Workplace Wellness Programs: Bona Fide Benefit or Prescription for a Lawsuit?

Transcription

1 Workplace Wellness Programs: Bona Fide Benefit or Prescription for a Lawsuit? Authors: Jennifer L. Bills, Disability Rights North Carolina Karin S. Feldman, AFL-CIO Patrick C. Hajovsky, BP Corporation North America Inc. Richard G. Moon, Verrill Dana, LLP This paper is intended to address both broadly what constitutes workplace wellness programs and the specifics of what is required for legal compliance with relevant laws and regulations. The paper is organized with an Introduction describing the extent and type of workplace wellness programs and their evolution, as well as pros and cons identified in recent studies over the last decade, and finally, flagging some of the legal issues impacted and concerns from employers and employees. Section 1 reviews the various federal laws and regulations which govern workplace wellness programs, including, inter alia, wellness incentives under the Affordable Care Act 1, and the newly-proposed EEOC regulations dealing with the Americans with Disabilities Act of 1990 ( ADA ). Section 2 discusses the few court cases and decisions addressing the legality of certain workplace wellness programs, including recent EEOC challenges. Section 3 discusses other state and federal laws that may apply to, or affect the nature of, wellness programs, including some implementation issues. Section 4 deals with the history and evolution of wellness programs, including a further discussion and assessment of their effectiveness. Section 5 has a series of short stakeholder perspectives on workplace wellness programs by the authors. The Appendix contains descriptions of four distinct employer wellness programs and the employers assessments of the relative success of such programs, together with a discussion of some of the legal concerns regarding the programs. 1 The Affordable Care Act or ACA refers to the Patient Protection and Affordable Care Act, P.L , as amended by the Health Care and Education Reconciliation Act of 2010, P.L

2 INTRODUCTION Wellness as a word by itself conjures up a very wide variety of activities, status, science, etc. Add the words Workplace and Program -- Workplace Wellness Program-- and while the perception may be much narrower, the breadth of what could be included is as extensive. Workplace wellness programs can facilitate employees discovering whether, and to what extent they are well, assist employees trying to stay healthy, or require employees to get healthier. Such programs may create a potentially potent vehicle to predict the costs associated with employer health plans, now and into the future. Indeed, wellness programs in their various forms encompass all four features, and in the United States on a huge scale, with 74 million people covered by employer-based wellness programs. In 2014, 51% of companies with over 50 employees offered some form of wellness program, including HRAs (Health Risk Assessments) or biometric screening, or both; 32% of small employers offered HRAs; and 26% of small companies offered biometric screening. 2 The growth in small employer offerings of wellness programs has continued since 2008, while large employer programs as a percentage has remained fairly constant since At the same time, some wellness programs may cross the line, intruding into employees personal lives and undermining privacy protections. Additionally, the new incentives for wellness programs permitted under the Affordable Care Act may result in policies that have an 2 Karen Pollitz, Matthew Rae, Workplace Wellness Programs Characteristics and Requirements, The Henry J. Kaiser Family Foundation, Issue Brief June 2015 available at 3 See Appendices 1 3; Soeren Mattke, Hang Sheng Liu, John P. Caloyeras, Christinia Y. Huang, Kristin R. Van Busum, Dmitry Khadyakov, Victoria Shier, Workplace Wellness Programs Study, Final Report Rand Health,, Rand Corporation (2013) available at ( Rand 2013 ) and Paul Fronstin, PhD EBRI, and M. Christopher Roebuck, PhD, RX Economics, LLC, Financial Incentives, Workplace Wellness Program Participation and Utilization of Health Care Service and Spending, Employee Benefits Research Institute, Issue Brief No. 417, August 2015 available at Both Rand 2013 and Rand 2014,infra, discussed and cited herein are extensive analyses of the covered topics and to appreciate all of the nuances and classifications should be reviewed in their entirety. 2

3 inadvertent disparate impact on people with disabilities or empower errant employers with a subterfuge for discrimination in addition to providing employers with an opportunity to reduce their health care costs by shifting them to workers. The ADA s requirement that employers reasonably accommodate an employee s disability remains in effect to counter possible discriminatory effects of workplace wellness policies. Similarly, an employer s well-meaning desire to improve employee health and manage financial risks must be balanced with the protections afforded workers under the ADA, HIPAA, ACA and other federal and state laws. Our paper provides a background for this discussion and begins to tease out some of these tensions. The Types of Workplace Wellness Programs and The Employers Utilizing Them Most studies and providers of workplace wellness programs divide them into three types: Promoting Health Preventing Disease Managing Disease Health promotion programs can be very inclusive in their activities. The activities range from nutritional advice in newsletters, sponsored activity programs, paid gym memberships, and healthy lifestyle guidance information, to more direct actions such as HRAs and providing individualized feedback to the participants. HRAs also normally provide the employer or wellness program provider, if different, aggregate de-identified feedback for use in selecting advice on lifestyle choices or can even lead to other programs for disease prevention and management. Roughly 80% of employers with wellness programs screen their employees for health risks. Such screenings can be done through a healthcare insurer, a private third party, or an in-house, self-administered questionnaire on health-related behaviors. Many programs stop there, providing the aggregate data to the employer and an insurer to determine how to most 3

