Source: http://www.icemiller.com/ice-on-fire-insights/publications/wellness-program-check-up-eeoc-finally-issues-prop/
Timestamp: 2016-09-29 03:18:04
Document Index: 600558864

Matched Legal Cases: ['§ 12112', '§ 1630', '§ 12112', '§ 12201', '§ 12112', '§ 1630', '§ 12201']

Wellness Program Check-up: EEOC Finally Issues Proposed Rules, Ice Miller LLP
ProfessionalsChristopher Sears RelatedEmployee Benefits
Medical questionnaires and medical examinations often make up a large part of an employer's wellness program. However, the Americans with Disabilities Act ("ADA") places significant limits on an employer's ability to make disability-related inquiries or to require medical examinations. Employers and benefits practitioners have eagerly awaited anticipated guidance from the Equal Employment Opportunity Commission ("EEOC") on how employer wellness programs can be designed in compliance with the ADA. Guidance has also been needed to understand how the ADA's requirements interact with the final wellness regulations issued under the Health Insurance Portability and Accountability Act by the Departments of Labor, Treasury, and Health and Human Services ("Final HIPAA Wellness Program Regulations").[1] That guidance finally came in the form of a proposed regulation on April 20, 2015 ("EEOC Proposed Rule").[2] This article traces the tortured history of the enforcement of the ADA against wellness programs and concludes with a discussion of the new EEOC Proposed Rule which provides employers and benefits practitioners with some highly anticipated guidance on how wellness programs might be structured to escape EEOC scrutiny.
After employment begins, an employer may generally only make disability-related inquiries and require medical examinations if they are "job-related and consistent with business necessity."[3] While wellness programs may be beneficial to both the employer and its employees, they have never been interpreted in any official guidance or in case law as satisfying the "job-related and consistent with business necessity" requirement under the ADA. Therefore, a wellness program that makes disability-related inquiries or requires medical examinations will violate the ADA unless it meets an exception under the ADA. The ADA includes an exception for "voluntary wellness programs," under which an employer does not have to show that the disability-related inquiries or medical examinations are job-related and consistent with business necessity if the wellness program is "voluntary" and records under the program are kept confidential and separate from personnel records.[4] Voluntary wellness programs can include such medical examinations as blood pressure screening, cholesterol testing, glaucoma testing, and cancer detection screening.[5] The preamble to the Final HIPAA Wellness Program Regulations states, however, that compliance with the HIPAA nondiscrimination rules and the final wellness regulations does not mean that the wellness program is "voluntary" within the meaning of this exception under the ADA.[6] The ADA also provides an insurance safe harbor that may apply to wellness programs if the program is a "bona fide benefit plan." This safe harbor states that the ADA is not to be construed to prohibit or restrict "a person or organization covered by this chapter from establishing, sponsoring, observing, or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law. . . ." [7] A. Disability-Related Inquiries and Medical Examinations Defined
The ADA states that an employer "may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site" even though such examinations are not job-related and consistent with business necessity.[12] The regulations repeat this provision almost verbatim, without providing any further interpretation of what it means to conduct a "voluntary" medical examination.[13] However, in guidance issued prior to the EEOC Proposed Rule, the EEOC has stated that a "wellness program is 'voluntary' as long as an employer neither requires participation nor penalizes employees who do not participate."[14] On March 6, 2009, and again on August 10, 2009, the EEOC addressed the issue more directly, although informally, by stating its view that if an employee's eligibility in an employer's health care plan is conditioned upon completion of a health risk assessment that makes disability-related inquiries and requires medical examinations, such health risk assessment does not qualify as a "voluntary wellness program," and therefore violates the ADA.[15]
C. Support for Wellness Programs: Seff v. Broward County
On April 11, 2011, the United States District Court for the Southern District of Florida provided employers with some additional support for their wellness programs under the ADA. In Seff v. Broward County,[16] the plaintiff, Bradley Seff, and a class of individuals who were similarly situated, alleged that Broward County, Florida violated the ADA because it charged $20 on a bi-weekly basis to employees who declined to participate in a health questionnaire and biometric screening as a part of a wellness program. Broward County, like many employers, instituted this wellness program because of rapidly escalating health care costs. The wellness program was designed to encourage employees to become active in managing their own health care. Employees who did not wish to incur the $20 surcharge completed an online health risk assessment and a biometric screening to test glucose and cholesterol levels. Personal information related to the program was held by a third-party wellness vendor and was not released to the County.
