On April 11, 2011, the Southern District of Florida upheld an employer health plan's wellness program despite a former plan participant's claim that it violated the Americans with Disabilities Act (ADA). The decision, Seff v. Broward County, finally provides some guidance for employers who have struggled with the ADA's prohibition on mandatory medical examinations and its application to wellness programs. While the Equal Employment Opportunity Commission (EEOC) has yet to issue any formal guidance regarding the applicability of the ADA to employer wellness programs, it has questioned whether a program that imposes a penalty for failing to participate would truly be "voluntary," and thus permissible, under the ADA. In Broward, the court held that the ADA does not prohibit wellness programs offered by an employer health plan as long as the program meets the ADA's safe harbor for bona fide benefit plans.
The ADA generally prohibits employers from discriminating against employees on the basis of disability, and includes a specific prohibition on medical examinations or medical inquiries unless they are voluntary or necessary to determine an employee's ability to perform their job. The ADA does not specifically address how this provision applies to an employee benefit plan or wellness program, but the EEOC has indicated that employers may conduct medical examinations if they are part of a "voluntary wellness program." A program will be "voluntary" so long as an employer neither requires participation nor penalizes employees who do not participate.
Importantly, there is an exception to the ADA's prohibition on medical examinations for "bona fide benefit plans." This "safe harbor" provision provides that the ADA will not restrict 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." This limited exception applies only to those who "establish, sponsor, observe, or administer benefit plans, such as health and life insurance plans," and ensures that employers are able to develop and administer benefit plans in accordance with accepted principles of risk assessment.
In Broward, the employer offered a wellness program which included a health risk assessment (HRA) and biometric screenings for cholesterol and glucose. Employees were required to either take the HRA and screenings or be subject to an additional $20 per pay period surcharge on health plan premiums. The incentive amount was based only on participation and not on the results of the HRA and screenings. Thus, an individual simply had to participate in the program in order to avoid the surcharge.
The plaintiff sued the employer, alleging that the wellness program violated the ADA's prohibition on mandatory medical examinations and inquiries because the program imposed a penalty for an employee's failure to participate. The court, however, found that the wellness program did not run afoul of the ADA because it fell under the safe harbor exception in the ADA. The plan was found to be a bona fide benefit plan because the plan's insurer administered the program under its contract with the employer, and because only those enrolled in the health plan could participate. Further, the program was based on underwriting, classifying or administering risk by virtue of its "application of the various risk factors or risk classes to a particular individual or group for the purposes of determining whether to provide coverage."
While this decision is significant, employers need to understand that the EEOC has yet to take an official position on this issue and has suggested in the past that such wellness programs may violate the ADA. Further, the Broward decision only serves as persuasive authority for many employers, as it is not binding on the EEOC or in other jurisdictions.
Employers must also remember that the ADA is not the only law which places restrictions on wellness programs under employer health plans. The Health Insurance Portability and Accountability Act (HIPAA) nondiscrimination and wellness rules will also apply to such programs when they offer a reward or incentive based on a health standard. Under HIPAA, the general requirement is that the dollar amount of any health-based incentives must be limited to 20 percent of the cost of employee coverage, and that the plan must provide a "reasonable alternative" for those who are medically incapable of meeting the health-based standard to earn the incentives. Additionally, the Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits a health plan from discriminating against a covered individual based on genetic information, and from collecting genetic information prior to or in connection with health plan enrollment, or at any time for underwriting purposes.
Because this area of law remains unsettled, employers must continue to keep an eye on legal developments concerning employer wellness programs. While Broward may serve as an indication that similar wellness programs will likewise be upheld, the EEOC's position remains uncertain and employers will need to closely examine their wellness programs to ensure compliance with the ADA, HIPAA and GINA.
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