The U.S. Equal Employment Opportunity Commission (“EEOC”) recently filed complaints against three employers alleging that the employers’ wellness programs violate the Americans with Disabilities Act (“ADA”) due to the penalties imposed on employees who chose not to complete the wellness programs’ requirements.
The ADA prohibits employers from asking employees disability-related questions or requiring employees to undergo medical examinations unless those questions and examinations are job-related and consistent with business necessity. However, the ADA allows disability-related questions and medical examinations as part of a wellness program as long as the wellness program is voluntary and the information obtained is kept confidential and not used to discriminate on the basis of a disability.1 A wellness program is considered voluntary if the employer neither requires participation nor penalizes employees for not participating in the program. Many employers offer incentives to employees to encourage participation in wellness programs. The EEOC has never formally explained whether and to what extent offering an incentive effectively amounts to a requirement to participate or a penalty. The EEOC has indicated in its last two semiannual regulatory agendas that it plans to issue proposed regulations on this issue, but no regulations have been issued to date.
In the recent complaints, the EEOC alleges that the employers’ wellness programs are not voluntary. The table below summarizes certain facts related to the wellness programs at issue. The employee incentives involved in these cases are significant; employees who elect to forgo participation in the programs lose “incentives” such as eligibility for health insurance coverage or 100% employer-paid premiums. That these incentives are far more easily described as penalties – loss of eligibility for health insurance or having to pay 100% of premiums – does not work in favor of finding them to be incentives. Although it is clear from the complaints that the EEOC believes the penalties at issue render the wellness programs involuntary, the complaints do not shed much light on the threshold at which an incentive is deemed a penalty that renders a wellness program involuntary.
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also limits incentives offered under certain wellness programs.2 The Patient Protection and Affordable Care Act, as amended, increased the limit under HIPAA to 30% of the cost of health plan coverage3 and 50% of the cost of coverage for programs aimed at preventing tobacco use. For years, many practitioners have expected the EEOC to issue regulations for the ADA’s voluntary requirement that correspond to the HIPAA limits. The EEOC’s delay in issuing guidance may indicate the EEOC will not match the HIPAA limits after all. But most practitioners think it is unlikely the EEOC will interpret the ADA to prohibit an incentive that is clearly allowed under HIPAA solely on the basis of the amount of the incentive.
|SUMMARY OF RECENT EEOC COMPLAINTS|
Alleged Wellness Program Requirements4
Alleged Wellness Program Incentive or Penalty
|EEOC v. Orion Energy Systems, Civil Action, 1:14-cv-01019 (E.D. Wis.) (filed Aug. 20, 2014).||
|EEOC v. Flambeau, Inc.,Civil Action No. 3:13-cv-00638 (W.D. Wis.) (filed Sept. 20, 2014).||
|EEOC v. Honeywell International Inc., Civil Action No. 0:14-cv-045175 (D. Minn.) (filed Oct. 27, 2014).||
1 A wellness program may not be subject to the ADA’s voluntary requirement if it is covered by the ADA’s “health plan safe harbor” set forth in 42 U.S.C. § 12201(c)(2). See Seff v. Broward County, 692 F.3d 1221 (11th Cir. 2012). The parameters of this safe harbor are not clear, however, and it appears the wellness program must be part of a health plan and related to underwriting or classifying risks to rely upon the safe harbor.
2 The limits under HIPAA apply to “activity-only” and “outcome-based” wellness programs. An activity-only wellness program requires an employee to complete an activity related to a health factor (e.g., a physical activity) to receive a reward. An outcome-based wellness program requires an employee to achieve or maintain some health goal to receive a reward. The HIPAA limits do not apply to “participatory” wellness programs. A participatory wellness program requires an employee to participate in an activity that is not related to a health factor, which generally means the activity must be a passive activity as opposed to a physical activity (e.g., attend a “lunch and learn” health seminar).
3 In general, the cost of coverage equals the sum of employer and employee contributions.
4 In all of the cases, it is unclear whether the employers offered to employees any alternative methods of avoiding the penalties at issue.
5 On November 6, 2014, the U.S. District Court for the District of Minnesota denied the EEOC’s motion for a preliminary injunction against Honeywell’s wellness program. Honeywell, No. 0:14-cv-04517 (D. Minn., Nov. 6, 2014).