Wellness plans have long held the potential to help employers manage the cost of their health benefits. Employers have been wary about embracing these plans, in large part because of uncertainty about how to structure them to comply with various state and federal laws such as the Americans with Disabilities Act ("ADA"), the Patient Protection and Affordable Care Act ("ACA"), the Health Insurance Portability and Accountability Act ("HIPAA"), state smokers' rights laws, and the federal Genetic Information Non-Discrimination Act ("GINA"). The many legal pitfalls surrounding wellness plans have been discussed in detail in previous alerts ( February 28, 2011, February 9, 2010 and May 14, 2007).
Finally there is some good news for employers, at least under the ADA, from a recent Eleventh Circuit Court of Appeals decision. Before we discuss the decision, however, some background on the specific concerns of how the ADA affects wellness plans would be helpful. The ADA prohibits employers from conducting disability-related inquires or medical examinations unless the inquiries or examinations are "job-related and consistent with business necessity." A "disability-related inquiry" is a question "that is likely to elicit information about a disability."
Many wellness plans make medical inquiries of participants and thus could violate this prohibition. Indeed, wellness plans of any effectiveness would be essentially impossible under the ADA if not for a "safe harbor" - an exception from many of its requirements for "bona fide benefit plans" - and an EEOC grafted exception for "voluntary" wellness plans. However, both exceptions have not been free from uncertainty.
The Eleventh Circuit decision takes a step in the right direction by finding a wellness plan with monetary incentives lawful under the ADA safe harbor for benefit plans. In Seff v. Broward County, the Broward County Health Plan charged employees an additional $20 biweekly for their health insurance premiums if the employees declined to participate in a health questionnaire and biometric screening as part of a wellness program. Participation was not required in order to obtain coverage under the plan.
Employees who were charged the increased premium brought a class action arguing that the wellness program violated the ADA prohibition on medical inquiries. However, both the U.S. District Court in Florida and the Eleventh Circuit disagreed, finding that the wellness program fell within the ADA safe harbor for benefit plans. The Court also held that the wellness program was a term of the County's group health plan even though the plan documents did not include any reference to the wellness program. It was enough that the wellness plan was sponsored by the insurer, was made available only to group health plan participants, and was described in employee handouts as part of the group health plan.
This decision makes clear that an employer may take advantage of the ADA safe harbor for wellness plans, and avoid liability for prohibited medical inquiries, if the wellness plan is a component of the group health plan. Although the Eleventh Circuit also ruled that the wellness plan did not have to be specifically included in the plan documents, the safest course for employers would be to do so. In addition, employers need to be aware that tying the wellness plan to a group health plan could subject the plan to other federal law requirements, including the ACA, ERISA, HIPAA and COBRA.
This decision answers favorably for employers a very important question about the viability of wellness plans under the ADA and hopefully will be followed by other courts. However, other areas of uncertainty remain. The bottom line for employers is to exercise care in crafting wellness plans in order to minimize risk.
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