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An Employer Mandate for Wellness

A recent ruling in an Equal Employment Opportunity Commission lawsuit now makes it possible for employers to tie employee participation in wellness programs to availability of healthcare coverage.  

Monday, February 1, 2016
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At the end of last year, Judge Barbara B. Crabb granted summary judgment to Flambeau Inc., a manufacturing firm in Baraboo, Wis., in a case that revolved around the company's ability to offer health insurance coverage only to those employees who participated in the company's wellness program.

Flambeau, which manufactures and sells plastic products, organized a wellness program in 2011 that initially offered the additional benefit of a $600 credit to any participating worker. By 2012, the company required any employee who wanted to obtain health insurance to complete the wellness program requirements, which included a health risk assessment and a biometric test, similar to a routine physical.  One worker refused to complete the requirements and was dropped from insurance coverage. The Equal Employment Opportunity Commission filed suit (EEOC v. Flambeau Inc., Western District of Wisconsin) on his behalf.

On its face, the lawsuit is a "simple issue," says Richard Meneghello, a Portland, Ore.-based partner at Fisher & Phillips. "The decision itself is only 12 pages," he says, adding that the EEOC claimed the program violated the Americans with Disabilities Act's ban on employer-mandated medical examinations. The ADA, however, has safe-harbor language, he says. While the ADA safeguards private medical information and restricts employers from collecting specific medical information, he says the "safe-harbor language states that employers can do it if they are implementing a wellness program."

Some other key findings from the ruling include:

·         The wellness program requirement was intended to assist the employer with underwriting, classifying or administering insurance plan risks. The information was collected in aggregate to help the employer calculate projected insurance costs. These actions were not illegal, the court said.

·         The wellness program was not a condition of employment. Workers could refuse to participate and remain employed. However, they would have to obtain health insurance elsewhere. The program was not seen as mandatory because of this option.

·         The employer did not use the wellness program for discrimination. The EEOC didn't show that the employer made any disability-based distinctions that were used to discriminate against any specific worker or group of employees, or that it used the data to treat any single worker differently.

Wellness programs have been shown to help lower insurance costs, which is the reason many employers and insurance carriers have developed such programs in recent years. "Most of my clients have wellness programs that are part of their overall health benefits," Meneghello says.

"The district court judge's opinion in the Flambeau case supports the position taken by many employers that reasonably designed wellness programs integrated with the sponsors' health plans do not violate the ADA prohibition on medical exams," says Sarah Bassler Millar, a partner with Drinker Biddle & Reath in Chicago. "This is helpful to employers – particularly sponsors of self-funded plans, as was the situation in the Flambeau case – because it is now the second case in which an employer has defeated an EEOC challenge of a wellness program," she says.

As long as the wellness program is tied to the employer's health benefit plan and is documented and communicated, Meneghello says, the court in the Flambeau case held that there was no violation of the ADA's ban on employer-mandated medical examinations.

While this decision is good news for employers, they are wise to exercise caution, says Meneghello. The concern now centers on final EEOC wellness program regulations that are pending. If the EEOC believes the decision is wrong, it may rewrite its wellness program rules, which may create a "series of hoops for employers who may have more of an administrative burden to maintain or create a compliant wellness program," Meneghello says.

Meanwhile, this case is not very representative of most employer plans, says Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington, because most wellness incentives are well below the 30-percent level permitted by the Affordable Care Act.

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"Even as this case winds its way through the courts and Flambeau succeeds," he says, "I don't think many employers would need to restructure their wellness plans."

Given that, most HR departments may not need to take any action, other than to be aware of additional cases or a potential appeal of the EEOC v. Flambeau district-court case, he says.

"Employers need to know how the safe-harbor language applies to wellness programs," he says. "They need to know what it means to collect medical-related information from employees. Clarification will be important."

As this issue continues to unfold, Millar suggests HR professionals "consider including information about how the wellness program relates to the overall health plan and the strategy to effectively manage the plan – particularly the underwriting risks associated with sponsoring such plans."

However, employers should be cautious about making any changes to their wellness programs based on this ruling, says Wayne Pinkstone, a partner in the Princeton, N.J., office of Fox Rothschild.

"The decision is likely to be appealed by the EEOC, given its aggressive approach to company-provided wellness programs and its proposed regulations on the issue," he says. "Moreover, employers should be mindful that the court's decision is relatively narrow, and in order for a wellness program to fit within the ADA's bona fide benefit plan safe harbor exemption, certain -- very specific -- requirements must be met."

For now, HR professionals in Wisconsin should be communicating about their wellness programs to ensure employees understand their options and the company's expectations -- and HR pros around the country should stay tuned, says Pinkstone. "It is almost certainly the case that we will hear from the EEOC again on this issue."

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