U.S. Federal District Court Judge K. Michael Moore granted summary judgment in favor of Broward County, thus denying any relief to the class of employees complaining in the lawsuit. Judge Moore did not analyze Broward County's program under the voluntary wellness program provisions of the ADA (as the EEOC had done in its informal letters discussed above). Instead, Judge Moore upheld the program under the ADA's insurance safe harbor provisions. This safe harbor states that the ADA is not to be construed to prohibit or restrict:
a person or organization covered by this chapter from establishing, sponsoring, observing, or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; . . .
The safe harbor further provides that it is not to be used as subterfuge to evade the overall purposes of the ADA.[17] Judge Moore found that the wellness program was a part of Broward County's group health plan structure and, using the bona fide benefit plan safe harbor of the ADA, he upheld the wellness program because it was designed to develop and administer present and future benefits using accepted principles of risk assessment. Broward County used the aggregate data it received from the health risk assessments and biometric screenings to classify risks and to assist it in developing future benefit plan designs. Judge Moore further found that the program was designed as an initiative to mitigate future risks in the benefit plans because it encourages employees to get involved in their own health care, thus leading to a healthier employee population and less future costs to the benefit plan. Thus, the program was held to fall within the safe harbor because it was a part of a bona fide benefit plan and was designed to assist in the underwriting, classifying, and administration of risks related to the plan.
Judge Moore's decision was affirmed by the United States Court of Appeals for the Eleventh Circuit on August 20, 2012.[18] This decision gives an additional potential defense to an employer sponsoring a wellness program that is part of its group health plan, and that is intended to help reduce costs under that health plan. The EEOC has made clear, however, that it does not agree with the outcome in the Broward County case.[19] D. EEOC Litigation
The EEOC initiated lawsuits in late 2014 against three separate employers, alleging that their employer wellness programs violated the ADA.
1. EEOC v. Orion Energy Systems
The EEOC filed its first complaint against Orion Energy Systems on August 20, 2014, alleging that Orion's wellness program violated the ADA, and that Orion's employment practices also violated the ADA.[20] Orion's wellness program required employees to complete a health risk assessment which included a fitness component, disclosure of medical history, and a blood draw. Orion paid the entire premium for employee-only coverage under the health plan. However, if an employee failed to participate in the wellness program, the employee was required to pay the entire premium for self-only coverage, plus a $50 per month penalty for failure to participate in the fitness component. According to the EEOC's complaint, Orion fired the only employee who complained about, and refused to participate in, the wellness program.[21] Although not stated in the court documents, it appears that the wellness program did not comply with the HIPAA Final Wellness Program Regulations.
The EEOC's complaint alleged that the blood draw is a medical exam and that it and the disability related inquiries were not job-related or consistent with business necessity, and were not voluntary because there was a significant financial penalty imposed for not participating (100% of self-only premium surcharge plus $50 per month penalty), and at least one employee was fired for not participating.[22] 2. EEOC v. Flambeau
an annual $1,000 tobacco surcharge was added to the employee's health premiums (a penalty for the employee's failure to participate). Additionally, if the employee's spouse did not do the biometric screening, the employee was charged another $1,000 tobacco surcharge for his or her spouse (if covered by the plan) (a penalty for failure of the spouse to participate). However, the tobacco surcharge did not apply if the employee and/or spouse enrolled in a tobacco cessation program, submitted a biomedical screening report from their physician that showed that they do not use tobacco, or worked with a health advocate to establish that they were nicotine free. Additionally, there were waivers from participation for employees with illnesses or pregnancy that precluded participation, and employees and spouses could submit a form from their personal physician if they had already had an annual exam in 2014 that included a biometric screening.[27]
This case has received significantly more attention than the prior two cases because it involves a fairly common wellness program design – even if slightly more aggressive in the size of the rewards and penalties than many – that satisfies the HIPAA Final Wellness Program Regulations. The EEOC alleged that Honeywell's wellness program violated the ADA and the Genetic Information Nondiscrimination Act of 2008 ("GINA"), and requested that the court enjoin Honeywell from penalizing employees and spouses who do not participate in the wellness program. First, the EEOC's petition alleged that the biometric testing is a medical examination within the meaning of ADA that was not job-related or consistent with business necessity. The EEOC further stated that the substantial financial inducement imposed upon employees to make them participate in the biometric testing was a penalty that made the testing involuntary, and it was, therefore, an unlawful medical examination under the ADA. Second, the EEOC's petition alleged that the imposition of penalties on employees if spouses fail to undergo biometric testing is an unlawful inducement to acquire family medical history (genetic information) that is a violation of Title II of GINA.[28] Honeywell responded that encouraging participation in its wellness program through surcharges does not make it involuntary, particularly in that the surcharges complied with the HIPAA Final Wellness Program Regulations. Honeywell argued that the EEOC's Enforcement Guidance is not entitled to any deference in light of Congress's express approval of rewards and penalties in connection with wellness programs, as expressed in these rules and regulations. Honeywell alternatively argued that its wellness program was a bona fide benefit plan that qualified for the ADA insurance safe harbor for covered entities "establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law."[29] With respect to the GINA allegation, Honeywell argued that its wellness program did not request genetic information within the meaning of that term as defined under GINA. Even if it did request genetic information, Honeywell argued that Title I of GINA, which applies to group health plans, controlled, and that the EEOC has no jurisdiction over Title I claims. Finally, Honeywell argued that even if Title II of GINA applies, Title II contains an exception for voluntary wellness programs.
