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The U.S. Equal Employment Opportunity Commission recently filed lawsuits against two Wisconsin companies that underscore the need for more clarity on rules that govern employers' use of financial incentives to motivate employee participation in workplace wellness programs.
Legal experts say the lawsuits — in which two private companies are accused of violating the Americans with Disabilities Act — are the most concrete indication yet of the EEOC's position on applying the ADA to workplace wellness programs.
“The EEOC is obviously sending out a broad message that blanket requirements for all employees regarding wellness programs are going to be looked as analogous to blanket requirements for criminal background checks or credit checks, in that they're viewed as a punitive measure that could disparately impact a certain class of employees,” said Ricki Roer, a New York-based partner at law firm Wilson Elser Moskowitz Edelman & Dicker L.L.P.
However, Ms. Roer said, the suits illustrate a more complex and largely unaddressed conflict between the EEOC's enforcement of workplace nondiscrimination laws and federal rules enacted earlier this year under the health care reform law encouraging employers to use results-based incentives to drive better health management among their employees.
Without a clearer view of the EEOC's position, Ms. Roer said employers face “a difficult environment, and one where I think we are going to see more lawsuits and more friction between an employer's reasonable efforts to provide wellness benefits to their employees and a rising potential arena of disability discrimination claims.”
Specifically, experts say many of the same chronic diseases and adverse health conditions employers often target in their wellness programs — including diabetes, obesity, hypertension and anxiety — generally qualify as disabilities under the ADA.
Consequently, experts say wellness programs that reward employees' completion of physical fitness, diet or stress management activities — or achievement of specific health measurements — may have limited efficacy in driving healthier outcomes among employees whose conditions qualify them as disabled, entitling them to a reasonable accommodation to get the reward without meeting the original incentive standard.
“We've got this tension between the ADA and the (Patient Protection and Affordable Care Act), and it's a tremendous point of uncertainty for employers,” said Sarah Bassler Millar, a partner at Drinker Biddle & Reath L.L.P. in Chicago.
The EEOC indicated in its most recent semiannual regulatory agenda that it intends to formalize a set of nondiscrimination rules for employers that provide incentivized workplace wellness programs, but it has not provided a timetable for completion.
Earlier this month, the EEOC sued Flambeau Inc. in a Madison, Wisconsin, federal court for allegedly terminating employees' group health insurance and forcing them to pay full price for coverage under COBRA if they failed to complete a health risk assessment and biometric screening under the Baraboo, Wisconsin-based plastics manufacturer's wellness program.
The complaint was the second-ever federal enforcement action against a private employer over penalties for not participating in wellness-related health screenings, following an August suit against Manitowoc, Wisconsin-based Orion Energy Systems Inc., a lighting and energy retrofitting company.
“For the employer to be able to ask the employees these kinds of health questions, the testing has to be voluntary,” said Chris Kuczynski, the EEOC's acting assistant legal counsel in Washington. “I think the commission is pointing out that you can't terminate someone from all health care coverage because they refused to participate in the tests, nor can you shift the entire cost of a health insurance plan onto an employee because they don't participate, because those things render the program nonvoluntary.”
In addition to conflicts with wellness provisions of the Affordable Care Act, experts say the EEOC's lawsuits against Flambeau and Orion Energy contradict a 2012 11th U.S. Circuit Court of Appeals ruling, in which the court said Broward County, Florida, officials did not violate the ADA by penalizing employees who did not complete a health risk assessment.
“Based on that ruling, one way to get an additional layer of protection could be to make your wellness program a part of your overall health insurance plan in order to take advantage of that safe harbor defense,” said Frank C. Morris Jr., a Washington-based employee benefits attorney at Epstein Becker & Green P.C.
Experts say the structure and severity of the penalties challenged by the EEOC are atypical of most employers' approaches to wellness program incentives.
Only 8% of employers in New York-based Buck Consultants at Xerox's 2014 Global Wellness Survey said they require wellness participation as a condition of eligibility for health coverage, while 33% add surcharges to employees' premiums for not participating in the company's wellness program.
“We take a much softer approach,” said Steve Ewing, benefits manager at Nottingham, Pennsylvania-based Herr Foods Inc. Under the snack food maker's wellness program, Mr. Ewing said employees that cannot meet health metrics necessary to get a discounted health insurance premium still can qualify through consultation with their physicians.
“If their doctor feels as though the employee has the risky condition under control or is at least working toward improving, we would count that as compliance for whichever metric was at issue,” Mr. Ewing said.
“Herr's alternative standards form is made to be as flexible as it can possibly be, because the ultimate goal of their program is to ensure that the employee is getting the care that they need,” said Scott Labrecque, vice president of client services at Stoudt Advisors Inc., a Lancaster, Pennsylvania-based benefits consultant that works with Herr Foods.
“The thing I like about Herr Foods and their program is that the goal of the program is really to get people healthy, not find ways to keep them out of the program,” Mr. Labrecque said.