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Wellness Program Regulations Update: GINA and Flambeau, Inc.

Last May, Nemeth Law wrote about the Equal Employment Opportunity Commission’s (EEOC) recent proposed regulations providing guidance to employers on how the Americans with Disabilities Act (ADA) applies to employee wellness programs.  Since then, there have been some notable updates.  First, the EEOC published another set of regulations regarding the impact of the Genetic Information Nondiscrimination Act (GINA) on wellness program incentives.  Second, a decision in a federal court case out of Wisconsin provides some insight into how courts could apply existing law to wellness program designs.

As discussed in our previous blog, the EEOC takes the position that incentives for employees to participate in wellness programs are illegal once they cross a set value threshold.  Specifically, for wellness programs offered as part of a group health plan, the maximum incentive (or, conversely, the maximum penalty) to participate in the program cannot be more than 30 percent of the total cost of employee-only coverage. Often times, wellness programs include health risk assessments (HRA’s) or other questionnaires meant to illicit information on what health risks exist in an employer’s workforce in the aggregate.  However, such questionnaires can conflict with laws like the ADA or GINA which look to restrict employer access to medical or genetic information.  Fortunately, for employers, both statutes provide general exceptions (with strict guidelines) for employers who gather such information as part of a wellness program and even allows employers to provide incentives for this information.   

That being said, prior GINA regulations placed some doubt on whether employers could collect HRA’s as part of a wellness program (which contain genetic information under the Act’s definition) for spouses of employees who participate in the employer’s health plan.  The EEOC’s published GINA regulations clarify that spouses can, in fact, provide this information and receive incentives for doing so as part of a wellness program.  The incentives are still limited (30 percent of the total cost of the plan) and are divided between the spouse and the employee. 

In another wellness program update, a federal court in Wisconsin struck a blow to the EEOC’s stance on wellness programs late last year when it ruled in favor of an employer’s restrictive wellness program design.  The employer, Flambeau, Inc., established a wellness program in 2010 for employees who wanted to enroll in its health insurance plan for the 2011 year.  Flambeau’s plan was self-funded and self-insured but administered through an outside vendor.  The wellness program had two primary components – an HRA and a biometric test.   Flambeau required its employees to participate in the wellness program, and provide the medical information, as a condition of enrolling in its health care program.  In other words, if the employee did not participate in the wellness program nor provide the medical information they were not eligible to receive health insurance.  The EEOC brought suit against Flambeau arguing that this violated the ADA.  Flambeau disagreed stating that it gathered the health information in its aggregate information to obtain the health risks of its health plan enrollees.  This allowed Flambeau to estimate the cost of providing insurance, set premiums, adjust co-pays, and evaluate the need for any stop-loss insurance.   As such, the plan design fell within a safe harbor provision under the ADA which states that the ADA does not restrict an employer from establishing or administering the terms of a bona fide benefit plan that are based on underwriting, classifying or administering risks.  The court agreed with Flambeau, and held that because the medical examinations were part of a wellness program and used to “administer and underwrite insurance risks associated with an employer’s health plan” the safe harbor provision of the ADA applied.  Importantly, the court noted that the safe harbor may not apply to wellness programs (and presumably the collection of aggregate health data) unrelated to the administration of insurance risks.

The legality of wellness programs and their design is currently in flux and will be for some time.  It is anticipated that the EEOC’s final regulations for both the ADA and GINA will be issued sometime early this year.  Nevertheless, there are a number of employers, like Flambeau, who simply may not accept the EEOC’s interpretation of these laws and are willing to litigate.  For at least one employer, this strategy met with success but it is uncertain if other courts will hold similarly.  Employers should continue review their current wellness programs in light of these updates and Nemeth Law will continue to monitor this developing area of law.

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