November 25, 2014

EEOC Takes Notice of Wellness

Programs Update
As previously reported, the Chicago District Office of the Equal Employment Opportunity
Commission (EEOC) filed two lawsuits against employers over wellness programs where the
arrangements, among other things, shifted the entire premium cost to the employee for nonparticipation in certain medical exams.
Recently, in a third lawsuit, the EEOC is challenging an aggressive incentive-based program
sponsored by Honeywell. In this case, the EEOC alleges violations under the Title I of the
Americans with Disabilities Act (ADA) and Title II of the Genetic Information Nondiscrimination Act
(GINA).
LEGAL BACKGROUND
ADA
The ADA limits an employers ability to obtain medical information from applicants and employees.
Generally, an employer may only require medical examinations and make disability-related inquiries
when it is job related and consistent with business necessity.
However, there is an exception when such medical exams and disability-related inquiries are part of
2
a voluntary wellness program. Unfortunately, the EEOC has not issued a definition of voluntary.

1
2

The following summarizes some, but not all, of the laws that affect wellness programs.
The ADA includes several safe harbors that exempt insurers and bona fide benefit plans from the ADA's restrictions on
medical exams and disability related inquiries, so long as the safe harbors are not used as a subterfuge to evade the
purposes of the ADA. How this safe harbor may actually apply to employer-based wellness programs is unclear. There is
only one known case where an employer successfully relied on this safe harbor with respect to its wellness program. The
ruling was very narrow as it was determined the insurance carrier, and not the employer, sponsored the wellness
program. The decision is not binding on any other Court and it is unclear whether the EEOC agrees with this decision.

Informally, however, the EEOC is concerned about financial incentives or other penalties imposed
on individuals who do not participate in a wellness program. See the Appendix below for the
EEOCs informal comments.
GINA
Under GINA, employers may not use financial inducements to obtain genetic information of an
employee. Genetic information includes, among other things, the manifestation of a disease or
disorder in a family member (i.e., family medical history). For this purpose, a family member is
defined broadly and includes an employees spouse (even though the spouse is not likely to share
the same genetic make-up as the employee). There is an outstanding question as to whether the
use of incentives to encourage a spouse to participate in a health risk assessment, biometrics or
have an annual physical violates GINA. As described below, this issue is raised in Honeywell.
HIPAA
Unlike the EEOC, the Department of Labor (DOL) has long standing regulations governing wellness
programs. These rules provide an exception from the general prohibition against group health plan
discrimination with respect to premiums, contributions or benefits based on a health factor. These
regulations were enhanced and codified by the Affordable Care Act (ACA). Briefly, these rules offer
employers two types of wellness programs that will not violate HIPAA subject to certain rules:

Participatory wellness programs do not violate HIPAA. This is an arrangement where either
there is no reward, or, if there is a reward, it is not based on satisfaction of a health-related
standard and the program is available to all similarly situated individuals, regardless of health
status.

Health contingent programs (activity-based or outcomes-based) must satisfy the 5-factor

test. This is a program that rewards certain behaviors or achievement of certain health related
standards. Such a program must comply with the following 5 requirements:
1.

Opportunity to qualify for the reward at least once per year.

2.

The reward cannot exceed 30% of the total cost of coverage (or 50% for a program
designed to prevent or reduce tobacco use).

3.

Program must be designed to promote health and prevent disease.

4.

The reward must be available to all similarly situated individuals and provide a
reasonable alternative.

5.

Notification in plan materials.

Unfortunately, compliance with HIPAA does not mean compliance with any other law.
THE CASES
As framed by the EEOC, the relevant facts and issues are as follows. It is expected that the
employers dispute some, or all, of the allegations.
Honeywell. Honeywell announced for the 2015 plan year, covered employees, and their covered
spouses if applicable, would need to undergo biometric testing (a blood draw). Failure to do so

Seff v. Broward County, 11-12217 (11th Cir. 8-20-2012) (Employers $20 per paycheck charge for employee declining to
complete a health risk assessment and obtain blood work fell under the insurer exemption and was not a subterfuge for
ADA discrimination.)