4 effectively design benefits and giving the employee his or her individual data to help them make healthier choices and perhaps voluntarily initiate suggested healthcare actions. Disease prevention programs differ slightly from overall health promotion activities in order to focus on particular high cost and debilitating conditions. For example, the growing popularity of fitness trackers could be used to reduce the harmful effects of metabolic syndrome for a workforce e that is typically desk-bound. As well, and more popular, anti-smoking measures could fall into this category to help participants avoid the documented harmful effects of nicotine and provide a path to reduce, in some cases, addiction to nicotine and similar products. Disease management programs, rather than general wellness approaches, zero in on certain chronic and high cost conditions. These programs are designed to help ensure effective treatment is provided as opposed to wasteful and inefficient care. For example, a diabetic disease management program could entail nutritional counselling to forestall the dangerous effects of diabetes, reducing overall costs of treatment. It could also provide discounts on insulin test strips or, in extreme cases, limited networks of providers with greater benefits coverage inside those networks. Types of Workplace Wellness Programs: Participatory v. Health Contingent First, what are the distinctions between participatory programs and outcome-based or health contingent programs? Participatory programs are those that may offer a reward just for participating or assess a penalty for non-participation. Neither the reward nor the penalty may be related to the participant s health status or achievement of a particular health outcome. Health contingent programs, on the other hand, are generally tied to health factors or outcomes. Two 4

5 types of health contingent programs 4 are recognized under the 2013 tri-agency rules implementing the Affordable Care Act wellness program provision: activity only programs; and outcome-based wellness programs. Compliance As detailed in Section 1, multiple federal laws deal directly with wellness programs. The federal laws of direct concern are the ADA, the Affordable Care Act, ERISA, HIPAA, the Public Health Service Act, GINA, and the Internal Revenue Code. 5 While there are regulations or questions and answers issued pursuant to each of these laws, open questions remain and there are proposed new regulations pending with others to be proposed. Many state laws also impact wellness programs. Some states allow more permissive individual treatment by insurers. One state requires annual plan evaluations and reporting to the state. And, of course, there are other still broader questions, such as what counts as wages, or what health information must be kept private. Section 1 Federal Laws and Regulations Impacting Workplace Wellness Programs Statutes Title I of the ADA prohibits discrimination based on disability or perceived disability in the terms, conditions, and privileges of employment, as well as retaliation for alleging such 4 Additional detail about the two types of programs are provided in Section 1, infra. 5 HIPAA, the Health Insurance Portability and Accountability Act, set some minimum federal standards for private health insurance, including a prohibition on discrimination based on health status factors. To cover different private sector health coverage and state and local government health programs, HIPAA s group health plan requirements were added to the Employee Retirement Income Security Act of 1974, as amended (ERISA), the Internal Revenue Code of 1986, as amended and the Public Health Service Act. See Jennifer A. Staman, Enforcement of Private Health Insurance Market Reforms Under the Affordable Care Act (ACA), Congressional Research Service (January 2014) available at The Affordable Care Act, in turn, also amended each of these three laws. For simplicity, we will refer to HIPAA and the Affordable Care Act (or ACA), and unless otherwise noted, refer only to the applicable ERISA sections and Department of Labor regulations, rather than all three statutory sections and regulatory guidance. Recognizing that the three agencies the Departments of Labor, Treasury and Health and Human Services work together to issue parallel regulations in connection with HIPAA, the Affordable Care Act and GINA, we use the term tri-agency regulations when discussing relevant regulations. 5

6 discrimination. 6 This proscription extends to employers contractual relationships with fringe benefit providers that have the effect of discriminating against employees with disabilities. 7 The ADA also restricts employers generally from inquiring about employees disabilities, medical information, or health status. Specifically, it prohibits an employer from conducting examinations or inquiries unless they are job-related and consistent with business necessity. 8 Certain exceptions apply, such as for voluntary medical exams and medical histories, which are part of an employee health program available to employees at that work site. 9 The ADA s restrictions on medical inquiries and examinations prevent employers from uncovering hidden disabilities that could become the basis for workplace discrimination. The ADA also requires employers to engage with workers who disclose their disability and provide reasonable accommodations to enable them to perform the essential functions of their job or to participate in the privileges and benefits of employment (e.g., health insurance, workplace wellness programs), unless they prove an undue burden. 10 The Genetic Information Nondiscrimination Act (GINA) provides federal protection against genetic discrimination 11 in the workplace (Title II) and by group health plans and health insurance 12 providers (Title I). GINA prohibits employment and insurance discrimination based on genetic information and similarly restricts employers and insurers from inquiring about employees genetic information. Both the ADA and GINA provide exceptions for employers to conduct certain medical inquiries, including as part of some voluntary workplace wellness 6 42 U.S.C (a) U.S.C (b)(2) U.S.C (d)(4). 9 Id U.S.C (b)(5)(A) 11 Genetic information is broadly defined and includes information about genetic tests of an individual and family members and the manifestation of a disease or disorder in family members. ERISA Section 733(d)(6) and 42 U.S.C. 2000ff(4). 12 Life, disability and long-term care insurance are not governed by GINA s protections. 6

