Court Says EEOC Misinterprets the ADA Safe Harbor Provision

In the case of Equal Employment Opportunity Commission (EEOC) v. Flambeau, Inc., the US District Court for the Western District of Wisconsin decided that Flambeau was not overstepping any boundaries by creating a wellness requirement for their voluntary health plan. This case highlights what information employers are able to require from employees in order to participate in the company’s health plan. This could be completing a Health Risk Assessment (HRA) or a biometric screening test.

Flambeau is a Wisconsin-based plastic manufacturing company. The company is subject to the Americans with Disabilities Act (ADA). Flambeau offers its employees various employee benefits, one of which is a health plan. The plan is self-funded and is administered by United Medical Resources.

In October of 2010, Flambeau created a wellness program for employees that chose to enroll in the health plan for the 2011 benefit year. The wellness program had two components: an HRA and a biometric test. The HRA required each participant to complete a questionnaire about his or her medical history, diet, mental and social health and job satisfaction. The biometric testing included height and weight measurements, a blood pressure test and a blood draw.

Flambeau used the HRA and biometric screening as a tool for underwriting risks, classifying risks and administering the risks. Flambeau chose to make the wellness program mandatory for employees to qualify for the health plan in 2012.

This case arose when Dale Arnold, an employee of Flambeau who participated in the benefit plan for the 2011 plan year, failed to complete the assessment by the established deadline for the 2012 plan year. Consequently, Flambeau discontinued Arnold’s insurance. Flambeau gave Arnold the option of paying the COBRA rate for continued coverage through 2012, but Arnold declined because he thought the insurance under the defendant’s benefit plan was too expensive without the subsidy.

Soon after losing his coverage, Arnold filed a union grievance, a complaint with the Department of Labor (DOL) and a complaint with the EEOC. After discussions with the DOL, Flambeau agreed to reinstate Arnold’s insurance if Arnold completed the plan’s required testing and assessment and made his premium contributions. When Arnold agreed, his insurance was reinstated retroactive to January 1, 2012.

Despite the compromise reached by Arnold, the DOL and Flambeau, the EEOC filed a lawsuit on Arnold’s behalf, asserting that the plan’s testing requirement violated the ADA’s ban on employer mandated medical examinations. The ADA provides that a covered entity shall not require a medical examination unless such examination is shown to be job-related and consistent with business necessity. The EEOC viewed Flambeau as violating the ADA by requiring its employees to complete the wellness program’s HRA and biometric screening tests before they could enroll in defendant’s health benefit plan.

Flambeau responded with the argument that its practice of conditioning enrollment in its benefit plan on completion of the wellness program is protected by a safe harbor in the ADA that provides that the ADA shall not be construed to prohibit or restrict an employer from establishing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.

The court agreed with Flambeau, stating that the wellness program requirement is protected by the safe harbor terms. The wellness program requirement was intended to assist Flambeau with underwriting, classifying and administering risks associated with the plan. The wellness program was a term of Flambeau’s benefit plan because the plan terms disclosed that employees were required to complete the wellness program before they could enroll in the plan. The wellness program requirement was also based on underwriting risks, classifying risks, or administering risks associated with the insurance plan.

EEOC v. Flambeau, Inc. is important because it is a rejection of how the EEOC reads the ADA benefit plan safe harbor. If it is upheld on appeal, the Flambeau decision will help employers with a proactive wellness culture.

Even with this decision, employers still need to be careful of nondiscrimination and wellness rules under the Health Insurance Portability and Accountability Act (HIPAA) and under the Genetic Information Nondiscrimination Act that apply to employer health plans. Certain wellness programs are also subject to regulations under both HIPAA and health care reform, which limit financial incentives to 30 percent of the premiums.

About John Garner

John Garner has over thirty five years of experience in employee benefits. He specializes in compliance, health care reform, the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA). He helps clients with life, health, and disability benefits, cost containment, flexible benefits, and claim consulting.

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