While wellness programs have increased in popularity, according to the 2014 UBA Health Plan Survey, actual wellness program adoption has been in a holding pattern. As one might expect, the highest percentage (58.8%) of plans offering wellness benefits came from employers with 1,000 or more employees and the lowest percentage (8%) of plans offering wellness benefits came from employers with fewer than 25 employees.
On average, wellness programs are down slightly by 1.3%. It's no wonder given all the pending litigation and regulation surrounding these programs, including the fact that the health of an employee population is no longer a rating factor for smaller employers. On the other hand, corporate wellness programs do have many positives.
From a global perspective, wellness programs combat the rising costs of health care. Employers also benefit from wellness programs by creating healthier workforces. Healthier employees are more productive and have less absenteeism. Moreover, employees who participate in wellness programs enjoy the extrinsic reward provided by their employer (or the spouse's employer), and they also realize the intrinsic value of changing their lives through healthier living.
Regardless of the motive and intent of employers who establish corporate wellness programs, they just may find themselves in hot water - I mean, court - with the EEOC or on the other side of the aisle from a grieved employee. What makes wellness programs particularly complicated is the numerous rules and regulations, many of which are discordant with other regulatory provisions.
Employers should take due diligence to ensure that they are not sponsoring a wellness program that is ripe for litigation. The programs should be analyzed under the Americans with Disabilities Act (ADA)/Americans With Disabilities Act Amendments Act (ADAAA), the Genetic Information Nondiscrimination Act (GINA), the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC), the Patient Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act (HIPAA), Title VII and other EEOC regulations, and state law, being mindful that adherence to one regulation, e.g., PPACA, does not guarantee compliance with another, like ADA or GINA.
The last three months have seen as many complaints filed by the EEOC against wellness programs. On August 20, 2014, the EEOC brought its first direct challenge of a wellness program under Title I of the ADA against Orion Energy Systems, Inc. (Orion suit).
On September 30, 2014, the EEOC initiated its second ADA action against Flambeau, Inc.'s wellness program (Flambeau suit). The latest suit was filed on October 27, 2014, against Honeywell International, Inc.'s wellness program (Honeywell suit), and it included counts under both the ADA and GINA.
In the following, I will briefly review the various statutory and regulatory language governing wellness programs, outline the employers' wellness programs that are the center of current litigation, address the EEOC's concerns, and discuss what employers should do to guard against running afoul.
As mentioned earlier, wellness programs must be analyzed under a myriad of laws and regulations. Here we will discuss generally the wellness program landscape in light of the Americans with Disabilities Act (ADA)/Americans with Disabilities Act Amendments Act (ADAAA), the Genetic Information Non-Discrimination Act (GINA), the Patient Protection and Affordable Care Act (PPACA), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Nondiscrimination Regulations.
This is a 30,000-foot overview of laws and regulations that are in need of microscopic scrutiny when applying them to a wellness program.
ADA/ADAAA
The ADA/ADAAA generally prohibits discrimination in employment against a qualified individual based on a disability, in regard to employee compensation and other terms, conditions, and privileges of employment. Further is a prohibition from requiring a medical examination and making inquiries of an employee as to whether he or she has a disability, or as to the nature or severity of a disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.
However, a statutory safe harbor exempts certain insurance plans from the ADA's general prohibitions. The "benefit plan exception" states that the ADA shall not be construed as prohibiting an employer 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 or where the plan is not subject to state law (a self-funded benefit plan) so long as the exemption is not used as a subterfuge for discrimination.
As such, voluntary medical examinations and/or histories, which are part of a group wellness program, are permissible so long as strict confidential processes are followed. What does it mean to be voluntary? There is no short answer, but the abbreviated answer is that a wellness program may be voluntary if the employer neither requires participation, nor penalizes employees who do not participate.
The U.S. Equal Employment Opportunity Commission (EEOC) once posited that a health reimbursement arrangement (HRA) administered as part of a wellness program that meets the incentive limitations of HIPAA wellness regulations - no more than a (then) 20% reward - would be deemed voluntary and would not violate the ADA.
Unfortunately, this portion of the opinion letter was withdrawn because it was outside the scope of the request. The position currently held by the EEOC is that an incentive is a veiled penalty, which, in essence, makes the program involuntary and, thus, violates the ADA. However, this is in conflict with the "benefit plan exception," noted above.
GINA
Generally, GINA prohibits both the acquisition of genetic information as well as the use of genetic information by employers in employment decisions. As it applies to group health plans, Title I prohibits discrimination in health insurance premiums based on genetic information and places limitations on genetic testing and the collection of genetic information.
Title II prohibits the use of genetic information in the employment context, restricts employers from requesting, requiring or purchasing genetic information and strictly limits employers from disclosing genetic information. In general, Title II limits the conditions under which an employer might lawfully collect genetic information pursuant to an employer-sponsored wellness program, it requires those employers to follow strict privacy and confidentiality mandates.
