District Court States Medical Exams Fit in Voluntary Wellness Programs

A recent court decision gives insight into what employers may require for wellness initiatives tied to benefit plans.

On September 19, 2016, the Eastern District of Wisconsin decided on the case of Equal Employment Opportunity Commission (EEOC) v. Orion Energy Systems, granting summary judgment in part favoring Orion Energy Systems’ argument that their wellness program was voluntary.

The case will set a precedent in allowing employers to require a health risk assessment (HRA) as a part of their voluntary wellness program while still remaining compliant with the Americans with Disabilities Act (ADA).

Orion Energy Systems is an American power technology company based in Manitowoc, Wisconsin and employs about 250 people. In 2008, Orion changed their insurance structure from being fully-insured to self-funded. In 2009, Orion started a wellness initiative as a way to control health insurance costs by keeping employees healthy. The initiative consisted of three parts.

Orion Energy employees who elected to enroll in Orion’s self-funded plan would have to show that they did not smoke or would have to pay a surcharge of $80 per month for single coverage. The employees would have to exercise sixteen times per month on a range of motion machine located in Orion’s fitness center or pay a surcharge of $50 per month.

The employees would also have to complete a HRA at the beginning of the insurance year or pay the entire monthly premium equivalent amount. The HRA was a health history questionnaire and biometric screening involving a blood pressure check, height, weight and body circumference measurement, and blood draw and analysis.

Orion did not receive any personally identifiable information as a result of the HRA. The results were in an anonymous format that was given to Orion by a vendor. The nameless aggregated data allowed Orion to see the percentage of participants in its plan who had particular health risks such as high cholesterol. Orion used the wellness program as a tool to find common health issues and offer employees education or assistance to improve their health.

In April of 2009, Wendy Schobert, an employee at Orion questioned the confidentiality of the HRA and chose not to participate. Schobert also questioned how the premium was calculated, and commented that it was excessive in light of the service fee Orion was paying its third-party administrator, Auxiant.

Schobert sent a letter to HR Director Kari Tylkem stating that she declined participation in the HRA. She then had to pay 100 percent for her premiums to be covered by the group health plan. Schobert complained around the office about the structure of the group health benefits and the premium cost incentive to participate in the HRA.

She received a warning from her supervisor about her complaints of the HRA and premium cost and was advised to keep her opinions to herself. In May of 2009, Schobert was terminated for sending out an email criticizing the CEO of Orion Energy systems. Orion fired her on the grounds that her complaints were lowering morale in the office.

The EEOC sued Orion claiming that the Orion Energy Wellness Initiative violated a section of the ADA which states that a covered entity “shall not require a medical examination and shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.”

The EEOC alleged that the HRA was not “voluntary” within the meaning of the ADA regulations by requiring employees to complete a health risk assessment; having the non-participating employees pay 100 percent of their monthly premium amount; and by directing the employee not to discuss her concerns about the employer’s wellness program and then terminating her shortly after she objected to (and opted out of) the wellness program.

The EEOC also argued that the wellness program incentive amount went over the 30 percent maximum allowed incentives from the 2016 ADA Final Rules.

Orion claimed that the wellness initiative did not violate a section of the ADA for 3 reasons:

  1. Orion claimed that the wellness program is covered by one of the provisions of the “Safe Harbor” exemption. The ADA’s safe harbor provision allows insurers and plan sponsors (including employers) to use information, including actuarial data, about risks posed by certain health conditions to make decisions about insurability and about the cost of insurance.
  1. Orion did not “make inquiries” as prohibited by and ADA provision, instead Orion received only anonymous, aggregated employee responses and results from the HRA.
  1. Lastly, the wellness program was voluntary because employees had a choice whether or not they wanted to participate.

Court’s Decision

The court disagreed with Orion stating that the Safe Harbor provision does not apply to Orion’s wellness initiative because it was not used to underwrite, classify, or administer risk.

The court agreed with Orion that the Wellness program is voluntary. A section of the ADA permits employers to conduct voluntary medical examinations, including voluntary medical histories, if they are part of an employee health program available to employees at that work site. Orion’s wellness initiative was also optional. Orion employees were not required to participate in the program and they were instead given a choice to either complete the HRA as part of the health program or pay the full amount of the health benefit premium.

The court chose not to grant summary judgment on the EEOC’s retaliation claim. The court stated that an employee may engage in a protected activity such as raising awareness of an issue even if the challenged practice is not actually illegal. The employee must have a sincere and reasonable belief that they are opposing an unlawful practice.

In this case, Schobert expressed concern about the confidentiality of her medical information under the new wellness initiative. Since confidentiality of medical information is something that the ADA does govern, her expression may have been covered. This being so, the retaliation claim will continue to trial and we will have to wait to hear for that decision.

The court also stated that Orion’s requirement that non-participants of the wellness initiative pay 100 percent of their premiums did not violate the 2016 EEOC final rules that set the 30 percent incentive limit, because those rules do not get applied retroactively.

For Employers

Before setting any wellness program incentives, employers should first check to see which of the ADA/Genetic Information Nondiscrimination Act rules apply to their wellness programs, especially after the final rules were released May of this year.

It’s important to remember that as long as the participation in wellness programs and health assessments are voluntary, the biometric screening/ HRA does not violate the ADA wellness program rules. For a reminder of the final rules released, refer to our June blog post on the EEOC rules.

About Ben Clairday

As Bolton’s Compliance Assistant, Ben Clairday is responsible for handling Business Associate Agreements, Form 5500s, HIPAA files and Summary Plan Descriptions for clients. He also supports Bolton’s employee benefits service teams by providing his knowledge on the Affordable Care Act, wage and labor laws and paid sick leave laws. Ben works closely with Bolton Chief Compliance Officer John Garner, and recently assisted with updates on the 12th edition of the Health Insurance Answer Book. Ben is licensed in Life & Accident & Health Insurance and holds a Bachelors of Art in History from Humboldt State University.

Subscribe to the Bolton Blog