United States: Big Employer Win In Wellness Program Case EEOC v. Flambeau

For the past couple of years, the U.S. Equal Employment Opportunity Commission (EEOC) has been challenging employer wellness programs for their alleged violations of the Americans with Disabilities Act (ADA). The most recent EEOC challenge was in EEOC v. Flambeau, Inc., (No. 14-cv-638-bbc (December 31, 2015)). In this case, the U.S. District Court for the Western District of Wisconsin handed the EEOC another loss in a wellness case (and handed employers a big win) by holding that the ADA "safe harbor" provision for bona fide benefit plans allowed the Wisconsin plastics manufacturer to condition participation in its self-funded group health plan on a requirement that employees complete a health risk assessment (HRA) and undergo "biometric screening."

Background

Flambeau, Inc. maintained a self-funded group health plan for several years. In 2011, Flambeau established a wellness program that included a HRA and biometric screening for employees that wanted to enroll in its group health plan. The wellness program required each participant to complete a questionnaire about his or her medical history, diet, mental and society health and job satisfaction. The biometric test was similar to a routine physical examination. For 2011, the first year of the program, the company gave a $600 credit to employees if they participated and completed both the HRA and the biometric test. For 2012 and 2013, the company eliminated the $600 credit and instead adopted a policy of offering health insurance only to those employees who completed the wellness program.

Dale Arnold participated in the wellness program for 2011, enrolled in the company's group health plan and received the $600 credit. However, for 2012, Mr. Arnold failed to complete the program's health assessment and tests by the established deadline, and the company discontinued his coverage. Mr. Arnold then filed a union grievance and a complaint with the Department of Labor (DOL) and EEOC. After discussions with the DOL, the company agreed to reinstate Mr. Arnold's coverage, subject to his completion of the plan's required testing and assessment. Despite this compromise, the EEOC sued the company alleging that the company violated the provision of the ADA that prohibits employers from requiring their employees to submit to medical examinations.

The Ruling & Analysis

Federal District Court Judge Barbara B. Crabb rejected the EEOC's challenge and upheld the company's wellness program. She ruled that the assessment and testing fell within the ADA safe harbor, which provides an exemption for activities related to the administration of a bona fide benefit plan. Because this was a matter of first impression in Wisconsin courts, she looked to the district court decision in Seff v. Broward County, 778 F. Supp.2d 1370 (S. D. Fla. 2011), and affirmed by the Court of Appeals for the Eleventh Circuit in Seff v. Broward County, Florida, 691 F.3d 1221 (11th Cir. 2012), which relied on the ADA safe harbor to uphold a similar employer wellness program that required both a biometric screening and completion of an HRA to avoid a $20 surcharge every two weeks.

The Flambeau court rejected the EEOC's arguments that the Seff decision was wrongly decided and should not be followed. Specifically, Judge Crabb rejected the EEOC's argument that a different exception under the ADA — the voluntary "employee health program" exception involving voluntary tests and inquiries that are part of employee health programs — would be "rendered irrelevant" by applying the ADA safe harbor to the company's wellness program. Judge Crabb was also not persuaded by the EEOC's position in its proposed rule (published on April 20, 2015), reported here, that the ADA safe harbor was not the proper basis for finding wellness program incentives permissible. It is notable that even though the health plan at issue in Seff was fully-insured Judge Crabb relied on it to apply the ADA safe harbor on bona fide benefit plans in this case where the plan was self-insured by the employer.

In upholding Flambeau's wellness program, the Flambeau case sheds light on how other courts may view the ADA bona fide benefit plan safe harbor as applied to wellness programs. Specifically, the court held the following:

  1. Wellness Program Requirement has to be a Term of an Employer's Benefit Plan

The court found that the company's wellness program was clearly a "term" of the company's benefit plan because employees were required to complete the wellness program before they could enroll in the plan. Judge Rabb found it difficult to fathom how such a condition could be anything other than a plan term. Interestingly, the court reached this conclusion even though neither the plan document, the plan's summary plan description, nor the collective bargaining agreement explicitly set forth the wellness requirements.

  1. Employees Must Receive Adequate Notice of Any Wellness Program Requirement

The court highlighted that the employees had adequate notice of the wellness program's requirements. For example, the court noted that the company distributed handouts to its employees informing them of the requirement and also scheduled the program's HRA and biometric screening so that they would coincide with the plan's enrollment period.

  1. The Wellness Program Requirement Must be Based on Underwriting Risks, Classifying Risks, or Administering Such Risks

The court found that the wellness program requirement was intended to assist Flambeau with "underwriting, classifying or administering risks associated with the insurance plan," because the company's consultants used the data gathered through the wellness program (which was collected in the aggregate) to classify plan participants' health risks and calculate the company's projected insurance costs for the benefit year. The court stated that it was irrelevant that the company could have potentially designed and administered the plan without requiring participants to complete the wellness program.

  1. The Wellness Program Must Not be Mandatory

Although completing the HRA and undertaking the biometric exams were required as a condition of health plan participation, the court found that the program was not mandatory in the sense of being a requirement of employment. It was deemed critical by the court that the wellness program was not a condition of employment and that employees could refuse to participate in the wellness program and still remain employed.

  1. The Wellness Program Requirement Cannot be a Subterfuge for Discrimination

The ADA safe harbor expressly prohibits using the safe harbor as a "subterfuge" to evade the purposes of the ADA. The court found no subterfuge in this case because, regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrollment in the company's plan and because there was no evidence that the company used the information gathered from the tests and assessments to make disability-related distinctions with respect to employees' benefits.

Proskauer's Perspective: No doubt, the Flambeau decision will be seen as a victory for employers. Nevertheless, employers should proceed with caution before making wellness plan design changes based on a reliance on the applicability of the ADA bona fide benefit plan safe harbor exception. It is very likely that the EEOC will appeal the Flambeau decision to the Seventh Circuit given the high-profile nature of this case (and others it filed against employers in connection with their wellness programs) and the fact that it is the only federal appeals court to provide a thorough analysis of the application of the ADA safe harbor in the wellness program context. In addition, the decision may cause the EEOC to double-down on its position in any final regulations it issues. Employers should continue to monitor these developments and, in the meantime, employers that wish to avoid EEOC challenges should continue to administer wellness programs consistent with the EEOC's proposed regulations as the EEOC is unlikely to challenge employers who do.

Big Employer Win in Wellness Program Case EEOC v. Flambeau

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