Under GINA, it is unlawful for an employer to request, require or purchase genetic information with respect to an employee or an employee's family member. There is an exception if the information is part of a wellness program, subject to strict adherence of the following three requirements:
- The employee provides prior, knowing, voluntary, and written authorization;
- Only the employee (or family member if the family member is receiving genetic services) and the licensed health care professional, or board certified genetic counselor involved in providing such services, receive individually identifiable information concerning the results of such services; and
- Any individually identifiable genetic information provided in connection with the services is only available for purposes of such services and shall not be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees.
Again, what does it mean to be voluntary? In the preamble to the 2010 final regulations implementing Title II, the EEOC concluded that a wellness program is voluntary if the program neither requires participation, nor penalizes employees for non-participation.
The EEOC concluded that it would not violate Title II for an employer to offer individuals an inducement for completing an HRA as long as the employer specifically identifies those questions and makes clear, in language reasonably likely to be understood by those completing the HRA, that the individual need not answer the questions that request genetic information in order to receive the inducement.
The EEOC specifically declined to take the approach taken in HIPAA regulations - no more than a 20% reward [30% post ACA] - and, instead, added that adherence to Title II of GINA does not guarantee adherence to Title I of GINA, ADA, or HIPAA.
HIPAA and PPACA
The general rule pursuant to HIPAA nondiscrimination provisions is that a plan or issuer is prohibited from charging similarly situated individuals different premiums or contributions based on a "health factor." However, there is an exception to the general rule if the reward, i.e., premium discount, is based on participation in a program reasonably designed to promote health or prevent disease, i.e., a "wellness program.
"When analyzing a wellness program under PPACA and HIPAA, the first step is to determine whether the wellness program - or, as it may be the case, which part of the wellness program - is "participatory" or "health-contingent."
Participatory wellness programs are not required to follow HIPAA nondiscrimination provisions, discussed below. However, and to the point of this blog series, participatory (and health-contingent) wellness programs should be reviewed and scrutinized against the provisions of GINA, ADA, the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC), and other federal and state laws.
Participatory wellness programs are defined under HIPAA nondiscrimination final regulations as programs that either do not provide a reward, or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor.
Examples include a program that reimburses employees for all or part of the cost of membership in a fitness center, a diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes, and a program that provides a reward to employees for attending a monthly, no-cost health education seminar.
If the wellness program, or a piece of the wellness program, is participatory, it does not have to follow HIPAA nondiscrimination regulations. However, if the wellness program or a portion thereof, is health-contingent, then the program must be analyzed pursuant to HIPAA nondiscrimination regulations.
HIPAA Nondiscrimination Provisions and the Wellness Program Exception
Health-contingent wellness programs, in contrast to participatory programs, require an individual to satisfy a standard related to a health factor to obtain a reward or require an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward.
The standard may be performing or completing an activity relating to a health factor, or it may be attaining or maintaining a specific health outcome. The final regulations further subdivided health-contingent programs into
(1) activity-only wellness programs, and
(2) outcome-based wellness programs.
While there are some differences, both types are permissible only if the program adheres to the five prongs:
- Be reasonably designed to promote health or prevent disease (the same rules apply to activity-only and outcome-based programs);
- Give employees a chance to qualify for the incentive at least once a year (the same rules apply to activity-only and outcome-based programs);
- Cap the reward or penalty at 50% of the total cost of coverage for avoiding tobacco and at 30% for all other types of wellness incentives (the same rules apply to activity-only and outcome-based programs);
- Provide an alternative way to qualify for the incentive for those who have medical conditions (different rules apply to activity-only and outcome-based programs); and
- Describe the availability of the alternative method of qualifying for the incentive in written program materials (the same rules apply to activity-only and outcome-based programs).
These rules set forth criteria for an affirmative defense that can be used by plans and issuers in response to a claim that the plan or issuer discriminated under HIPAA nondiscrimination provisions.
This is Not the End!
The above is merely a general overview of the innate tension created by conflicting regulations, compounded by the lack of guidance from the commission, which is confronting concerned employers who have chosen to be proactive in combating the costs of health care and improving consumers' lives.
The next part of the series will discuss the movements in the courts, the backlash felt by the EEOC, and steps employers should take. For more data on wellness programs and other plan design trends, download the 2014 Health Plan Executive Summary.
This survey - which has been conducted every year since 2005 - is the nation's largest health plan survey and provides more accurate benchmarking data than any other source in the industry. You can contact a UBA Partner Firm for a customized benchmark report based on industry, region and business size.