In short, the issue in Honeywell was whether a wellness program that fully complies with the HIPAA Final Wellness Program Regulations could nonetheless violate the ADA and GINA. The Court in Honeywell issued an order on November 6, 2014, denying the EEOC's petition for a temporary restraining order on the grounds that there was no threat of irreparable harm since employees could be made whole through monetary damages if the EEOC were to ultimately prevail. The court also noted that it could not determine the likelihood of success on the merits given the great uncertainty in how the ACA, ADA and GINA are intended to interact, and the need for clarity under the laws. E. EEOC Proposed Rule
Compliance with the requirements of paragraph (d) of this section, including the limit on incentives under the ADA, does not relieve a covered entity from the obligation to comply in all respects with the nondiscrimination provisions of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., the Equal Pay Act of 1963, 29 U.S.C. 206(d), the Age Discrimination in Employment Act of 1967, 29 U.S.C. 621 et seq., Title II of the Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. 2000ff, et seq., or other sections of Title I of the ADA.[32]
The EEOC Proposed Rule has five essential elements.
First, an employee health program, including any disability-related inquiries or medical examinations that are part of such programs, must be reasonably designed to promote health or prevent disease. This is similar to the requirement under the HIPAA Final Wellness Program Regulations that a wellness program be "reasonably designed." To comply with this element, a wellness program must have a reasonable chance of improving the health of, or preventing disease in, participating employees and must not be overly burdensome. In addition, the program must not be a subterfuge for violating the ADA or other laws preventing employment discrimination, or highly suspect in the method chosen to promote health or prevent disease. The EEOC provided examples of wellness programs that would meet this standard and some that would not:
Acceptable: Conducting a health risk assessment and/or a biometric screening of employees for the purpose of alerting them to health risks of which they may have been unaware would meet this standard.
Acceptable: Use of aggregate information from employee health risk assessments by an employer to design and offer health programs aimed at specific conditions that are prevalent in the workplace would meet this standard.
Not Acceptable: Collecting medical information on a health questionnaire without providing employees follow-up information or advice, such as providing feedback about risk factors or using aggregate information to design programs or treat any specific conditions would not be reasonably designed to promote health.
Not Acceptable: A program is not reasonably designed to promote health or prevent disease if it imposes, as a condition to obtaining a reward, an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or places significant costs related to medical examinations on employees. It is also not acceptable if the program exists mainly to shift costs from the covered entity to targeted employees based on their health.
The second element of the EEOC Proposed Rule is that the wellness program must be voluntary. Consistent with past guidance from the EEOC on this topic, the EEOC Proposed Rule states that a wellness program is not voluntary if an employee is required to participate. Furthermore, an employee cannot be denied coverage under any group health plan or particular benefit packages within a group health plan for non-participation, nor can benefits be limited for employees who do not participate. This requirement would clearly make programs that condition eligibility on whether an employee completes a health risk assessment or undergoes biometric screenings impermissible. It would also appear to prohibit programs that prevent employees from enrolling in particular plan options if they do not undergo a medical examination or a disability-related inquiry (e.g., employee can enroll in the employer's high deductible health plan without completing a health risk assessment, but would be prohibited from enrolling in the health maintenance organization option without completing a health risk assessment). Finally, an employer cannot take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees for not participating. Note that the kinds of programs that would now be prohibited under this element would have likely been allowed under the HIPAA Final Wellness Program Regulations as a "participatory" wellness program. In this way, the EEOC Proposed Rule goes further to regulate wellness programs than the HIPAA Final Wellness Program Regulations.
