Source: United Benefit Advisors, LLC
The Equal Employment Opportunity Commission (EEOC) appears to be attacking corporate wellness programs based on the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). After staying on the sidelines while the popularity of workplace wellness programs skyrocketed, the EEOC has brought its third lawsuit in about two months alleging that an employer’s wellness program, in violation of the ADA and GINA, was not “voluntary” due to the “large” and “substantial” penalties to those who chose not to participate. EEOC v. Honeywell International, Inc. (D. Minn., filed Oct. 27, 2014). This attack raises complex challenges for employers since the agency has not issued guidance on wellness programs, even as other federal statutory schemes permit, and even promote, wellness programs.
According to the EEOC, employees not participating in Honeywell’s program would pay up to $2,500 in “direct surcharges,” as well as lose “up to $1,500 in contributions” to the employee’s health savings account. The Honeywell program appears to require individuals to participate only in the biometric testing, not achieve any particular test results, to qualify for the premium discount. In its prior two lawsuits, the EEOC alleged not participating in the employer’s wellness program would result in the employee paying 100% of the health insurance premium, a penalty the agency described as “steep,” “enormous,” and created “dire consequences.” Generally, wellness programs with premium surcharges, as in Honeywell’s, are more common than those that result in the employee’s having to pay the full health insurance premium, as in the first two EEOC litigations.
EEOC regulations and Interpretive and Enforcement Guidance permit employers to conduct medical examinations, which can include obtaining medical histories, as part of a voluntary wellness program. For years, the EEOC’s position has been that “[a] wellness program is ‘voluntary,’ as long as an employer neither requires participation nor penalizes employees who do not participate.” In 2013, the EEOC reiterated that it “has not taken a position on whether and to what extent a reward amounts to a requirement to participate, or whether withholding of the award from non-participants constitutes a penalty, thus rendering the program involuntary.” Not long after announcing that it plans to issue guidance this year on the amount of a reward or penalty allowed for a program to be “voluntary,” an EEOC Commissioner suggested that any guidance with “bright line” rules was unlikely.
While the EEOC had been silent on incentives in wellness plans, Congress and other government agencies have not. More than 18 years ago, in the Health Insurance Portability and Accountability Act (HIPAA), Congress carved out an exception to the general rule that group health plans and group health insurance issuers may not discriminate against individual participants and beneficiaries by allowing premium discounts, rebates, or modification to otherwise applicable cost sharing (including copayments, deductibles, or coinsurance) in return for adherence to certain programs of health promotion and disease prevention. The Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury published joint final regulations implementing the HIPAA nondiscrimination and wellness provisions in December 2006. Wellness plans complying with these regulations became common in workplaces.
In March 2010, with the President’s support for an incentive-based approach to wellness and a statement of Congress’ approval of such an approach to wellness, the Affordable Care Act amended the HIPAA nondiscrimination and wellness provisions to allow employers to provide larger incentives to employees who satisfy requirements of the employer’s health promotion and disease prevention (i.e., wellness program).
Regulations implementing the HIPAA provision have been issued as well. They include “bright-line” rules for determining the nature and extent of the incentives an employer may include in its wellness program.
The business community has responded to the HIPAA and ACA provisions by enacting wellness programs in large numbers and the EEOC is well aware that it is challenging a mainstream feature of corporate America. Some 94% of employers with more than 200 workers and 63% of employers with fewer employees have a wellness program, according to an EEOC press release issued when it filed its first wellness lawsuit.
The extent compliance with HIPAA and the ACA is a defense against the EEOC’s legal attack likely will be a threshold issue in the case against Honeywell. In a press release, the company refers to the EEOC’s lawsuit as “frivolous” and states that its “wellness plan incentives are in strict compliance with both HIPAA and the ACA’s guidelines.” It added that it is “disappointed that the EEOC would take a position that is so contrary to a fundamental component of the President’s health care plan, legislation passed by Congress, and the desire of all Americans to lead healthier lives.”