would result in potential lost contributions and surcharges totaling as much as $4,000 for the year.
Specifically, non-participants could lose up to $1,500 in HSA contributions and face a $500
surcharge on medical premiums. Declining the blood draw also resulted in a $1,000 tobacco related
surcharge per employee and/or covered spouse regardless of whether the employee/spouse
3
declined the blood draw for non-tobacco reasons. Prior to implementation, two employees filed
complaints with the EEOCs Chicago District Office alleging ADA and GINA violations. The EEOC
unsuccessfully tried to obtain a temporary restraining order (TRO) to keep Honeywell from imposing
penalties on non-participants for the 2015 plan year while litigation is ongoing. While the Court
denied the TRO request, the lawsuit continues. Briefly, the EEOC alleges:

A blood draw is a medical exam and is not job related and consistent with business necessity.
Therefore, to be permitted under the ADA, the program must be voluntary. Employees failing to
participate in the blood draw are penalized though lost HSA contributions and surcharges. The
EEOC believes this program is involuntary under the ADA.

In addition, to avoid lost contributions and surcharges, a covered spouse must also participate in
the blood draw. The EEOC alleges this violates GINA because it is an impermissible collection
of an employees genetic information (defined to include the manifestation of a disease or
disorder in a spouse as reported in the blood work).

In a press release, Honeywell strongly disputes the EEOCs allegations and specifically states their
program complies with the requirements under HIPAA and the ACA.

Orion Energy. The EEOC maintains that the employer instituted a wellness program that required
medical examinations and the completion of disability-related questions through a health risk
assessment. When an employee declined to participate in the program she was required to pay
100% of her health insurance premium. Had she participated in the program, the employer would
4
have paid the full premium associated with her health coverage. Another component of the
5
program required use of a Range of Motion (RM) machine to avoid a $50/month surcharge. When
the employee expressed her objection to the program she was terminated from employment. The
EEOC alleges the medical examination and subsequent action to terminate the employee violated
the ADA.
Flambeau. The EEOC alleges employees were required to complete biometric testing and a health
risk assessment consisting of blood work, measurements, and a self-disclosure of medical history.
In this case, the employee was unable to complete the biometric testing and risk assessment on the
day indicated by the employer because the employee was on a medical leave. Once he returned
from medical leave, the employee requested additional time to complete the requirements of the
wellness program, but the request was rejected by the employer. Subsequently, the employer
6
cancelled his health insurance coverage, but allowed for reinstatement at the full premium cost.
The employee could not afford that cost and his insurance remained cancelled. The employer also
informed employees that failure to attend the testing at the appointed time could result in

4
5

This design may also violate HIPAA nondiscrimination rules as described above. The EEOC is not responsible for HIPAA
enforcement; that is under the purview of the DOL. It will be interesting to see if the DOL has further comments or looks at
this program. Per Honeywells response, a reasonable alternative is available if an employee/spouse fails nicotine test in
the blood draw.
Orion disputes this allegation and states that the company would not have paid the entire premium.
This design may also violate HIPAA nondiscrimination rules as described above. The EEOC is not responsible for HIPAA
enforcement; that is under the purview of the DOL. It will be interesting to see if the DOL has further comments or looks at
this program. While Orion acknowledges the surcharge, it denies employees were required to use the RM machine.
It appears the employer offered continuation under COBRA, even though this would not be an event that triggers a COBRA
continuation right.

disciplinary action. Employees who participated in the program did not have their coverage
cancelled and paid 25% of the premium cost.
CONCLUSION & CONSIDERATION
While the plan designs described above may not be the norm, the alleged facts provide a helpful
reminder that employers need to carefully evaluate and identify potential risks in their wellness
programs with employment counsel. This is particularly true in light of the EEOC action against
Honeywell.
Based on the ongoing litigation, the EEOCs statements and other informal guidance, some
practices that should be avoided with respect to wellness programs include:

Terminating employees for non-participation in a wellness program.

Requiring the employee to pay a significant amount of the cost for health insurance coverage if
the employee does not participate in the wellness program, when participating employees are
required to pay little, or nothing, for coverage.

Denying access to a benefit (including an HRA) for failing to participate in a wellness program.