The foregoing requirements of the "voluntariness" element of the EEOC Proposed Rule are consistent with the EEOC's prior informal guidance and litigation positions. However, the EEOC Proposed Rule goes further and requires an employer to provide employees a written notice that: (a) is written so that the employee from whom medical information is being obtained is reasonably likely to understand it; (b) describes the type of medical information that will be obtained and the specific purposes for which the medical information will be used; and (c) describes the restrictions on the disclosure of the employee's medical information, the employer representatives or other parties with whom the information will be shared, and the methods that the covered entity will use to ensure that medical information is not improperly disclosed (including whether it complies with the HIPAA Privacy Rule). This new notice requirement adds to the various notices that employers must provide in connection with their group health plans. It is not yet clear whether this notice can be provided in connection with the HIPAA Final Wellness Program Regulations' required disclosure about the availability of a reasonable alternative standard and/or whether this notice might be integrated in a group health plan's HIPAA Notice of Privacy Practices.
The third element of the EEOC Proposed Rule requires that incentives (financial or in-kind) connected with the wellness program must not exceed a 30 percent limit of the total cost of employee-only coverage. An incentive can be in the form of a reward or a penalty, but all rewards for all wellness programs connected with the group health plan must be combined and may not exceed the 30 percent limit. This element roughly aligns with the HIPAA Final Wellness Program Regulations' limits; however, HIPAA's allowance to extend the limit to 30 percent of the cost of family coverage if family members are eligible to participate is conspicuously absent from the EEOC Proposed Rule. It is not yet clear why the EEOC did not extend the limit to dependent coverage if dependents participate in the program; however, the EEOC may be reserving on this point until is provides further guidance with regard to whether the collection of a spouse's health information is considered to be the collection of "family history" under the Genetic Information Nondiscrimination Act (the position that the EEOC took in Honeywell, discussed above).
The EEOC limit also diverges from the HIPAA Final Wellness Program Regulations' limit because it can apply to both participatory and health-contingent programs, or any combination of the two. The HIPAA Final Wellness Program Regulations do not impose a limit on rewards connected with a participatory wellness program because such programs do not implicate a "health status factor" under HIPAA. However, the EEOC's concern is whether a wellness program requires medical examinations or makes disability-related inquiries. Although completing a health risk assessment or undergoing a biometric screening, alone, is a participatory program under the HIPAA Final Wellness Program Regulations, these activities often involve disability-related inquiries and medical examinations and thus are subject to the EEOC's reward limit. This could require some wellness programs to adjust their reward limits. Many wellness programs take advantage of the full 30 percent limit on their health-contingent components because that is all the HIPAA Final Wellness Program Regulations require. However, if those wellness programs provide an additional incentive for completion of a participatory component involving a health risk assessment or a biometric screening, the EEOC Proposed Rule would require that the amount of that incentive be included in the 30 percent limit.
The EEOC Proposed Rule notes that not all participatory wellness programs require disability-related inquiries or medical examinations such as attending nutrition, weight loss, or smoking cessation classes. These kinds of participatory wellness programs would not be subject to the EEOC's limit on incentives, nor would they be subject to the HIPAA Final Wellness Program Regulations' limit. It should also be noted that the EEOC Proposed Rule would not prevent employers from taking advantage of the HIPAA Final Wellness Program Regulations' allowance of a 50 percent incentive for tobacco-related wellness programs as long as the program did not involve disability-related inquiries or medical examinations. For example, a wellness program that merely asks employees whether or not they use tobacco (or whether or not they ceased using tobacco upon completion of the program) is not an employee health program that includes disability-related inquiries or a medical examination. Thus, this program could still utilize the HIPAA rules' allowance of an incentive up to 50 percent of the cost of the coverage. However, a program that requires employees to undergo a blood test or other medical examination to conclusively demonstrate the absence of tobacco use would involve a medical examination and would have to confine the reward to the 30 percent limit (even though the HIPAA Final Wellness Program Regulations might have otherwise allowed an incentive of up to 50 percent).
