Employer-Based Wellness Programs – Lawsuits Could Signal More Trouble Ahead

Like a warning shot that alerts a ship that it’s straying out of acceptable territory, the Equal Employment Opportunity Commission (EEOC) lawsuits against employer-based wellness programs are a signal that there may be more trouble ahead.

“It really was a cut across the bows for employers with respect to their wellness programs,” said Seth T. Perretta, a principal at Groom Law Group, Chartered, in Washington, D.C. Perretta addressed wellness programs, the EEOC and the Americans with Disabilities (ADA) Act issues at The Alliance Learning Circle on The Wellness Culture Conundrum held Jan. 13 at The Monona Terrace.

Monitoring EEOC

Before the EEOC filed lawsuits against employers in the fall of 2014, Perretta said legal advisers did not have EEOC on their
“monitor list.”

“You would hope that we as a federal government would have our left and our right hands acting in concert,” Perretta said. “But what we’ve seen this fall is that this is not always the case.”

There were three EEOC lawsuits that prompted anxiety among
employers. Two separate lawsuits filed against Wisconsin employers Orion and Flambeau involved specific elements of wellness programs that made them “atypical.” But the lawsuit against major employer Honeywell challenged a “bread-and-butter” wellness program. Perretta provided details about each lawsuit in his
presentation.

Fortunately, Perretta said he does not expect any additional Honeywell-type challenges to employer-based wellness programs – at least unless and until the EEOC issues its long-awaited regulations. Honeywell defeated the EEOC lawsuit’s request for an injunction in court and employer-based groups rallied support for wellness programs in Congress and in the national media. But the EEOC could still pursue additional lawsuits similar to those filed against Orion and Flambeau.

ACA, ADA, HIPAA and GINA

Perretta said several federal acts impact employer-sponsored wellness programs.

• The Health Insurance Portability and Accountability Act (HIPAA) forbids discrimination related to health
  benefits based on health factors, but provides an exception that allows financial incentives to be offered for health promotion and disease prevention programs.
• The Affordable Care Act (ACA) codified support for wellness programs by allowing employers to reward employees for health promotion participation programs with up to a 30 percent reduction in health premiums. The limit increases to 50 percent if smoking cessation is involved.
• The Americans with Disabilities Act (ADA) limits employers’ ability to make disability-related inquiries or require
  medical examinations, with exceptions for voluntary wellness programs, which cannot require participation nor penalize employees for failing to participate. In addition, there is a “bona fide benefit plan exception” that provides a safe harbor for wellness programs. To qualify for this exception, a wellness program must be part of a “bona fide” health benefit plan. The EEOC is the sole authority for ADA prosecutions.
• The Genetic Information Nondiscrimination Act (GINA) applies to group health plans and issuers to prohibit collecting genetic information, including family medical history, for underwriting purposes. GINA offers an exception for information collected as part of a voluntary wellness programs. EEOC representatives in the past suggested that wellness programs could violate GINA if they offer a reward in connection with the request or collection of health information about a spouse through health risk appraisals (HRAs) or similar programs. This interpretation was formally evidenced in the EEOC’s pleadings in the litigation involving Honeywell’s program.

The Basis for EEOC Challenge

The EEOC based its challenges to employer-based wellness programs on the ADA and GINA. Perretta noted the EEOC is unlike other federal agencies that supervise wellness programs, such as the Internal Revenue Service (IRS) or Department of Justice, because it does not report to a cabinet-level secretary who responds to directives from the President, who may in turn respond to pressure from employers or other groups.

Instead, the EEOC is a quasi-independent commission made up of appointed officials who do not report to an authority structure that ultimately leads to the president.

As a result, the EEOC is a little bit like a wild horse,” Perretta said. “There is a fence and if it does not go beyond that
fence there is not much you can do.”

Perretta said the EEOC “hates” the bona fide exception because officials believe it violates the intent of the ADA. Unfortunately, the EEOC has not issued clear guidelines or regulations for wellness programs. The EEOC earlier announced that it would draft regulations by February 2015, but Perretta said lack of progress to date indicates that employers will be “lucky” to see regulations emerge before year-end.

Future Litigation

Wellness programs may be participation-based, activity-only or outcomes-based. Perretta predicted the EEOC will focus its future challenges on participation programs, which typically ask an employee to complete an HRA or undergo a biometric screen.

“We will definitely see litigation around this in the future unless Congress addresses this,” Perretta said. Perretta
urged the employers at the ALC to express their opinions when the EEOC issues regulations in proposed form.  In addition, Perretta urged employers to contact federal legislators to indicate their support for introducing and passing legislation that protects employer-sponsored wellness programs.

One way employers can protect themselves is to offer the wellness program only to employees who are participating in the medical plan, which may help shore up an argument that the wellness program does not violate the ADA because it fits within the “bona fide” safe harbor. But some employers who attended the ALC noted that they want to encourage broader wellness participation.

One employer representative noted that when wellness participation is tied to lower health premiums, it means that
employees who are not part of the health plan have neither an incentive or disincentive to participate. Perretta said that
approach still creates an opening for litigation, although the risk is “generally low.”

Ideas for Employers

Perretta said wellness providers and employers should think about these items when aiming to protect themselves from
litigation:

• Structure wellness programs to comply within the HIPAA wellness rules.
• Structure wellness programs within the group health plan and use information for underwriting and classifying risks to preserve a “bona fide safe harbor” argument under the ADA.
• Consider designing spousal HRAs to shore up possible defenses and avoid practices that could give rise to GINA violations.
• Only share aggregated de-identified personal health information with an employer plan sponsor.
• Think practically regarding litigation risk management.

“Thinking practically” includes avoiding an aggressive program that would anger employees or invite scrutiny by the regulators. That’s because “At the end of the day, anybody can file a claim, anybody can file a lawsuit,” Perretta said.

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Learn More About Employer-Based Wellness Programs

• Finding the Wellness Payoff from Happier Employees
• Read Resources from The Alliance Wellness Event
• EEOC Wellness Program Rules Are Still in Effect, But Changes Are Expected

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