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Federal Court Upholds Wellness Program and Rejects Law Suit Filed By EEOC Challenging Health Risk Assessment Procedures

By on March 3, 2016 in ADA with 1 Comment

Wellness programs are becoming a new area of litigation as can be seen in Equal Employment Opportunity Commission  v. Flambeau, Inc., 2015 U.S. Dist. LEXIS 173482 (W. D. Wisconsin December 31, 2015).  The case involved a manufacturer of plastic products which offered its employees various employee benefits, including participation in a health insurance plan.  Employees were not required to participate in the health insurance plan, but for those employees who wanted to be in the plan, the company established a “wellness program.”

The wellness program had two parts:  a health risk assessment and a biometric test.  The health risk component required a participant to complete a questionnaire regarding his or her medical history, diet, mental and social health and job satisfaction.  The biometric test was akin to a routine physical examination, including height and weight measurements, a blood pressure test and a blood draw.

The information from the health risk assessment was only reported to the company in the aggregate, so as to make sure that the company had no idea of any individual participant’s results.  This information helped the employer estimate the cost of providing health insurance as well as appropriate premiums and co-pays.  The information also was useful to the company in formulating weight loss competitions and modified vending machine options.

For the year 2011, the company gave employees a $600 credit if they participated and completed both the health risk assessment and the biometric test.  This credit was eliminated in subsequent years, and health insurance was only offered to those employees who completed the wellness program.

This particular litigation arose from one employee, Mr. Arnold, who refused to complete the program tests.  That led the company to discontinue Arnold’s health insurance.  After losing his coverage, Arnold filed a union grievance and a complaint with the EEOC.  Eventually Arnold decided to participate in the program, and his benefits were reinstated.  However, the EEOC filed a lawsuit anyway, challenging the program.

The EEOC charged the company with violating the ADA, alleging that the company could not show that it had a job related need for the medical examination.  The company countered that the ADA has a “safe harbor” provision for insurance benefit plans.  Section 12201(c)(2) provides that the ADA “shall not be construed to prohibit or restrict” an employer from establishing or administering ‘the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.”

The federal court Judge who heard the challenge agreed with the employer.  He held that the safe harbor noted in the ADA does apply to wellness programs as a term of defendant’s benefit plan.  The Judge also found that the wellness program was “based on underwriting risks, or administering such risks.”  42 U.S.C. 12202(c)(2). The Court said that underwriting risks, classifying risks or administering risks refer to the process of developing an insurance plan.

The wellness program requirement was clearly intended to assist defendant with underwriting, classifying or administering risks associated with the insurance plan.  The undisputed evidence establishes that defendant’s consultant used the data gathered through the wellness program to classify defendant’s projected insurance costs for the benefit year.  They then provided recommendations regarding what defendant should charge the plan participants for maintenance medications and preventative care.  They also made recommendations regarding plan premiums, which included a recommendation that defendant charge cigarette smokers higher premiums. Finally, after identifying the risks through the wellness program, defendant decided to purchase stop-loss insurance as a hedge against the possibility of unexpectedly large claims.  These types of decisions are a fundamental part of developing and administering an insurance plan and therefore fall squarely within the scope of the safe harbor.

 The Court also rejected the EEOC’s argument that the purpose of the ADA was to prohibit employers from asking for medical and disability-related information. The Court said the real purpose of the ADA is to eliminate discrimination against individuals with disabilities.

“Regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrolling in defendant’s plan.  Furthermore, there is no evidence that defendant used the information gathered from the tests and assessments to make disability-related distinctions with respect to employees’ benefits.”

Employers can expect more challenges to wellness programs in the future, as the EEOC seems to be decidedly opposed to such programs.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, an executive committee member and shareholder with Capehart Scatchard, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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