EEOC Challenges Some Wellness Programs

The commission and employers are fighting over whether incentives make the programs involuntary

When the federal court in Minneapolis denied the Equal Employment Opportunity Commission’s request to block Honeywell’s employee wellness program for 2015, employer groups and their lawyers exhaled, then went right back to holding their breaths, wondering what the next move by the commission might be.

As the enforcer of the Americans With Disabilities Act (ADA), the EEOC has a role in regulating employee wellness programs. Title I of the ADA specifically prohibits discrimination against people with disabilities, and that prohibition extends to medical conditions.

Confusion reigns

The Affordable Care Act, however, encourages employee wellness programs, and the EEOC’s view of these programs has confused and frustrated the managers who design and implement them.

Early 2015 could be eventful for EEOC oversight of employee wellness programs if, as some expect, the commission finally clarifies how Title I applies. Employers are concerned that guidance so far has been both vague and inconsistent with HIPAA and ACA regulations.

Wellness programs have been shown in some studies to reduce medical costs for health insurance plans and employers. Although there have been some questions raised about its findings, an often-cited study published in the January 2010 issue of Health Affairs found that medical costs fell more than $3.27 for every dollar spent on wellness programs and that absenteeism costs fell by about as much. The first author of that study, Katherine Baicker, PhD, has noted, though, that the findings come with many qualifiers.

The hang-up with the EEOC is the word voluntary. The ADA forbids employers from requiring employees or their dependents to submit to medical testing or screening unless they are job-related and consistent with business necessity. In October 2014, the EEOC filed a preliminary injunction aimed at preventing Honeywell from moving forward with biometric testing, a medical exam that assesses a person’s risk for diabetes, heart disease, and other conditions. In its complaint against Honeywell, the EEOC asserted that the wellness program wasn’t voluntary because it would penalize employees if they or their spouses do not get biometric screening because, according to the EEOC, they’d stand to lose up to $4,000 in the form of surcharges and lost health savings account contributions. The federal court’s denial of the injunction effectively ended the litigation, but the commission says it is continuing to investigate the Honeywell wellness program.

The Honeywell action was the latest in a spate of suits the Chicago EEOC office brought late last year against Midwestern employers over wellness programs, the first such actions the commission had taken under the ADA. The first lawsuit involves an employee of a Wisconsin energy company who refused to participate in the health screening. The company allegedly told the employee she would have to pay the full cost of her health insurance as a result, then fired her shortly thereafter. The second targets a Wisconsin plastics company that, the complaint says, canceled an employee’s health insurance after he missed a scheduled health screening because he was out on medical leave.

Are incentives mandatory?

These two cases appear to be more clear cut because employers are alleged to have fired or denied health insurance coverage to employees who refused or were unable to participate in wellness programs, according to employment lawyer Leslie Silverman, a former EEOC commissioner appointed by George W. Bush. The Honeywell case is more troubling for employers, she says, because it pivots on the definition of voluntary and the use of incentives as they apply to wellness programs.

The question as to what constitutes voluntary medical tests and screenings for workplace wellness programs goes back to the early 2000s, says Silverman, when the EEOC declared that employers were permitted to make disability-related inquiries or conduct medical examinations that are part of a voluntary wellness program without having to meet the job-related or business-necessity standard.

Reading from a Q&A in the EEOC’s 2000 enforcement guidance on disability-related inquiries and medical examinations of employees under the ADA, Silverman highlights the last line: “A wellness program is voluntary as long as an employer neither requires participation nor penalizes employees who do not participate.”

ACA changes the game

Since 2000, HIPAA regulations have been revised to limit employee incentives for participation in a wellness program. The adoption of the ACA raised that incentive level to 30%. Silverman says during this period the EEOC has never said what kind of an incentive or penalty would render it involuntary — and the commissioners have been asked.

Nancy Hammer, a lawyer at the Society of Human Resources Management, an international organization for human resources executives and administrators, was at a May 2013 meeting with business leaders at which the commission was asked.

“Even then, there were representatives expressing the employer viewpoint that we really need you to promulgate some kind of guidance for employers so they know where the bright lines are because that’s the most important thing for structuring plans and for employers to know that they are complying with the law,” she recalls.

“We need to figure this out,” says Nancy Hammer of the Society of Human Resources Management. Employers want to know whether they are complying with the law.

For members of her organization, Hammer says getting clarity on the EEOC’s approach to wellness plans is important.

When the members were surveyed on what changes they plan to make in 2015 in light of the ACA, one in four said they plan to implement or increase wellness offerings. Hammer says, “We need to figure this out.”

Speaking with people at employer and business associations in Washington, you get the sense that the EEOC is an outlier among federal agencies regulating those benefits.

“The administration has generally been supportive of these kinds of programs, and this is the only provision implemented under the Affordable Care Act that has bipartisan support,” says Kathryn Wilber, senior health policy counsel to the American Benefits Council.

Even the Obama administration seems to be trying to distance itself from the EEOC’s attitude toward wellness programs. At a White House briefing before the federal district court blocked the injunction against Honeywell, Press Secretary Josh Earnest noted that the EEOC is an independent agency but also underscored the White House’s support of wellness programs.

The EEOC is an outlier in its attitude toward wellness programs, says Kathryn Wilber of the American Benefits Council.

The EEOC consists of five commissioners. A vacancy was filled in early December when the Senate confirmed Charlotte A. Burrows, a Justice Department lawyer who was on Sen. Ted Kennedy’s staff. The appointment of Burrows could put the commission in a position to settle the question on wellness plans once and for all, says Wilber.

Word in Washington is that the EEOC will provide more specific guidance on what voluntary means in the context of incentives, wellness programs, and medical exams in the next month or so. Some say that schedule may be unrealistic.

EEOC spokeswoman Kimberly Smith-Brown gives assurances, though, that the commission is updating its regulatory guidance for wellness programs under the ADA and federal genetic discrimination statutes. Meanwhile, the Honeywell matter is still wending its way through the EEOC’s investigative process.

Wilber says all her group wants is for the commission to clear up the uncertainty—and to do so in a way that’s consistent with the HIPAA and ACA regulations that promote wellness plans. Until then, they will be holding their breaths.