The last few months have seen as many complaints filed by the U.S. Equal Employment Opportunity Commission (EEOC) against wellness programs. On August 20, 2014, the EEOC brought its first direct challenge of a wellness program under Title I of the Americans with Disabilities Act (ADA) against Orion Energy Systems, Inc. (The Orion Suit).
On September 30, 2014, the EEOC initiated its second ADA action against Flambeau, Inc.'s wellness program (The Flambeau Suit). The latest petition was filed on October 27, 2014, against Honeywell International, Inc.'s wellness program (The Honeywell Suit), and it includes counts under both the ADA and the Genetic Information Non-Discrimination Act (GINA).
In this third part of a series on wellness programs, I am going to summarize the facts of each of the suits as they were presented in the EEOC's court filings, discuss the often-cited case, Seff v. Broward County, as well as some takeaways for employers sponsoring corporate wellness programs.
The Orion Suit
Orion's Wellness Program, Generally
In March 2009, Orion implemented a wellness program where employees were required to test on a range of motion (ROM) machine and complete a health risk assessment (HRA), disclosing their medical history and underwent blood work. Declining to participate in the HRA resulted in a 100% shift in premium cost from Orion to the employee. Employees who declined to participate in the ROM test were assessed a penalty of $50 per month.
Allegations Giving Rise to the Suit
An employee feared that the disclosed medical information would not remain confidential and declined to participate in the HRA and ROM testing. As a result, Orion allegedly cancelled the employee's medical insurance after the employee failed to pay the entire premium and subsequently terminated the employee because she did not participate in the wellness program.
The ADA and the EEOC's Claim
As a refresher, the ADA generally prohibits an employer from requiring a medical examination unless the examination is shown to be job-related and consistent with business necessity.
There is an exception where an employer may conduct voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that worksite provided:
(i) participation in the program is voluntary;
(ii) information obtained is kept confidential in accordance with the ADA requirements; and
(iii) information obtained is not used to discriminate against an employee.
The EEOC claims that Orion's wellness program was not voluntary because, when the employee objected to participation, she had to pay the entire monthly premium and was assessed an additional monthly charge of $50 for declining to participate. Further, the EEOC claims Orion retaliated against the employee because of the employee's objections to the wellness program and was subsequently terminated because of those objections.
The Flambeau Suit
Flambeau's Wellness Program, Generally
From December 2011 through December 2012, Flambeau sponsored a wellness program where employees were required to complete an HRA and biometric testing, including blood work, measurements, and a medical history questionnaire.
Employees who participated in the wellness program paid about 25% of the total employee-only premium. Declining to participate in the HRA resulted in a 100% shift in premium cost from Flambeau to the employee, possible insurance cancellation, and unspecified disciplinary action.
Allegations Giving Rise to the Suit
An employee was unavailable to participate in the HRA and biometric testing on the day in which he was scheduled. The employee attempted to reschedule upon returning to work. Flambeau reportedly did not give the employee additional time to complete the HRA and biometric testing and cancelled his health insurance because the employee failed to pay the premiums.
The ADA and the EEOC's Claim
The EEOC claims that Flambeau's wellness program was not voluntary for the following reasons:
- If an employee did not complete the HRA and biometric testing, the employee risked losing his health insurance or paying the COBRA cost to keep insurance;
- Flambeau told employees that participation in the wellness program was "mandatory" in order to be on the company's medical insurance;
- Flambeau told employees that failing to attend the testing at his or her scheduled time would result in "disciplinary action;"
- Flambeau did not provide health insurance to new employees unless they submitted to the HRA and biometric testing;
- Flambeau did not offer health insurance to existing employees without the COBRA premium penalty unless they submitted to the HRA and biometric testing.
The Honeywell Suit
Honeywell's Wellness Program
In August and September 2014, Honeywell announced to its employees that they (and their spouses if they had family coverage) are to undergo biometric testing, including a blood draw, by a Honeywell vendor for the 2015 health benefit year. If an employee (or the spouse if they had family coverage) declines to participate in the biometric tests, the following will be assessed in 2015:
- The employee will lose health savings account (HSA) contributions from Honeywell, which range up to $1,500 depending on the employees' annual base wage and type of coverage;
- The employee will be charged a $500 surcharge that will be applied to their 2015 medical plan costs;
- The employee will be charged a $1,000 "tobacco surcharge," even if the employee chooses to not go through the biometric testing for reasons other than smoking; and
- The employee will be charged another $1,000 "tobacco surcharge" if his or her spouse does not submit to the testing, even if the spouse declines to participate for reasons other than smoking.
Worth noting, and the crux of the issue from an employer's perspective, is that the incentives/penalties above appear to be inside the parameters of the Patient Protection and Affordable Care Act (PPACA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
The ADA and the EEOC's Claim
The EEOC claims that Honeywell's wellness program is not voluntary because an employee could lose up to $4,000 through surcharges and lost HSA contributions for declining to participate in the Honeywell wellness program.
