Why it matters

With the question of the Americans with Disabilities Act's (ADA) application to employer wellness programs still uncertain, one federal court judge made his position clear by tossing an Equal Employment Opportunity Commission (EEOC) lawsuit accusing an employer of violating the statute by mandating that employees take part in a wellness program. Last year, the agency filed multiple suits challenging employer wellness plans, including a complaint alleging that Flambeau, Inc., required its workers to complete a health risk assessment and biometric screening to be eligible for participation in the company's group health insurance plan in violation of the ADA. The employer moved to dismiss the suit, and the court granted the motion. The health risk assessment and biometric screening were terms of the plan and used to enable the employer to "underwrite, classify, and administer" its health insurance risks more effectively, the court found. Therefore, the program fell within a safe harbor in the ADA for employers to administer the "terms of a bona fide benefit plan." Although the EEOC has issued proposed rules in an effort to clarify the application of the ADA to wellness programs, employers still face uncertainty due to discrepancies between the proposed guidance and the rules for wellness programs under the Affordable Care Act and Health Insurance Portability and Accountability Act.

Detailed discussion

Wisconsin-based Flambeau, Inc., manufactures and sells plastic products. The company offers employees various benefits including the ability to participate in its self-funded and self-insured health insurance plan. Participation in the health insurance plan—administered by a third party—is wholly voluntary.

In 2010, Flambeau established a "wellness program" for employees who wanted to enroll in the health insurance plan for the 2011 benefit year. The wellness program had two components: a health risk assessment, which required each participant to complete a questionnaire about his or her medical history, diet, mental and social health, and job satisfaction, and a biometric test (involving heath and weight measurements, a blood draw, and a blood pressure test).

The information gathered through the program was used to identify the health risks and medical conditions common among the plan's enrollees. With one exception—tobacco use—the health risks and medical conditions identified were reported in the aggregate. Flambeau used the information to estimate the cost of providing insurance, set participant premiums, adjust co-pays, and evaluate the need for stop-loss insurance.

For the 2011 benefit year, the first the wellness program was in place, the employer promoted it by giving employees a $600 credit if they participated and completed both the health risk assessment and biometric test. Flambeau eliminated the credit for the following years, instead adopting a policy of offering health insurance only to those employees who completed the wellness program.

From 1990 until 2014, Dale Arnold worked at the company's manufacturing facility in Baraboo, Wisconsin. In 2011, he participated in the wellness program and received the $600 credit. However, he failed to complete the assessment and tests by the established deadline for the 2012 benefit year and his insurance was discontinued.

Arnold then filed a union grievance, a complaint with the Department of Labor (DOL), and a complaint with the Equal Employment Opportunity Commission (EEOC). Working with the DOL, Flambeau agreed to reinstate Arnold's insurance if he completed the required testing and assessment. Despite this compromise, the EEOC filed suit on Arnold's behalf.

Specifically, the agency alleged that the employer violated Section 12112(d)(4)(A) of the Americans with Disabilities Act (ADA), which provides that a "covered entity shall not require a medical examination … unless such examination is shown to be job-related and consistent with business necessity."

Flambeau moved for summary judgment, arguing that its wellness program is protected by the ADA's safe harbor found in Section 12201(c)(2), which states that the ADA "shall not be construed to prohibit or restrict" an employer from establishing or administering "the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks."

U.S. District Court Judge Barbara B. Crabb agreed that the employer's program fell within the safe harbor, granting the motion to dismiss and entering judgment in Flambeau's favor.

The EEOC's proposed regulatory rules governing health programs did little to support the plaintiff's case, the court said. According to the proposal, "[t]he Commission does not believe that the ADA's 'safe harbor' provision applicable to insurance … is the proper basis for finding wellness program incentives permissible."

"Even if I were bound by plaintiff's proposed regulations, which I am not … plaintiff's proposed regulation speaks only to the safe harbor's application to 'wellness program incentives,' " Judge Crabb wrote. "It says nothing about the safe harbor's applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer's health plans."

The court was similarly not persuaded by the EEOC's position that the court should construe the safe harbor narrowly as an exception to a remedial statute. A more limited reading would still not allow the court to ignore the safe harbor altogether, the court said.

Having concluded that the safe harbor may extend to wellness programs that are part of an insurance benefit plan, Judge Crabb then found it applied to protect Flambeau.

"It is clear that the wellness program requirement was a 'term' of defendant's benefit plan," she said. "First and foremost, plaintiff's entire claim is premised on its undisputed allegation that defendant's employees were required to complete the wellness program before they could enroll in the plan. It is difficult to fathom how such a condition could be anything other than a plan term. Additionally, plaintiff does not allege that defendant failed to provide its employees adequate notice of the wellness program requirement."

Handouts were distributed to workers informing them of the wellness program requirement, the court noted, and the fact that the health assessment and biometric testing were not set forth in the summary plan description or collective bargaining agreement was not dispositive, as "it is well-recognized that a summary plan description does not establish the terms of an employee benefit plan."

Further, the wellness program requirement was "based on underwriting risks, classifying risks, or administering such risks," as set forth in the safe harbor, the court said. "The undisputed evidence establishes that defendant's consultants used the data gathered through the wellness program to classify plan participants' health risks and calculate defendant's projected insurance costs for the benefit year," the judge wrote.

The consultants then provided recommendations about what to charge for plan premiums (including higher premiums for smokers) and how much to charge for maintenance medications and preventative care, as well as the decision to purchase stop-loss insurance. "These types of decisions are a fundamental part of developing and administering an insurance plan and therefore fall squarely within the scope of the safe harbor," the court added.

Finally, the court rejected the EEOC's argument that the defendants were using the safe harbor as a "subterfuge," finding the agency's position to be "based on a flawed understanding" of the ADA's purpose. "Contrary to the plaintiff's contention, the purpose of the ADA is not to prohibit employers from asking for medical and disability-related information," Judge Crabb wrote. "Instead, its purpose is 'to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.' "

A benefit plan term does not operate as a subterfuge unless it involves a "disability-based distinction" that is used to discriminate against disabled individuals in a non-fringe benefit aspect of employment, the court held. "Defendant's wellness program clearly did not involve such a distinction or relate to discrimination in any way," the court said. "Regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrolling in defendant's plan. Furthermore, there is no evidence that defendant used the information gathered from the tests and assessments to make disability-related distinctions with respect to employees' benefits."

Judge Crabb granted summary judgment in favor of Flambeau and dismissed the EEOC's claim with prejudice.

To read the opinion and order in EEOC v. Flambeau, Inc., click here.