7 programs. The Equal Employment Opportunity Commission (EEOC) enforces both the ADA and GINA. EEOC Enforcement Guidance for the ADA clarifies that whether an employee is required to participate, or penalized for not participating, affects the determination of voluntariness. 13 The HIPAA and many other state privacy laws require health plans and insurers to protect the privacy of personal health information, including information that may be collected by workplace wellness programs or health insurers. Wellness programs that are part of group health plans must comply with the non-discrimination provisions of HIPAA, as amended by the Affordable Care Act, which permit incentives for some workplace wellness programs. HIPAA prohibits group health plans and health insurance issuers from discriminating on the basis of health status-related factors. 14 As an exception to the general prohibition, group health plans and issuers offering group health coverage could offer as part of a program of health promotion and disease promotion premium discounts or rebates or modify co-payments or deductibles. 15 Section 1201 of the ACA amended the discrimination prohibition included in HIPAA 16 to provide more detailed directives regarding wellness programs. Section 2705(j) of the PHSA generally incorporates the provisions of the 2006 regulations issued by HHS, DOL and Treasury 17 with one significant exception. Section 2705(j)(3) permits the reward under any wellness program requiring satisfaction of health status related factor to be increased from a 13 Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees under the Americans with Disabilities Act (ADA) available at 14 The statutory sections listed eight factors, including health status, medical condition, and claims experience. See, e.g., ERISA Section 702(a)(1). 15 ERISA Section 702(b)(2)(B). 16 The ACA amended the Public Health Service Act to add a new Section 2705, and that change is included in both ERISA and the Code through other statutory changes. See ERISA Section 715(a)(1) and Code Section 9815(a)(1). 17 Nondiscrimination and Wellness Programs in Health Coverage in the Group Market; Final Rules, 71 Fed. Reg (December 13, 2006) available at 7

8 maximum of 20 percent of the cost of coverage up to 30 percent. 18 In addition, DOL, HHS and Treasury were permitted to increase the available reward to up to 50 percent of the cost of coverage if the Secretaries determine that such an increase is appropriate. Regulatory Guidance EEOC Americans with Disabilities Act Regulations and Guidance Current ADA Act regulations 19 explain that risk assessments do not discriminate even if they result in limitations on individuals with disabilities, provided that these activities are not used as a subterfuge to evade the purposes of this part. They continue, [A]n employer or other covered entity cannot deny an individual with a disability who is qualified equal access to insurance or subject an individual with a disability who is qualified to different terms or conditions of insurance based on disability alone, if the disability does not pose increased risks. Part 1630 requires that decisions not based on risk classification be made in conformity with non-discrimination requirements. 20 The EEOC has also issued specific Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees under the ADA, 21 explaining when it is permissible for employers to make disability-related inquiries or require medical examinations of employees, and specifically regarding inquiries that are part of voluntary wellness and health screening programs. 22. May an employer make disability-related inquiries or conduct medical examinations that are part of its voluntary wellness program? Yes. The ADA allows employers to conduct voluntary medical 18 The cost basis would be employee-only coverage unless dependents could participate in the program when it would be the cost of coverage including those dependents CFR Part See Senate Report at 84-86; House Labor Report at ; House Judiciary Report at 70-71; 29 CFR Limiting, Segregating and Classifying

9 examinations and activities, including voluntary medical histories, which are part of an employee health program without having to show that they are job-related and consistent with business necessity, as long as any medical records acquired as part of the wellness program are kept confidential and separate from personnel records. These programs often include blood pressure screening, cholesterol testing, glaucoma testing, and cancer detection screening. Employees may be asked disability-related questions and may be given medical examinations pursuant to such voluntary wellness programs. A wellness program is voluntary as long as an employer neither requires participation nor penalizes employees who do not participate. 22 Currently, the guidance lacks more clarity around voluntariness and an explication of what constitutes a penalty in this context. The privacy protections serve a separate purpose from the disability discrimination prohibitions ensuring robust workplace rights for people with disabilities. Apart from protecting against disparate treatment or adverse employment actions, the limits on inquiries and examinations also serve to prevent social stigma and stereotyping by guarding employees right to privacy. Tri-Agency Wellness Program Regulations and Guidance Regulations implementing the Affordable Care Act wellness program provisions were issued jointly by the DOL, Treasury, and HHS. 23 The 2013 final regulations build on the original 2006 wellness programs rules and continue to recognize two types of wellness programs: (1) participatory programs, meaning no reward or penalty is based on the result or outcome; and (2) health-contingent programs which provide a reward only if workers meet a health-related standard. Participatory programs must be available to all similarly situated individuals regardless of their health status. In addition, there is no limit on the amount of any potential reward available or penalty Id. Incentives for Nondiscriminatory Wellness Programs in Group Health Plans; Final Rule, 78 Fed. Reg (June 3, 2013) available at 9