GINA and the EEOC's Claim
As discussed in Part II of this series, under GINA, it is unlawful for an employer to request, require, or purchase genetic information with respect to an employee or an employee's family member. There is an exception if the information is part of a wellness program, subject to strict adherence of the following three requirements:
- The employee provides prior, knowing, voluntary, and written authorization;
- Only the employee (or family member if the family member is receiving genetic services) and the licensed health care professional or board certified genetic counselor involved in providing such services receive individually identifiable information concerning the results of such services; and
- Any individually identifiable genetic information provided in connection with the services is only available for purposes of such services and shall not be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees.
Within the framework of the wellness program exception, employers are permitted to offer certain kinds of financial inducements to encourage participation; however, employers may not offer an inducement for individuals to provide genetic information. In the HRA context, for example, an employer may incentivize participants to complete the HRA, but those questions requesting genetic information must be specifically identified and clearly state that they need not be answered in order to receive the incentive.
In the petition for a temporary restraining order (TRO) and preliminary injunction, the EEOC claimed that Honeywell violated GINA by requiring covered spouses to undergo biometric testing or the employee and/or spouse will incur penalties and lose incentives, thus acquiring genetic information through inducement. U.S. District Judge Ann Montgomery denied the EEOC's request in November 2014.
Seff v. Broward County ADA Safe Harbor Overview
The Broward County Wellness Program, Generally
In October 2009, Broward County adopted a wellness program as part of its benefit plan, which had an HRA and a biometric screening, including finger stick, as well as an optional disease management component. All information was kept confidential and any personal information obtained was not disclosed to Broward County officials and was reported only in aggregate form.
Participation in the wellness program was not required for health coverage; however, employees who did not complete the HRA and biometric screening would incur a $20 charge on each biweekly paycheck.
The ADA Safe Harbor Exception
The 11th Circuit U.S. Court of Appeals held that Broward County's wellness program fell squarely within the ADA's safe harbor provision, which exempts certain insurance plans from the ADA's general prohibitions, including the prohibition on required medical examinations and disability-related inquiries.
The "benefit plan exception" states that the ADA "shall not be construed" as prohibiting a "person or organization 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" or where the plan is not subject to state law (a self-funded benefit plan) so long as the exemption is not used as a subterfuge to avoid the purpose of the ADA.
The Court held that the wellness program was a term of a bona fide benefit plan, which was available only to group plan enrollees, and was included in benefit explanation handouts. Determining whether the program was based on underwriting, classifying, or administering risks, at least one court has defined underwriting as "generally referring to the application of the various risk factors or risk classes to a particular individual or group for the purposes of determining whether to provide coverage." The safe harbor acts to protect the process of risk assessment so that accurate premiums may be established.
Bad Form, Feeling the Burn, and New Year's Resolution
Bad Form
If the facts in the Orion and Flambeau suits are taken as true, it is simply bad form, and illegal, for an employer to retaliate against an employee, and legal action should be sought. It is also a bad idea to shift 100% of the premium cost to an employee who declines to participate in a wellness program. The EEOC clearly views this as punishment and a non-voluntary program.
Feeling the Burn
Many legislators, CEOs, and sponsors of corporate wellness programs are angered that the EEOC is bringing lawsuits and sending confusing messages instead of releasing guidance on its approach to wellness incentives. Earlier in December 2014, a number of prominent business leaders organized by the Business Roundtable met at the White House and threatened to withdraw their support for PPACA.
New Year's Resolution
The EEOC recently stated in its 2015 legislative agenda that it expects to release proposed regulations on the impact of the ADA and GINA on wellness programs in February 2015. Employers should remember that wellness programs have always been an alphabet soup of laws under which compliance is required.
Employers should resolve to bring in legal counsel and other experts when designing their wellness programs. There is a fine line between what constitutes voluntary and non-voluntary, and until guidance is issued or cases adjudicated, that line is hard to see.
For more data on wellness programs and other plan design trends, download the 2014 Health Plan Executive Summary. This survey - which has been conducted every year since 2005 - is the nation's largest health plan survey and provides more accurate benchmarking data than any other source in the industry. You can contact a UBA Partner Firm for a customized benchmark report based on industry, region and business size.
About the Author
Jennifer S. Kupper, J.D.In-House Counsel & Compliance OfficeriaCONSULTING, a UBA Partner Firm in TexasJennifer S. Kupper, J.D., combines a background in healthcare with her legal expertise in health law, health care reform, and compliance to assist more than 200 small and large employers on a variety of compliance issues that affect fully insured and self-funded group health insurance plans, including the Patient Protection and Affordable Care Act (PPACA), wellness programs, private and public exchanges, HIPAA, HITECH, ERISA, COBRA, and other applicable federal and state laws
