The EEOC has been bringing lawsuits against employers challenging wellness programs. A recent case involved a company that had previously provided a credit to employees enrolled in the health plan who participated in a health risk assessment (HRA) and biometric screenings. The company had eliminated the credit and instead conditioned health plan enrollment on participation in the HRA and the biometric screenings. In other words, instead of costing an employee more to decline the HRA and biometric screening, an employee who failed to complete the screenings was no longer eligible for coverage. According to the court’s decision, the company used aggregate health data to establish premium contributions, assess the need for stop loss insurance, adjust co-pays, and develop other programs to address the risks identified through the wellness program. The EEOC sued the employer, Flambeau, Inc., taking the position that conditioning health plan coverage on biometric screening violated the provisions of the Americans with Disabilities Act (ADA) that require medical examinations to be voluntary unless they are required by business necessity. While biometric screenings may assist employers in identifying medical risks or encouraging employees to adopt healthier behaviors, the screenings are not likely to be considered “necessary” to the business of the employer.

The EEOC has proposed regulations governing wellness programs that would allow certain incentives or penalties tied to an employee’s participation in a wellness program. One provision of those proposed regulations would preclude an employer from conditioning enrollment in a medical plan on completing biometric screenings. The court in the Flambeau decision, however, rejected the EEOC’s position and upheld the ability of the employer to deny enrollment to an employee who failed to participate in the wellness program. The Court concluded that a provision in the ADA that allows employers to establish the terms of a bona fide benefit plan based on underwriting risks, classifying risks, or administering risks acted as a safe harbor that trumped the requirement that the biometric screenings be “voluntary.” The employer claimed that its wellness program was a term of its health benefit plan and that the purpose of the program was underwriting, classifying and administrating health insurance risk.

The court accepted that argument, thereby allowing the employer to condition coverage under the plan on completion of the HRA and biometric screening. This conclusion undermines the EEOC’s position and would give employers great leeway in establishing wellness programs. So long as the results of the wellness program are used to classify or underwrite risks, employers could require that participants complete the programs in order to enroll in the health plan. On the other hand, if the employer simply wanted to have an incentive or penalty, the incentives or penalties would be limited to 30% of the cost of the coverage (50% for tobacco cessation programs) otherwise contained in wellness regulations under the Affordable Care Act.

One would expect that the EEOC will appeal this decision since it provides employers with the ability to impose much more severe consequences for failure to participate in wellness programs than the EEOC would like. The decision might also cause the EEOC to rethink its proposed regulations to better justify its position that employees should not be required to participate in wellness programs to obtain health plan coverage from the employer.