Court’s wellness ruling is good news, but beware of ACA interaction
Employers and employer-side attorneys have been celebrating a recent court ruling that shot down an EEOC lawsuit. The suit claimed major components of an employer’s wellness program were illegal. But the celebration may be short-lived due to the ACA.
The lawsuit
The EEOC sued Flambeau Inc., a plastics manufacturer, claiming its wellness program violated the ADA because it required workers to submit to “medical examinations” that weren’t job-related or part of a “voluntary” wellness program.
Flambeau had a requirement that stipulated that any employee who wanted to enroll in the company’s health insurance plan had to submit to its wellness program’s biometric screening and health risk assessment. The results of those “exams” would be used in aggregate form to aid in the health plan’s underwriting and risk administration.
The EEOC said the wellness program wasn’t “voluntary” because the non-participation penalty — i.e., the prohibition from enrolling in the company’s health plan — was so steep.
Flambeau fought the lawsuit, claiming the exams fell under an ADA safe harbor that allows employers to conduct activities related to the administration of a bona fide insurance benefit plan.
The ruling
A federal judge in Wisconsin agreed with Flambeau’s stance that its wellness exams fell under the ADA’s safe harbor. As a result, the EEOC’s lawsuit was tossed.
Some of the reasons Flambeau won the day:
- The exams were intended to assist in underwriting risks, classifying risks or administering risks under the company’s health plan so it could project future insurance costs.
- Employees wouldn’t be denied employment with the company if they refused to submit to the exams — they would only be denied enrollment in the company’s health plan. In other words, workers could refuse to participate in the exams and still retain employed with the company.
- The company provided adequate notice of the wellness program requirements through handouts.
- The fact that the exams coincided with the health plan’s open enrollment strengthened the company’s argument that they were related strictly to the administration of the health plan.
- There was no evidence that the exams were a subterfuge for disability discrimination. In other words, the EEOC didn’t show the company used the exams as part of an attempt to treat any worker, or group of workers, differently.
Two reasons to pump the brakes
This case is not doubt good news for employers. It shows that at least one court is in their corner should they decide to condition enrollment in their group health plans on employees’ participation in wellness exams. And employers have been celebrating the win for that very reason.
However, there are two reasons to pump the brakes on the celebrations:
- The EEOC has issued a proposed set of rules that, when finalized, will govern the interplay between the ADA and wellness programs. And those rules appear to prohibit, at least in some circumstances, what the federal judge has allowed Flambeau to do here. But those rules aren’t final yet, which factored in to the judge’s ruling in this case.
- The ACA’s employer mandate. This is a biggie. Large employers that deny full-time employees access to health coverage for any reason likely will subject themselves to steep ACA penalties. The Flambeau case began back before the law’s employer mandate took effect. Employers are operating in a different world today. Now, it may be possible to skirt the penalties if applicable employers deny coverage to one or two employees (depending on just how large their companies are). The mandate stipulates that an offer of coverage must be extended to 95% of a company’s full-timers — so some people can be left out. But for the most part, larger-scale denials will trigger big penalties.
Cite: EEOC v. Flambeau Inc.