In addition, in light of Honeywell, employers should carefully review the use of financial incentives to
encourage participation in biometric tests, medical exams or health risk assessments. Absent
clarification, any incentive (even if it satisfies HIPAA requirements) has the potential to trigger a
problem under the ADA and GINA.
We will continue to monitor and provide updates on the latest developments.
For more information, see the following press releases:
The EEOC press release regarding Flambeau:
http://www.eeoc.gov/eeoc/newsroom/release/10-1-14b.cfm
The EEOC press release regarding Orion Energy:
http://www.eeoc.gov/eeoc/newsroom/release/8-20-14.cfm
Honeywells press release at: http://honeywell.com/News/Pages/Honeywell-Responds-to-EEOCsFrivolous-Lawsuit-To-Stop-Companys-Biometric-Screening-for-Employees.aspx

APPENDIX
The following are reflective of the EEOCs informal comments with respect to penalties:

As long as an employer neither requires participation nor penalizes employees who do not
participate, a wellness program is voluntary. Enforcement Guidance: Disability-Related
Inquiries and Medical Examinations of Employees under the ADA, Q/A-22, pg. 16,
http://www.eeoc.gov/policy/docs/guidance-inquiries.html.

With respect to a wellness program design where punitive triggers were used to make
uncooperative employees pay higher health care premiums, the EEOC commented that if the
program requires employees to answer disability-related inquiries or submit to medical
examinations, participation in the program must be voluntary. Punitive triggers would
seem to amount to penalties for non-participation in the program, thus rendering the
program involuntary. Further, the rules on disability-related inquiries and medical examination
apply to all applicants and employees, not just individuals with disabilities. Questions for the
EEOC Staff for the 2006 Joint Committee of Employee Benefits Technical Session, May 4,
2006, Q/A-1 & 2,
http://www.americanbar.org/content/dam/aba/migrated/jceb/2006/EEOC2006final.authcheckda
m.pdf.

A wellness program that requires employees to complete a health risk assessment in order to
receive coverage under the group health plan renders the program involuntary and would
violate ADA because employees choosing not to participate are denied a benefit (i.e., penalized
for non-participation) as compared to those employees who participate. Informal Letter dated
March 6, 2009. Informal comments do not reflect the official opinion or formal guidance of the
EEOC. A portion of this letter was rescinded. The deleted section appeared to adopt a similar
standard to the HIPAA requirements for purposes of a voluntary wellness program. However, as
this language was removed from the published informal letter, it remains unclear what the
EEOCs approach will be on these issues.
http://www.eeoc.gov/eeoc/foia/letters/2009/ada_disability_medexam_healthrisk.html.

To the extent disability-related inquiries are made of employees though a health risk
assessment, a wellness program will not be voluntary if the employer provides those
individuals who complete the assessment an HRA and does not provide such a benefit to those
who dont participate. Informal letter dated August 10, 2009.
http://www.eeoc.gov/eeoc/foia/letters/2009/ada_health_risk_assessment.html.

Recently, John Hendrickson, regional attorney for the EEOCs Chicago District, expressed serious
concern with programs that cancel or deny coverage or significantly shift cost back to the employee
for failure to participate in a program that requires compliance with medical exams or disability7
related inquiries. Hendrickson issued the following statement in an EEOC press release:
They can't compel participation in medical tests or questions that are not job-related
and consistent with business necessity by cancelling coverage or imposing enormous
penalties such as shifting 100% of the premium cost onto the back of the employee
who chooses not to participate. Having to choose between complying with such
medical exams and inquiries, on the one hand, or getting hit with cancellation or a
penalty, on the other hand, is not voluntary and not a choice at all.

In an earlier press release, Hendrickson is quoted as follows: "But they have to actually be voluntary. They can't compel
participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto
the back of the employee or by just firing the employee who chooses not to participate. Having to choose between
responding to medical exams and inquiries which are not job-related in a wellness program, on the one hand, or
being fired, on the other hand, is no choice at all." http://www.eeoc.gov/eeoc/newsroom/release/8-20-14.cfm.

*Note: All of this is subject to change based on government regulations.