Under the fourth element of the EEOC Proposed Rule, reasonable accommodations must be provided, absent undue hardship, to enable employees with disabilities to earn whatever financial incentive an employer offers (regardless of whether a wellness program includes disability-related inquiries or a medical examination). This element is similar to the HIPAA Final Wellness Program Regulations' requirement to provide a reasonable alternative. Compliance with one will likely constitute compliance with the other. However, note that the ADA would require a reasonable accommodation under a participatory wellness program, even though the HIPAA Final Wellness Program Regulations do not require reasonable alternatives for participatory wellness programs. For example, an employer that offers a financial incentive to attend a nutrition class, regardless of whether the employee reaches a healthy weight as a result, would have to provide a sign language interpreter so that an employee who is deaf and who needs an interpreter to understand the information could earn the incentive, as long as providing the interpreter would not result in an undue hardship to the employer. Furthermore, an employer would, absent undue hardship, have to provide written materials that are part of a wellness program in alternate format, such as in large print or on computer disk, for someone with a vision impairment. Moreover, an employer that offers a reward for completing a biometric screening that includes a blood draw would have to provide an alternative test so that an employee with a disability that makes drawing blood dangerous can participate and earn the incentive.
The final element of the EEOC Proposed Rule requires that confidentiality be observed with regard to the medical information collected in connection with the wellness program. In general, information obtained from disability-related inquiries and medical examinations may only be provided to an employer in aggregate terms that do not disclose, or are not reasonably likely to disclose, the identity of an employee. An exception exists for the administration of a health plan, in which case the group health plan administrator must comply with the HIPAA Privacy Rule (discussed in more detail in Section V).
For more information about laws regulating employer wellness programs, or any employee benefits matter, contact Mary Beth Braitman, Sarah Funke, Melissa Proffitt, Shalina Schaefer, Tara Sciscoe, Chris Sears, or any member of the firm's Employee Benefits Group.
[2] 80 Fed. Reg. 21659 (April 20, 2015).
[3] 42 U.S.C. § 12112(d); 29 C.F.R. §§ 1630.13 and 1630.14.
[4] 42 U.S.C. § 12112(d)(4)(B); see also EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees under the ADA, 8 Fair Empl. Prac. Man. (BNA) 405:7701 (hereinafter, "Enforcement Guidance").
[5] Enforcement Guidance.
[6] See 78 Fed. Reg. 33158, 33168 (June 3, 2013).
[7] 42 U.S.C. § 12201(c).
[10] Id. The EEOC lists the following factors in the Enforcement Guidance: (1) whether the test is administered by a health care professional; (2) whether the test is interpreted by a health care professional; (3) whether the test is designed to reveal an impairment of physical or mental health; (4) whether the test is invasive; (5) whether the test measures an employee's performance of a task or measures his or her physiological responses to performing the task; (6) whether the test normally is given in a medical setting; and (7) whether medical equipment is used.
[11] Id. at n.78.
[12] 42 U.S.C. § 12112(d)(4)(B).
[13] 29 C.F.R. § 1630.14(d) ("A covered entity may conduct voluntary medical examinations and activities, including voluntary medical histories, which are part of an employee health program available to employees at the work site.").
[14] Enforcement Guidance.
[15] EEOC Informal Discussion Letter, "ADA: Disability-Related Inquiries and Medical Examinations; Health Risk Assessment," Mar. 6, 2009; EEOC Informal Discussion Letter, "ADA: Health Risk Assessments," Aug. 10, 2009.
[16] Seff v. Broward County, Case No. 10-61437-CIV-MOORE/SIMONTON, N. Dist. Fl. (April 11, 2011).
[17] 42 U.S.C. § 12201(c).
[18] Seff v. Broward County, 691 F.3d 1221 (11th Cir. 2012).
[19] See Memorandum in Support of EEOC's Application For Temporary Restraining Order and an Expedited Preliminary Injunction, EEOC v. Honeywell (filed Oct. 27, 2014); See also Preamble, EEOC Proposed Rule, 80 Fed. Reg. 21662 n. 24.
[20] Complaint, EEOC v. Orion Energy Systems, Inc., No. 1:14-cv-01019 (E.D. Wis. Aug. 20, 2014).
[23] Complaint, EEOC v. Flambeau, Inc., No. 3:14-cv-00638 (W.D. Wis. Sep. 30, 2014).
[26] Petition for a Temporary Restraining Order and Preliminary Injunction, EEOC v. Honeywell Int'l Inc., No. 0:14-cv-04517 (D. Minn. Oct. 27, 2014).
[29] See Seff v. Broward County, 691 F.3d 1221 (11th Cir. 2012). [30] 80 Fed. Reg. 21659 (April 20, 2015).
[31] "Questions and Answers about the EEOC's Notice of Proposed Rulemaking on Employer Wellness Programs," published on the EEOC's website at http://www.eeoc.gov/laws/regulations/qanda_nprm_wellness.cfm (last visited on April 29, 2015).
[32] 80 Fed. Reg. 21667.
Authors Christopher S. Sears