(c)(2). This section protects employers from liability for acts that would otherwise violate the ADA if such acts were in the course of establishing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.
The court found support for its position in Seff v. Broward County, an Eleventh Circuit decision, in which the “safe harbor” was applied to uphold a similar program in which an employer imposed a $20 bi-weekly surcharge for employees who did not participate in its wellness program requiring biometric testing and completion of an HRA.
Take Aways For Employers
There are now at least two cases in which employers have used the ADA “safe harbor” to fend off ADA claims. However, employers will have to proceed carefully as the EEOC mulls final ADA wellness program regulations. In its proposed regulations, the agency took issue with the decision in Seff v. Broward County and provided a clearer position on the reach of the “safe harbor” in the final rule. It is unclear what effects that would have on future court decisions.
When an employer intends a wellness program to be a part of its health plan, it should include the terms of the wellness program in its summary plan description (SPD). The EEOC raised this issue when challenging the application of the “safe harbor” because the employer’s SPD did not have express terms related to the program. The court determined this was not dispositive, but it is recommended that the SPD contain wellness program terms, particularly where those terms affect eligibility to participate in the plan.
The “safe harbor” does not apply solely if the wellness program is necessary for the employer to classify, underwrite or administer participants’ health risks under the plan, as the court held in Flambeau, Inc. However, using certain program data to classify health risks and calculate projected insurance costs and cost-sharing amounts, among other things, will help support an argument that the “safe harbor” applies and, hopefully, enhance the results of the program.