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This week, the Equal Employment Opportunity Commission (EEOC) sued a Wisconsin employer under the Americans with Disabilities Act (ADA) for levying too significant a penalty on an employee for declining to participate in a health plan-related health risk assessment. The EEOC action serves as a reminder that simply because a workplace wellness program is compliant with wellness program regulations under the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA), the program doesn’t get a free pass under the ADA. At least not yet.

Wellness Programs Under the ACA and HIPAA

The ACA largely codified in a federal statute the wellness program rules issued as HIPAA regulations years earlier. Subsequent regulations issued under the ACA describe three kinds of wellness programs:

  • Participation-based (such as asking employees to participate in an activity that has no physical requirement, such as completing a health risk assessment)
  • Activity-based (asking an employee to participate in an activity where the employee’s ability to merely participate depends on his or her health condition, such as asking the employee to participate in a 5k walk or run, i.e., the employee must be able to walk or run in order to participate)
  • Outcomes-based (where the incentive or penalty is actually tied to the employee’s health, such as weight, blood pressure, whether the employee uses tobacco, etc.).

For activity- and outcomes-based programs, the regulations limit the size of the incentive or penalty the employer may impose. The limit is generally 30 percent of the cost of the employee-only coverage, but may be as high as 50 percent if the program targets tobacco usage. Where the program invites dependents to participate, the 30 percent and 50 percent maximums may apply to the cost of family coverage.

Those limits don’t apply to participation-based programs, however. Yet the Wisconsin employer is learning that while there are no ACA-imposed limits on participation-based wellness programs (such as submission to health risk assessments), the story doesn’t end there.

The ADA Crashes the Wellness Program Party 

The ADA prohibits medical inquiries (like health risk questionnaires and biometric screens) unrelated to employment, unless they’re “voluntary.” They won’t be considered “voluntary” if there’s a “penalty” associated with the inquiry. What, then, is a “penalty”?

A few years ago the EEOC, which governs the ADA, seemed poised to say, “Any incentive or penalty permissible under HIPAA is okay by us, too.” It actually included text to that effect in a letter written to an employer, but then the EEOC withdrew the letter and has had no further comment on it. Overall, the EEOC has been infuriatingly silent on how the ADA interacts with wellness programs (although if you subscribe to the “Be careful what you wish for” school of thought, perhaps the EEOC’s silence has been a good thing). We understand the EEOC is writing rules on this topic as we speak. We look forward to seeing them.

Despite the absence of formal guidance, we have some sense as to where the EEOC believes an employer crosses the line into the realm of the impermissible. Informally, the EEOC has said  it doesn’t like programs that condition outright eligibility for coverage, or condition employer contributions to a health reimbursement account, on submission to a health risk questionnaire or biometric test. The “penalty” – the outright denial of coverage or absence of a benefit– seems too steep for the EEOC’s comfort level.

This week’s lawsuit by the EEOC involved a case where an employer, while not disqualifying an employee from coverage for refusing to submit to an HRA, shifted the entire cost of coverage to the employee. As we write this, we have not yet seen the EEOC’s written complaint filed with the court, so don’t know how steep the employer’s subsidy had been before it yanked it from the employee. But apparently, completely stripping the employer subsidy amounts to a “penalty” in the eyes of the EEOC. (It didn’t help that the employer then fired the employee, but it appears from the EEOC’s press release regarding the lawsuit that the Commission would have sued the employer anyway, even had it not terminated the employee.)

Don’t Panic… 

Now before you panic, you should know that a federal trial court ruled, a couple years ago, that an employer offering a health risk assessment to its employees may get a free pass under the ADA. That case involved Broward County, Florida, which assessed its employees a very modest health plan premium surcharge for not submitting to a health risk assessment.

The court concluded the county’s program fell within a narrow “safe harbor” exception under the ADA. Under the safe harbor, it is not an ADA violation to sponsor or administer a “bona fide benefit plan” based on underwriting, classifying or administering risks that are not inconsistent with state law, as long as the benefit plan is not used as a subterfuge to evade the purposes of the ADA. The court concluded the wellness program was a “bona fide benefit plan” that was not a subterfuge to evade the purposes of the ADA.

The case involving Broward County is important because the court never had to reach the question of whether the county’s modest surcharge amounted to a penalty. So, can the Wisconsin employer argue that the size of the surcharge is irrelevant—that is, that the question of whether the surcharge is a “penalty” under the ADA is moot—because the health risk assessment is a bona fide benefit plan under the ADA safe harbor? You can bet the employer will make that argument (but again, the employer didn’t help its cause by firing the employee).

What’s the Fallout?

Most employers don’t shift the entire cost of coverage to employees who refuse to submit to a health risk assessment. Those that do can continue to argue that the assessment is a “bona fide benefit plan” under the ADA safe harbor. The more strident the surcharge, however, the easier it might be for a court to conclude the surcharge is a subterfuge to evade the purpose of the ADA.

In any event, we should have proposed regulations from the EEOC soon. Then we won’t have to resort much longer to defining the limits of what the Commission thinks is permissible by drawing inferences from informal comments, withdrawn opinion letters and lawsuits.