Wellness Program Clears ADA Hurdle

In a recent decision, a Florida federal trial court waded into an area of the law that has generated substantial concern among employers wishing to implement wellness programs that include both a carrot and a stick. The result was surprisingly good news for those employers.

This decision (in Seff v. Broward County) arose from Broward County’s imposition of a monetary penalty ($20 per bi-weekly pay period) on any participant in the County’s health plan who refused to complete a health risk assessment ("HRA") and undergo a biometric screening (a finger-stick blood test to measure glucose and cholesterol levels). Citing the Americans with Disabilities Act (“ADA”) prohibition on involuntary medical examinations or disability-related inquiries, an employee who was assessed the penalty filed a class action lawsuit against the County.

This case first drew national attention in December of 2010, when the court certified the lawsuit as a class action. In its April 2011 decision, however, the court dismissed all of the ADA claims against the County. In so ruling, the court relied on an ADA “safe harbor” for “bona fide benefit plans that are based on underwriting risks, classifying risks, or administering such risks … .

What makes this Seff decision interesting is that it might be something of a “game changer” in this area of the law. Until now, any ADA discussion of a wellness program has focused on whether the program is “voluntary. This was due to a “voluntary wellness program” exception to the ADA prohibition noted above.  Under this line of analysis, the key question is whether a wellness program imposes a “penalty” on employees who decline to participate (making it “involuntary”), or merely “rewards” those employees who agree to participate (“voluntary”).

Certainly, this was the analysis presented by the staff of the Equal Employment Opportunity Commission (“EEOC”) in a 2009 letter addressed to an unnamed county (but sponsoring a wellness program that sounded suspiciously like Broward County’s). According to this letter, any wellness program that includes a medical exam or disability-related inquiry must be “voluntary,” and any penalty for not participating in the program makes it “involuntary.” It’s hard to argue with that logic.

But what the EEOC staff failed to address was the entirely separate ADA safe harbor relied upon by the Seff Court. Under the ADA’s statutory framework, this “bona fide benefit plan” safe harbor applies not only to the substantive terms of a health plan (a context in which numerous courts have applied it to reject ADA challenges), but also the ADA prohibition on involuntary medical exams and disability-related inquiries that are not “job-related and consistent with business necessity.”

Broward County did not even try to argue that its wellness program was job-related or consistent with business necessity, perhaps because the EEOC’s 2009 letter had specifically rejected such a characterization.  Hence its need to find some other ADA defense. But rather than arguing that its wellness program was “voluntary” (probably a losing argument, in view of the monetary penalty — over $500 per year — imposed for not participating), the County relied on the bona fide benefit plan safe harbor.

The court analyzed the County’s wellness program and found that it met the safe-harbor requirements. That is, the program was a “term” of the County’s health plan (because only health plan enrollees were eligible for the program, and the program was administered by the plan’s insurer).  Moreover, the program was “based on underwriting, classifying, and administering risks because its ultimate goal is to sponsor insurance plans that maintain or lower its participant’s [sic] premiums.”

So how far does this Seff decision reach? Clearly, wellness programs must continue to be analyzed under both the Genetic Information Nondiscrimination Act (“GINA”) (e.g., does an HRA ask for family medical history?) and the nondiscrimination provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) (does the program offer an alternative route to any premium discount that is otherwise conditioned on satisfying a particular health status?). But does this decision at least give wellness programs a free pass under the ADA? We don’t think so, for several reasons.

First, this was only a trial court decision. It could be reversed on appeal. And in the meantime, the decision is not binding on any court outside of south Florida.

Second, this wellness program was closely tied to the County’s health plan, making it easy for the court to characterize the program as a “term” of that bona fide benefit plan. A more free-standing program — such as one covering all employees, or not administered by a health plan’s insurer — might not be considered part of a health plan. (Whether such a free-standing wellness program could itself constitute a bona fide benefit plan is another unresolved question.)

Third, the ADA safe harbor for bona fide benefit plans is subject to its own exception for employer actions that are “a subterfuge to evade the purposes” of the ADA. Other courts — or the EEOC — might place greater weight on this “subterfuge” analysis.

Finally, Broward County’s wellness program contained various safeguards that might have colored the court’s ADA analysis. The program was administered by an outside insurer, and the County did not receive any employee’s personal information (only aggregated data). Any employee who was identified as having one of five specific “disease states” was given an opportunity to participate in a free disease management coaching program (but was not required to do so). After this coaching, such an employee would be eligible to receive certain medications at no additional cost.  Finally, even those employees who declined to participate in the wellness program remained eligible for coverage under the County’s health plan.

A wellness program failing to incorporate these types of safeguards might not be viewed as a “bona fide benefit plan.” Or it could be viewed as a “subterfuge to evade the purposes” of the ADA. Either characterization would result in the program falling outside of the ADA safe harbor relied upon by the Seff court.

Clearly, wellness programs are here to stay. And employers who are dissatisfied with the low level of employee participation achieved through “rewards” are increasingly turning to “penalties” for non-participation. This recent decision suggests that, notwithstanding the EEOC’s announced position, such an approach might be consistent with the ADA.