10 The final regulations permit two types of health-contingent wellness programs: (1) activity-only programs and (2) outcome-based programs. Examples of activity-only programs include walking, diet or exercise programs but without any requirement to attain or maintain specific health outcome. Outcome-based programs, on the other hand, require the attainment or maintenance of a specific health outcome, such as attaining certain results on biometric screenings. Both activity-only and outcome-based programs must satisfy additional requirements in order to avoid being considered discriminatory. First, eligible individuals must be able to qualify for the reward at least once each year. Second, the total reward or penalty under all available health-contingent programs cannot exceed the applicable percentage of the total cost of coverage. The maximum percentage is 50 percent for smoking-cessation programs and 30 percent for all other types of health-contingent programs. The total cost of coverage is the sum of the premium shares paid by the individual and the employer for self-only coverage unless other family members, such as spouses and other dependents may participate in the program. In those cases, the total cost is based on the coverage in which the worker and dependents are enrolled. 24 Third, health-contingent programs must be reasonably designed to prevent disease and promote health, a determination made on a case-by-case basis. Fourth, the reward must be available to all similarly situated individuals and to satisfy this requirement, reasonable alternative standards for obtaining the reward or waivers must be available in the case of activity-based programs to individuals if it is unreasonably difficult due to a medical condition to satisfy the standard or medically inadvisable for the individual to attempt to satisfy it and to C.F.R (f)(3)(ii) and (f)(4)(ii). 10

11 individuals who do not meet the initial standard for outcome-based programs. 25 Last, plan materials describing the wellness program must disclose the availability of alternative ways to qualify for the reward and the agencies provide sample language. 26 Outcome-based programs must satisfy additional requirements with respect to the reasonable alternative with some limitations on when verification from the individual s physician may be requested. Genetic Information Nondiscrimination Act Regulations and Guidance Tri-agency 27 and EEOC regulations provide guidance on how GINA affects wellness program incentives. The tri-agency rules address what group health plans may do while the EEOC regulations are more directed at employers though they also impact benefit plan terms. Under the tri-agency rules, any HRA or other tools asking questions about family medical history considered to be protected genetic information are limited. These questions are permitted only if they are asked after plan enrollment and no reward is provided for the completion of the HRA (or penalty assessed for failure to complete it). HRAs may include questions that do not directly seek genetic information as long as clear instructions advise the employees to not provide such information. 28 The EEOC regulations include a broad prohibition on the acquisition of genetic information with an exception for voluntary wellness programs. 29 To be considered voluntary, there must be no requirement that the genetic information be provided or penalty for choosing 25 The rule includes some factors to be considered in determining whether alternatives are reasonable, including making available an educational program and the required time commitment C.F.R (f)(6). 27 The interim final regulations were issued on October 2009 (74 Fed Reg ) available at and the EEOC issued its final rule on November 9, 2010 (75 Fed. Reg ), available at 28 The example language included in the rules provides that: In answering this question, you should not include any genetic information. That is, please do not include any family medical history or any information related to genetic testing, genetic services, genetic counseling or genetic diseases for which you believe you may be at risk. 29 C.F.R (d)(3), Example C.F.R (b)(2). 11

12 not to provide it. The EEOC makes clear that no financial inducements to provide genetic information may be offered, although they may be offered for completion of [HRAs] that include questions about family medical history or other genetic information, provided the covered entity makes clear, in language reasonably likely to be understood that the inducement will be made available whether or not the participant answers questions regarding genetic information. 30 Proposed EEOC Regulations As we have noted, different agencies regulate the many laws impacting these programs and EEOC, HHS, Treasury and DOL have endeavored to coordinate their regulatory and enforcement efforts to prevent conflicting federal guidance. 31 On April 20, 2015, the EEOC promulgated proposed regulations to modify ADA requirements for workplace wellness programs. 32 Proposed regulations to modify GINA s requirements for these programs are expected later in The EEOC s proposed rule tracks some of the requirements of the tri-agency ACA rules. For example, it requires wellness programs that involve medical inquiries to be reasonably designed to promote health, rather than acting as a subterfuge for discrimination. 33 Such programs cannot be overly burdensome and cannot shift costs onto employees based on their health. 34 The proposed EEOC rule provides guidance on the extent to which the ADA permits employers to offer incentives to promote participation in wellness programs that include C.F.R (b)(2)(ii). 31 Indeed, the 2013 tri-agency final regulations made no changes to the regulatory provision included in the final 2006 wellness program regulations regarding the effect of the complying with its provisions. Paragraph (h) of each agency s rule stated, in relevant part, that Compliance with this section is not determinative of compliance with any other provision of the Act or any other State or Federal law, such as the Americans with Disabilities Act. See 29 C.F.R (h) (2006) Fed. Reg (April 20, 2015) available at Proposed 29 C.F.R (d)(1). Id. 12

