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Wellness Program Passes ADA Fitness Test

A recent ruling by the 11th Circuit suggests that there are circumstances where an organization can offer a "non-voluntary" wellness program without running afoul of the ADA, according to legal experts.

Wednesday, September 12, 2012
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Employers have been trying to lower employee healthcare costs in a number of ways in recent years. Two such strategies, wellness and disease management, received a boost recently when a federal appeals court ruled that those approaches did not violate part of the Americans with Disabilities Act.

Specifically, the U.S. Court of Appeals for the 11th Circuit upheld a federal district court ruling that a wellness program instituted by Broward County, Florida, did not violate the general prohibition under the ADA against non-voluntary medical examinations and inquiries that are not job-related.

In the case, Seff v. Broward County, Fla., the court determined that the wellness program qualified for an ADA "safe harbor" that applies to a "bona fide employee benefit arrangement," the terms of which are based on underwriting risks, classifying risks, or administering risks as long as the arrangement is not "a subterfuge" to evade ADA requirements.

In this instance, Broward County offered the wellness program as part of its 2009 open enrollment process. Sponsored by the County's group health insurer, the plan had both a health questionnaire and a biometric screening. Information gathered was used to identify employees with asthma, hypertension, diabetes, congestive heart failure and/or kidney disease. Employees were then offered a disease management coaching program, which in turn could result in participants being offered appropriate medications free of charge. Employees who failed to complete the health-risk assessment or submit to the biometric screenings were required to pay an additional $20 per paycheck for coverage under the County's health and pharmacy benefit programs.

 

Subsequently, a former employee brought a class-action claim under the ADA, alleging that the wellness program violated the ADA's prohibition on non-voluntary medical exams and health questions because the finger stick and questionnaire constituted the types of medical tests and health inquiries prohibited by the ADA.

 

According to Brian Pinheiro, a partner and practice leader of the Employee Benefits and Executive Compensation Group at Ballard Spahr in Philadelphia, the 11th Circuit's decision clearly suggests that at least in some circumstances, a "non-voluntary" wellness program can be offered without running afoul of the ADA.

"It is significant and the first case of this kind at the appellate level," Pinheiro says. "The court said that if you have your wellness program as part of your standard health plan, you can fit this under a new exception that does not violate the ADA and doesn't require voluntariness."  

While the 11th circuit only affects Alabama, Florida and Georgia, Pinheiro believes the ruling will surface in other circuits as well.

He does warn, however, that employers should keep in mind that wellness programs need to comply not only with the ADA, but with requirements set forth in the Health Insurance Portability and Accountability Act, the Genetic Information Nondiscrimination Act, and, beginning in 2014, the Patient Protection and Affordable Care Act.

 

"One of the big pieces of the healthcare act is backing the wellness program idea in every workplace," he says. "It's safe to say the Obama administration would be in favor of this ruling."  

Chris Palamountain, senior counsel with Seyfarth Shaw in Houston, Texas, says that the growth of broader wellness programs to help stabilize healthcare expenses for chronic conditions such as diabetes and high blood pressure is on the rise. But, she adds, although the goals of these programs may be to improve the overall health of the workforce, they also pose legal "pitfalls for the unwary."

One potential pitfall is the ADA, she notes. But the 11th Circuit seems to have at least opened the door for a penalty-based strategy, as opposed to a reward-based approach -- the more common one used in wellness programs to date.

"I don't think this paves the highway for wellness. It's still more like a needle to be threaded," Palamountain says. "But it does show courts will hear employers out on the legality of wellness."

Plus, she says, chronic diseases such as diabetes continue to grow as core healthcare issues for employers because they can be very expensive if not monitored carefully.

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"Disease management is the key to not seeing a further erosion of a person's health, but it's tricky in the workplace," she says. "The biggest question for employers is how involved do they want to be in their employees healthcare? It's a big bite, so they need to tread carefully.

"Even with this ruling, there are many opportunities to not get it right," she adds.

Teresa Jakubowski, a partner at Barnes and Thornburg, in Washington, says the 11th Circuit decision was a positive one for employers and insurers, and especially significant because it flows around the idea of using a penalty rather than a reward.

Also, she adds, the reason a lot of wellness programs are careful to craft their incentives as rewards rather than surcharges is that the EEOC, which enforces ADA regulations, has yet to clearly articulate a position on the point at which the offering of a financial incentive crosses the line.

"There are the carrot and the stick approaches, and the court approved the stick in this case," she says.

Jakubowski also warns, however, that employers have to line up all the different laws and make sure they are not running afoul of any of them when it comes to wellness programs and penalties.

"Employers are trying to reduce costs and so are insurers, and if they are going to offer these wellness programs they should get a payback," she says. "In that sense, the court looked at it and decided that these programs can benefit everyone."

Jakubowski says the tricky part is how you cross that line, in taking something meant to be voluntary and making it mandatory without inadvertently discriminating against people with certain health conditions regarding achievement in the workplace.

"It's a welcomed decision because it gives employers a bit more breathing room," she says. "But it is just one jurisdiction. We also need to see how EEOC responds and there is a lot yet to be written on the issue. It's still safer to use a reward versus a surcharge."

Says Ballard Spahr's Pinheiro, "Everyone now believes wellness should be part of keeping people healthy and cutting overall healthcare costs at the same time. This case can be a step in that direction. But at the very least, it could at least change the dialogue around the issue."

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