On December 30, 2015, a federal judge in the U.S. Court of Appeals for the Seventh Circuit ruled in favor of Flambeau, Inc. (Flambeau) and against the Equal Employment Opportunity Commission (EEOC) in holding that Flambeau’s medical exams as part of its wellness program and self-insured medical plan did not violate the Americans with Disabilities Act (ADA).
In October 2010, Flambeau established a “wellness program” for its employees who wanted to enroll in Flambeau’s health care plan for the 2011 benefit year. The wellness program had two components, a health risk assessment and a biometric test. The health risk assessment required each participant to complete a questionnaire about his or her medical history, diet, mental and social health and job satisfaction. The biometric test was similar to a routine physical examination, and included a height and weight measurement, a blood pressure test and a blood draw. The information gathered through the wellness program was used to identify the health risks and medical conditions common among the plan’s enrollees. Except for information regarding a participant’s tobacco use, the health risk and medical condition information was reported to Flambeau in an aggregate report, so that Flambeau did not know any individual participant’s results.
Flambeau used this gathered information to estimate the cost of providing health coverage to its employees, set participant premiums, evaluate the need for stop-loss insurance, adjust the co-pays for preventive exams and adjust the co-pays for certain prescription drugs. Aside from this, Flambeau also engaged in other wellness-related activities, such as sponsored weight loss competitions, modified vending machine options and other “organization-wide changes” aimed at promoting health. Nevertheless, Flambeau’s employees continued to suffer from nutritional deficiencies and weight management problems.
For the 2011 benefit plan year, which was the first year the wellness program was in place, Flambeau promoted its new wellness program by giving employees a $600 credit if they participated and completed both the health risk assessment and the biometric test. For the 2012 and 2013 benefit plan years, Flambeau eliminated the $600 credit and instead adopted a policy of offering health coverage only to those employees that completed the wellness program. Participating in the wellness program was not a condition of continued employment at Flambeau, but Flambeau offered company-subsidized health coverage under its benefit plan only to wellness program participants.
For the 2011 benefit plan year, a Flambeau employee participated in the wellness program, enrolled in Flambeau’s health plan and received the $600 credit. However, for the 2012 benefit plan year, which was the first year participation in the wellness program was required, this employee failed to complete the wellness program’s assessment and tests by the established deadline. Consequently, Flambeau discontinued this employee’s health coverage and gave the employee the option of paying the COBRA rate for continued coverage through 2012. The employee declined because he thought the coverage was too expensive without the company provided subsidy.
After losing his coverage, the employee filed a union grievance, a complaint with the U.S. Department of Labor (DOL) and a complaint with the EEOC. After discussions with the DOL, Flambeau agreed to reinstate the employee’s health coverage as long as the employee completed the plan’s required testing and assessment and made his premium contributions. When the employee agreed, his health coverage was reinstated retroactive to January 1, 2012. Despite the compromise reached by the employee and Flambeau, the DOL and the EEOC filed a lawsuit on the employee’s behalf, asserting that Flambeau’s plan’s medical testing requirement violated ADA §12112(d)(4)(A)’s ban on employer mandated medical examinations.
The EEOC’s civil action against Flambeau alleged a violation of 42 U.S.C. §12112(d)(4)(A) of the ADA, which generally prohibits employers from requiring their employees to submit to medical examinations by conditioning participation in their employee health plan on completing a “health risk assessment” and a “biometric screening test.” Flambeau responded that although requiring employees to complete the health risk assessment and biometric screening might violate ADA §12112(d)(4)(A) in some circumstances, in this case the assessment and testing requirement fell within the ADA’s “safe harbor,” which provides an exemption for activities related to the administration of a bona fide health benefit plan. Flambeau contended that completing the assessment and test was not the type of “required” exam prohibited by ADA §12112(d)(4)(A). Flambeau only required employees to complete the assessment and test if they wanted to participate in the company’s health benefit plan. Flambeau further contended that when viewed from this perspective, the assessment and testing were entirely voluntary and therefore not prohibited by ADA §12112(d)(4)(A).
The court ruled that Flambeau’s use of the information it gathered from the wellness program testing fell squarely within the scope of the ADA safe harbor since it was used to assist Flambeau with underwriting, classifying or administering risks associated with the health benefit plan. Flambeau’s consultants used the data gathered through the wellness program to classify plan participants’ health risks and calculate Flambeau’s projected health plan costs for the benefit year. The consultants also provided recommendations to Flambeau regarding what it should charge plan participants for maintenance medications and preventive care, and suggested charging cigarette smokers higher premiums. After identifying the risks through the wellness program, Flambeau also used the information to purchase stop-loss insurance as a hedge against the possibility of unexpectedly large claims.
The court also stated that while the EEOC may be correct in arguing that the ADA’s safe harbor provision may not be appropriate for examinations that are part of a stand-alone wellness program, in the Flambeau case, the program was tied to the administration of the group health plan’s insurance risks. The judge also disagreed with the EEOC’s assertion that Flambeau was using the safe harbor provision as a “subterfuge” against the ADA’s protections that bar employers from requiring workers to be examined or to provide disability-related information, as the tests were not shown as being used as part of discriminatory acts.
In light of this recent Seventh Circuit decision and the EEOC’s proposed regulations on bona fide wellness programs, employers may want to examine their wellness programs, particularly their stand-alone wellness programs, to ensure they comply with the ADA and other legal compliance requirements.