13 disability-related inquiries and/or medical examinations. 35 The rule clarifies the Commission s position that employee health programs that include disability-related inquiries or medical examinations (including inquiries or medical examinations that are part of a HRA or medical history) must be voluntary [particularly] in light of the amendments made to HIPAA by the Affordable Care Act. 36 Under the proposed rule, voluntary is defined to mean that (1) employees are not required to participate, (2) coverage is not denied under any group health plan or benefit package or limited due to non-participation, and (3) employers do not take any adverse employment action as a result of an employee s lack of participation. 37 The rule requires robust notice regarding what medical information is sought, where it will be stored, who will have access, how it will be used, and methods that will ensure against unauthorized disclosure or use, which must comply with the HIPAA Privacy Rule. 38 Disclosure of medical information obtained by wellness programs to employers may be made only in aggregate form, except as needed to administer the health plan. 39 The rule clarifies that an offer of limited incentives to participate in wellness programs that are part of a group health plan and that include disability-related inquiries and/or medical examinations, will not render the program involuntary. 40 It further proposes to extend the 30 percent limit on incentives to participatory programs, so long as it is available to all similarly situated employees, regardless of any health factor. 41 Importantly, the Commission is considering whether to instruct employers that incentives offered to promote participation in wellness programs must not render the cost of health insurance unaffordable to employees, such Fed. Reg. at Fed. Reg. at Fed. Reg. at 21662; Proposed 29 CFR (d)(2). Proposed 29 C.F.R (d)(2)(iv). Proposed 29 C.F.R (d)(6). Proposed 29 C.F.R (d)(3). Id. The EEOC proposal bases its 30 percent limit on the total cost of employee-only coverage. 13

14 that it is deemed coercive or involuntary forcing employees to disclose otherwise protected information. 42 Section 2. Case Law Actual case law related to enforcement of wellness programs is scarce. The only federal case directly on point, and perhaps the seminal case from which all future wellness program litigation will derive, is Seff v. Broward County, (778 F.Supp.2d 1370, S.D. Fla. 2011). In Seff, a Florida federal district court granted Broward County s (Broward) motion for summary judgment against a complaining class of employees finding that Broward s employee wellness program fell within the ADA s safe harbor provision for insurance plans. The 11 th Court of Appeals affirmed the summary judgment in 2012 (691 F. 3d 1221). Faced with escalating health care costs, Broward County ( Broward ) sought to stem the tide by implementing a wellness program within and as a part of its health care plan. The strategy contemplated that, via the wellness program, plan participants would be provided tools they need to live healthier lives and, as a direct byproduct, lead to lower health care costs for Broward taxpayers and employees. As a part of the plan s open enrollment process in 2009, Broward asked all participants to complete both a health risk assessment (HRA) and a biometric screening. The HRA could be completed online, while the biometric screening consisted of a finger stick blood test to measure glucose and cholesterol. Both the HRA and the biometric screening results would be kept confidential and not used against the participant in any way. Participation in the plan was not dependent on completion of either element; however, should the participant be identified by the plan s contract administrator as having any one of 5 chronic conditions, the participant would be Fed. Reg. at

15 eligible for a disease management coaching program and access to certain medications at no cost to the participant. In 2010, Broward sought to increase participation in the wellness program. Beginning in June of that year, the plan instituted a rule that any employee who did not complete both wellness components would incur a $20.00 charge on each biweekly paycheck. It is at this point that Plaintiff Bradley Seff and other participants in the Broward health plan objected legally. Seff alleged that the employee wellness program s biometric screening and online HRA ADA s prohibition on non-voluntary medical examinations and disability-related questions not related to the employee s ability to perform his/her essential job functions. Broward rebutted those allegations by arguing that its wellness program was a part of its health care plan and, therefore, was exempt from these ADA prohibitions. Recall that, under the ADA, a covered entity is prohibited from requiring a medical examination and making inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity. 43. However, the ADA has a safe harbor provision that exempts health care plans from the ADA s general prohibitions, including the prohibition on required medical examinations and disability-related inquiries. 44 The safe harbor provision states that the ADA shall not be construed as prohibiting a covered entity from establishing, sponsoring, or observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, U.S.C (d)(4)(A). 42 U.S.C (c)(2). 15

