In EEOC v. Orion Energy Systems, Inc., the Eastern District of Wisconsin rejected the EEOC’s claims that Orion Energy’s wellness program violated the Americans with Disabilities Act (“ADA”). Although the court upheld the employer’s past practice, the court signaled that the EEOC’s recent regulations on wellness plans (discussed here and here), which limit the incentive that an employer can provide to encourage participation in a wellness program, will be enforceable going forward. Although it has limited precedential value, the Orion decision suggests that employers should continue to take the new regulations into account for 2017 and beyond.

Orion’s Wellness Program

Orion’s wellness program included three incentives for health behavior:

  1. Orion would cover the full cost of medical coverage (ranging from $413 per month for single coverage to $1,130 per month for family coverage) for any employee who completed a health risk assessment (“HRA”). The HRA included a health history questionnaire, biometric screening, and a blood draw. Any employee who declined to participate in the HRA would have to pay the full cost of coverage.
  2. Orion charged an extra $50 per month to any employee who did not exercise at least 16 times per month on a machine in Orion’s fitness center.
  3. Orion charged an extra $80 per month to any employee who smoked.

The Law on Wellness Programs

As discussed in our earlier posts, wellness programs raise issues under the Health Insurance Portability and Accountability Act (HIPAA), which prohibits discrimination in group health plans on the basis of adverse health factors; the ADA, which generally prohibits employers from making disability-related inquiries to employees or requiring employees to take medical examinations; and the Genetic Information Nondiscrimination Act (GINA), which generally prohibits requesting genetic information from employees and their spouses. The HIPAA requirements are enforced by the Department of Health and Human Services (HHS); the ADA and GINA requirements are enforced by the EEOC. The Orion case involved only the ADA requirements.

The EEOC’s position on wellness programs under ADA and GINA is reflected in final regulations issued in May 2016 (discussed here and here). Those regulations state two rules that are relevant to this case:

  1. An ADA safe harbor that allows bona fide plans “based on underwriting risks, classifying risks, or administering . . . risks” (42 U.S.C. § 12201(c)(2), which we call the “underwriting safe harbor”) does not apply for wellness programs. Consequently, disability-related inquiries and medical examinations are permitted only if they are voluntary.
  2. A program will not be considered voluntary if the incentive for participation exceeds 30% of the cost of self-only coverage (50% for certain tobacco-related incentives).

The EEOC brought its case against Orion before it published its wellness plan regulations—and before promulgating its 30% rule. Nevertheless, the EEOC asserted that the cost of not participating in Orion’s HRA (i.e., having to pay 100% of the premium instead of 0%) was so great as to make the program involuntary.

The Court’s Holding

The court deferred to the EEOC’s position that the ADA’s safe harbor does not apply to wellness programs, but concluded that Orion’s program was voluntary—and therefore did not violate the ADA. The court held that “even a strong incentive is still no more than an incentive.” According to the court, the fact that the cost of not participating in the HRA was high (having to pay 100% of the premium) was not enough to make the program involuntary: “This choice may have been difficult, but is a choice nonetheless.”

At the same time, however, the court noted that Orion’s HRA would violate the requirements of the EEOC’s May 2016 regulation, had the regulation been in effect—signaling that Orion’s victory probably will have only limited significance for future cases.

Where Do We Go From Here?

The Orion decision endorses the EEOC’s position on wellness programs for 2017 and future years. At the same time, it is only one case in a federal district court. The Orion court was not authorized to overturn the Eleventh Circuit’s decision in Seff v. Broward County, 691 F.3d 1221 (11th Cir. 2012), that the ADA’s underwriting safe harbor can apply for wellness programs; and the same issue is currently on appeal to the Seventh Circuit in EEOC v. Flambeau, Inc.

Although the issues have not yet been fully resolved by the courts, the path of least resistance is to follow the EEOC’s new regulations for 2017 and future years. The new regulations will require some changes to popular programs, as well as new notice requirement; but the combination of regulations from the EEOC and HHS appear to provide a workable roadmap for wellness programs going forward.