The question of whether a wellness program violates the requirements of the Americans with Disabilities Act (ADA) has been unclear for some time. The Chicago District Office of the U.S. Equal Employment Opportunity Commission (EEOC) increased employers’ anxieties by filing suit against several companies in late 2014, asserting that their wellness programs violated the ADA because they were not “voluntary” medical exams (or employee health programs).
The ADA generally requires that employer-mandated medical exams—which could include a biometric screening or completion of a health risk assessment—be “voluntary.” The only exception to this “voluntary” requirement (other than a post-offer, pre-employment medical examination) is a medical exam that is job-related and consistent with business necessity. In general, biometric screens and health risk assessments are not likely to be job-related and consistent with business necessity. Prior to these lawsuits, the EEOC had provided little or conflicting informal guidance as to what was considered “voluntary” for these purposes.
In April of 2015 (after these lawsuits were filed), the EEOC issued proposed rules clarifying when an employee health program (including a wellness program) would be considered “voluntary” under the ADA. However, these proposed rules, while providing some clarity, unfortunately muddied the waters because they did not sync with the rules for wellness programs under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA). Thus, employers continue to face uncertainty about whether their wellness programs are compliant under the ADA.
With the Western District of Wisconsin’s December 31 ruling disagreeing with the EEOC’s position regarding the “voluntary” standard, employers now have more clarity about how to design an ADA-compliant wellness program.
In EEOC v. Flambeau, Inc., No. 3:14-cv-638 (December 31, 2015), the EEOC alleged that Flambeau, Inc. violated the ADA’s prohibition on employer-mandated medical examinations because it required employees to complete a health risk assessment and a biometric screening to be eligible to participate in the company’s group health insurance plan. The Flambeau court dismissed the EEOC’s lawsuit because the wellness program fell within the ADA’s “safe harbor,” which states that the medical examination prohibition “shall not be construed to prohibit or restrict” employers from administering the “terms of a bona fide benefit plan.”
The court determined that the health risk assessment and biometric screen were terms of a bona fide benefit plan because employees were required to complete them to gain access to Flambeau’s group health insurance benefit plan. The court also determined that because Flambeau used the collected information to estimate insurance costs, set premiums, evaluate the need for stop-loss insurance, adjust copays and to make other “organization-wide changes” aimed at promoting health, the wellness program fell within the ADA’s “safe harbor.” As mentioned above, this safe harbor provides an exemption from the ADA’s medical exam prohibition for activities related to the administration of a bona fide insurance benefit plan.
Other than wrapping up one of the EEOC’s highly publicized cases related to alleged wellness program ADA violations, this case is significant because the Western District of Wisconsin followed the ruling and analysis of the Eleventh Circuit Court of Appeals in its August 20, 2012 decision, Seff v. Broward County. In Seff, the Eleventh Circuit applied the ADA’s bona fide benefit plan “safe harbor” to a wellness program that required employees to complete a health risk assessment and a biometric screening to avoid a $20 per-pay-period surcharge on health plan premiums.
Despite this ruling, however, the EEOC specifically discounted the Eleventh Circuit’s Seff findings in a footnote to the preamble of its April 2015 proposed rules, claiming that the “safe harbor” exemption is not the proper method for a wellness program (and its rewards or penalties) to achieve ADA compliance.
The Flambeau ruling is precedent only for employers in the Western District of Wisconsin. Because (1) this decision is only at the district court level (and the EEOC will likely appeal the decision), (2) there is still at least one other case pending, and (3) the EEOC’s proposed rules are not yet finalized, employers should still exercise caution in designing their wellness programs.