16 classifying risks, or administering such risks that are based on or not inconsistent with State law. 45 The Florida U.S. District Court granted summary judgment in Broward s favor based on its conclusion that the employee wellness program fell within the ADA s safe harbor provision. They also stated that the employee wellness program qualified as a term of a bona fide benefit plan within the meaning of the safe harbor provision because the employee wellness program constituted a term of Broward s group health plan. Seff argued this could not be the case since the wellness program did not dictate whether (employees) were eligible to receive insurance benefits. 46 The District Court disagreed, stating that the $20.00 surcharge for non-participation made the wellness program a condition of receiving full benefits. Additionally, even if the program were optional, health plans containing optional features do not divorce such features from the plan. 47 The District Court then turned its attention to whether the wellness program was based on underwriting risks, classifying risks or administering such risks, key elements in determining whether or not the ADA safe harbor applies. The court referenced two cases examining whether underwriting risks similarly falls under the ADA safe harbor. In Zamora-Quezada v. Health- Texas Medical Group of San Antonio, 34 F.Supp.2d 433 (W.D.Tex. 1988), a Federal District Court in Texas defined underwriting as the application of the various risk factors or risk classes to a particular individual or group for the purposes of determining whether to provide coverage. 48 In Barnes v. Benham Group, Inc., 22 F.Supp.2d 1013, 1020 (D.Minn. 1998), a federal district court in Minnesota found that the purpose of the ADA safe harbor was to permit Id. Seff, at Id. Zamora-Quezada, at

17 the development and administration of benefit plans in accordance with accepted principles of risk assessment. From this, the court in Seff concluded that the safe harbor provision was specifically aimed to protect the process of developing insurance plans. Relying on these cases, the Seff court concluded that the wellness program at bar was nothing other than an initiative designed to identify and mitigate risks, on the theory that encouraging employees to get involved in their own healthcare leads to a more healthy population that costs less to insure. 49 Furthermore, the court pointed out that the penalties at hand here were far worse than what the Minnesota court concluded was permitted in Barnes. There, the Benham Group required employees to complete health questionnaires for coverage in the Benham group health plan. When Barnes refused, he was fired for insubordination. The court found this action was clearly protected by the ADA s safe harbor provision given the information was used strictly for underwriting purposes and not as a pretext to receive information about a person s continued employment. 50 The Broward plan, by comparison, merely charged employees a $20.00 sanction biweekly. It is important to note that the District Court in Seff took pains to point out that all personally identifiable information obtained by both the Broward plan and the Benham Group plan was kept strictly confidential. The implication here is that this is a key element in establishing that gathering the information was for underwriting purposes exclusively, and not meant as a pretext to use the information for prohibited disability discrimination. While this Court did not mention it, this protection of confidentiality would also be a requirement under the privacy provisions of both the Health Insurance Portability and Accountability Act (HIPAA) and the ADA Seff, at Barnes, at

18 On appeal to the 11 th Circuit Court of Appeals, Seff and his fellow class members argued that the district court ignored the testimony of Broward s business manager, Lisa Morrison, who had stated that the wellness program was not a term or provision actually contained in any of the Broward benefit plan s governing plan documents. The 11 th Circuit was unpersuaded. In a brief two page opinion, the Court stated that there is no authority suggesting that a wellness program must be explicitly identified in a benefit plan s written documents to qualify as a term of the benefit plan. Seff presented no substantive argument that the issue of whether the employee wellness program was a written term contained within the plan document was material to the determination of the safe harbor applicability. The facts that the wellness program was available only to plan participants, and that Broward broadly communicated the terms of the program as part of its group plan in at least two employee handouts were sufficient. The 11 th Circuit upheld the decision, and Seff did not appeal to the U.S. Supreme Court. The Circuit Court decision did not address the underwriting issue. Subsequent Cases In 2014, the EEOC determined that it had an obligation under the ADA to pursue cases where wellness programs created barriers to health plan entry for individuals with disabilities, notwithstanding the safe harbor s limited exception. The EEOC filed three lawsuits EEOC vs. Honeywell International, Inc., Case No (D.Minn., filed Oct. 27, 2014), EEOC v. Orion Energy Systems, Inc., Case No (E.D. Wis filed Aug. 201, 2014) and EEOC v. Flambeau, Inc., Case No (W.D. Wis filed Sept. 30, 2014). The case that brought the most direct interest, which was also the shortest lived, was Honeywell. The Honeywell program provided that if the participating employee did not complete a biometric screening, the employee would be subject to a $1,500 premium surcharge 18

