Good (But Guarded) News on the Wellness Plan Front
Legal developments often bear resemblance to theatrical plays – with multiple acts and scenes before the whole story is told. Such is the course of developments in the wellness plan arena. In Act I, Scene 1 various federal agencies issued regulations (under HIPAA and ACA) on how wellness plans can work, describing the legally permissible range of incentives and penalties such plans may implement to promote healthy behavior (e.g., participating in certain activities or maintaining a certain body mass index) or to discourage unhealthy behavior (e.g., tobacco use). But the EEOC entered in Scene 2 with a plot twist, announcing its position that certain wellness plan inquiries could violate the Americans with Disabilities Act's (ADA) prohibitions on employee medical exams and inquiries. As thus foreshadowed, Scene 3 had the EEOC pursuing ADA-related lawsuits against several employers over their wellness plans. Notably, while Scene 3 continues to play out, a court has now ruled on one of those cases, finding the wellness plan to be lawful.
The case of EEOC v. Flambeau, Inc. involved a challenge to a wellness plan's requirement that employees undergo an annual health risk assessment and biometric test in order to avoid cancellation of coverage. The EEOC brought suit in federal court, asserting that the plan violated the ADA's proscription (in 42 U.S.C. 12112(d)(4)(A)) against medical exams and inquiries unless job-related and consistent with business necessity. Flambeau responded that its wellness plan fell within the ADA's “safe harbor” (under 42 U.S.C. 12201(c)(2)) for gathering information used to underwrite risks, classify risks, or administer risks in a health plan. On December 31, 2015, Scene 3 closed, as the federal judge sided with Flambeau.
The script with regard to Flambeau's role may yet be re-written, as the EEOC still has time to appeal the decision. Nevertheless, important guidance can be gleaned from its performance to date. The ruling in Flambeau's favor was largely based on the unique characteristics of its wellness plan; as such, changes to any of the following factscould have altered the outcome of the decision:
- Flambeau's wellness plan is linked to its health plan.
- Flambeau self-funds and self-insures its health plan, but it is administered by a third party.
- Except for tobacco use confirmation, Flambeau receives only aggregated data about the results of the health risk assessment and biometric tests, so it does not know any individuals' health results.
- The health risk assessment and biometric testing are scheduled to coincide with open enrollment and the beginning of a new plan year.
- The third party administrator of Flambeau's health plan utilizes the information from the health risk assessment and biometric testing to calculate projected insurance costs for the benefit plan year, recommend plan charges for medications and particular aspects of care, and suggest premium levels and the need for stop-loss insurance.
Based on these specific facts, the federal judge concluded that the wellness plan's requirement of a health risk assessment and biometric testing was legally permissible. This is good news, but represents just one court's judgment on one wellness plan arrangement – one critic's review of one scene in one act of a larger play. Thus, we strongly suggest you discuss your wellness plan design with your benefits counsel or with your Elarbee Thompson attorney.