19 and would not be eligible for employer contributions to the employee s health savings account. Additionally, if the employee s covered spouse did not complete the biometric screening, the plan s tobacco use premium surcharge would be applied, increasing the employee s health plan premiums by an additional $1,000. The EEOC filed a request for a temporary restraining order and preliminary injunction claiming that Honeywell s employees would be irreparably harmed by participating in Honeywell s wellness program. Similar to Broward County, the Honeywell wellness program was made a part of the Honeywell medical plan, thus attempting to avail itself of the ADA safe harbor. Honeywell further argued that the use of surcharges in wellness programs was specifically endorsed by the Affordable Care Act. Honeywell contended, Congress would not expressly endorse in one federal statute what is illegal under another pre-existing federal statute. The federal District Court in Minnesota ruled that the EEOC could not establish a threat of irreparable harm for three reasons. First, the EEOC could easily meet its enforcement obligations by merely continuing the investigation into the lawfulness of Honeywell s program. Second, there was no threat of actual injury since the plaintiffs had already submitted to the biometric screening. In actuality, should the EEOC subsequently lose the suit, employees who did not submit to the biometric screening could be penalized retroactively for failing to do so. Third, as the results of the biometric tests were not shared in any identifiable way with Honeywell, the EEOC failed to demonstrate any right to privacy had been jeopardized. In fact, the EEOC never even alleged that Honeywell s program violated any privacy laws. While coming to no conclusion on the merits of the EEOC s overall arguments, the Court spent several pages outlining how the Honeywell program seemed to comply with both ACA and the ADA, citing Seff. In its Memorandum in Support of the Motion for a Preliminary Injunction, 19

20 the EEOC proactively attempted to distinguish Seff. Disputing the District Court s conclusions in Seff that surcharges and wellness programs furthered the concept of the development and administration of benefit plans in accordance with accepted principles of risk assessment, 51 the EEOC stated that the legislative history and purpose of the safe harbor does not force one to conclude that wellness programs fall under concepts of actuarial studies and legitimate classifications of risk. To do so, argued the EEOC, would be to find the safe harbor so broad that any health-based inquiry designed as a cost-saving measure would be permitted. After the District Court denied the motion for a temporary injunction, the EEOC dismissed this case on November 6, Although this case implicated the issue of the ADA safe harbor provision, the EEOC instead focused on the other two cases addressing this issue: Orion and Flambeau. 52 In Orion, the employer s wellness program was also embedded within its health plan, similar to Broward County s. However, Orion took this several steps further by requiring enrollees not only to complete a health risk assessment but also to complete a fitness test using a Range of Motion Machine in Orion s physical fitness room, with a further requirement to complete a medical history form. Failure to complete the HRA resulted in the employee being responsible for the full premium cost of the Orion health plan without an employer subsidy, should the employee choose to enroll. Additionally, failure to complete the fitness test would cost the employee an additional $50 per month in premiums. It should be noted that the complainant was the only employee who did not participate in the wellness program. Finally, 51 Seff, at It was reported in several news outlets that the EEOC commissioners did not review and approve of the Honeywell case before it was filed, in contrast to the Orion and Flambeau cases. (See Is EEOC Wellness Program Litigation Making You Sick? ) 20

21 her employment was terminated due to what Orion claims were non-related performance reasons. The Flambeau case presented a similarly aggressive program. Here, while also a part of the Flambeau medical plan, the employee was required to complete both an HRA and a biometric screening to be eligible. Additionally, if the employee did not complete both at the appointed time, the employee would be subject to disciplinary action, up to and including termination of employment. The complainant in this case was unable to complete the tests on the appointed date due to being in the hospital for cardiomyopathy and congestive heart failure. Upon his return to work, the complainant requested additional time to complete the tests due to his prior unavailability. These requests were denied, and his medical coverage was cancelled soon thereafter. He was, however, offered COBRA coverage. Both Orion and Flambeau have contended that their wellness programs fall squarely under the ADA s safe harbor provisions and invoked Seff while making those arguments. Clearly, these two programs attempt to apply Seff aggressively, perhaps too much so, raising important questions whether these are actual wellness programs related to accepted principles of risk assessment. For example, both the Seff and Honeywell courts emphasized the importance of privacy. In Orion, it is unclear who was present while the employees were completing the Range of Motion Machine fitness test. It will be important for the court to determine whether those individuals were representatives of the medical plan, and thus covered by HIPAA s privacy protections, or were other Orion employees. Other relevant considerations will undoubtedly include whether Orion maintained the wall of protection between employer and employee and whether the medical history form contained family medical history in violation of GINA. 21

22 In Flambeau, it will be important whether any reasonable accommodation was afforded the employee due to his medically related inability to complete the wellness program, as is required by HIPAA and the ADA. If there was not a reasonable modification offered pursuant to the ADA, or a reasonable alternative for the HRA and biometric screening under HIPAA, the non-compliance might render the program automatically unrelated to accepted principles of risk assessment. Moreover, if the programs are unrelated, the court might not even need to reach whether the ADA safe harbor applies since the programs would, by their nature, fall outside the safe harbor. 53 These are important questions for the courts to address, before one even gets to the new proposed EEOC wellness program rules, and their viability in the face of the ADA safe harbor. Pleadings and arguments are ongoing in these cases, and final decisions may not be issued for some time. State Court Case While no other federal court to date has cited Seff, an Oregon state court recently faced a similar fact pattern and, following Seff, ruled the employer s use of a health assessment questionnaire did not violate the ADA. See Patten v. State of Oregon, --- P.3d --- (Oregon Ct. App 2015), 2015 WL September 8, In Patten, an Oregon trial court granted the State s motion for summary judgment against complaining employees finding that the Public Employees Benefit Board s ( PEBB ) health assessment questionnaire did not violate the ADA, its state analog, or the Fourth or Fourteenth Amendments of the U.S. Constitution. 53 It is important to note that the reasonable alternative standard under HIPAA differs from the reasonable accommodation standard of the ADA, and just because a plan complies with one, the other could present a challenge to compliance. 22

23 PEBB s insurance program urged state employees who wanted to obtain (or maintain) state-subsidized health insurance to fill out an on-line health risk assessment questionnaire. The questionnaire contained questions that are highly personal and could indicate the presence of a disability. However, employees were informed that they need not answer all of the questions, although they were urged to do so. PEBB used the aggregated results to help design future health plan offerings. It also used the program itself as a way to encourage employees to adopt beneficial health habits, which they hoped, in turn, would reduce insurance costs. The assessment was to be filled out privately, online, and then automatically forwarded to a third party administrator, who aggregated the responses, securely stored the individual questionnaires (until they are destroyed) and forwarded the aggregated data to PEBB. PEBB and state employers received only a list of employees who had taken the assessment and a summary of the aggregated, anonymized or de-identified data. PEBB used the program to encourage employees to adopt beneficial health habits by requiring each assessment taker to agree to undertake two health actions. The agreement was not policed. Assessment takers were simply asked to report whether they took the health actions. They were not required to submit proof or to identify which actions they took. Although an employee's eligibility for state-sponsored health insurance did not depend on whether the employee had completed the assessment, those who failed to complete it paid more for their insurance than those who did. The difference was $17.50 per month for individuals or $35.00 per month for couples. Nonparticipants also had a deductible that is $ larger than participants. Plaintiffs alleged that the self-assessment questionnaire violates the ADA and Oregon s analog statute by requiring them to disclose disabilities. PEBB rebutted those allegations by 23

24 moving for summary judgment on the grounds that the assessment did not contain disability inquiries; that, even if it contained such inquiries, they fell within statutory safe harbor provisions that permit certain inquiries used by insurance providers for underwriting purposes; and that the assessment was neither a search nor an unlawful invasion of any constitutionally protected privacy interest. Plaintiffs argued that summary judgment was improper because a fact issue remained as to whether PEBB used the aggregated data to design future health plan offerings. The Court of Appeals disagreed. Kapowich s (PEBB's administrator) sworn declaration that the aggregated data enables PEBB to understand the overall health trends of the population it insures was uncontradicted in the record. Additionally, plaintiffs argued that there was a disputed issue of fact as to whether an employee's responses to the assessment were revealed to defendants; however, they presented no evidence regarding this alleged factual issue. Plaintiffs primary legal argument was that requiring employees to take the risk assessment questionnaire violates the ADA, which provides: A covered entity shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity. 54 The court concluded that the assessment asked employees to answer questions but in context the questions were not inquiries and the risk assessment questionnaire was not a prohibited disability inquiry. This conclusion obviates the need to address defendant s alternative argument that, if the assessment poses disability inquiries, they fall within the ADA's so-called insurance safe harbor provision. By this holding, the Oregon court went well beyond the Seff court. Even if this position does not hold up on appeal or is not followed by other courts reviewing the ADA, U.S.C (d)(4)(A). 24

25 the Oregon court would likely follow Seff s lead and hold the safe harbor applicable. In fact, the judges here wrote, tellingly: We note in passing, however, that we find persuasive the reasoning in the only case addressing the insurance safe harbor in the context of a wellness program identical to PEBB s in all relevant respects [then quoting extensively from Seff]. The plaintiffs made three other claims. First, the plaintiffs argued that the risk assessment questionnaire violated Oregon s analog statute, which provides that an employer may not require that an employee submit to a medical examination, may not make inquiries of an employee as to whether the employee has a disability, and may not make inquiries of an employee as to the nature or severity of any disability of the employee, unless the examination or inquiry is shown to be job-related and consistent with business necessity. 55 The court concluded that this argument was invalid because plaintiffs failed to address the question of whether the assessment makes disability inquiries in the first place. Therefore, PEBB s risk assessment questionnaire does not violate the ADA or Oregon s analog to that federal statute. Second, the court reached a similar conclusion regarding plaintiffs Fourth Amendment claim. Plaintiffs contended that, by requiring them to reveal medical information, for which they have a reasonable expectation of privacy, defendants conducted a prohibited warrantless search. The court concluded that there is no such thing as a Fourth Amendment right to be free from intrusive questioning and plaintiffs provided no reason why this court should be the first to find one. Finally, plaintiffs argued that the assessment violated their Due Process right to the privacy of their personal medical information. The court concluded that that government s interest as an employer in managing its internal affairs, combined with protections against public dissemination, outweighed the plaintiffs interest in nondisclosure. In the end, the court held that 55 Oregon Revised Statutes 659A