Tuesday, January 12, 2016

Western District of Wisconsin Rejects EEOC's Challenge to Employer's Wellness Program

In a case that caught a lot of attention recently, a federal district court in Wisconsin dealt the Equal Employment Opportunity Commission a blow when a judge there granted the defendant's motion for summary judgment in a case involving the issue of wellness plans--a case also not yet addressed by the 7th Circuit.

Facts

The defendant, Flambeau, Inc., manufactures and sells plastics internationally.  Flambeau offers its employees various employee benefits, one of which is the ability to participate in its health insurance plan--a plan that is self-funded and self-insured, but administered by United Medical Resources.  Participation in the health insurance plan is wholly voluntary and employees are not required to participate in the plan as a condition of their employment.  The charging party in this matter, Dale Arnold, participated regularly in the insurance plan.

In October 2010, Flambeau established a "wellness program" for those employees that wanted to enroll in their health insurance plan for the 2011 benefit year.  The wellness program had 2 components:  1) a health risk assessment, and a 2) biometric test.  The health risk assessment required each participant to complete a questionnaire about their medical history, diet, mental and social health and job satisfaction.  The biometric test was similar to a routine physical exam.  The information gathered through the wellness program was used to identify the health risks and medical conditions common among the plan's enrollees and, except for information regarding tobacco use, the health risks and medical conditions identified were reported to the defendant in the aggregate, so that it did not know any participant's individual results.  This information was then used to estimate the cost of providing insurance, set premiums, evaluate the need for stop-loss insurance, adjust co-pays, etc.

For 2011, the first year the wellness program was in place, Flambeau promoted the program by giving employees a $600 credit if they participated and completed both the health risk assessment and the biometric test.  For 2012 and 2013, Flambeau eliminated the $600 credit and instead adopted a policy of offering health insurance only to those employees that completed the wellness program.  However, participation in the wellness program was not a condition of continued employment, but Flambeau offered company-subsidized health insurance under its benefit plan to wellness program participants exclusively.

For the 2011 benefits year, Arnold participated in the wellness program, enrolled in defendant's insurance plan and received the $600 credit.  However, for the 2012 year, which was also the first year participation in the wellness program was required, Arnold failed to complete the program's assessment and tests by the established deadline and, thus, Flambeau discontinued his insurance.  Flambeau gave Arnold the option of paying the COBRA rate for continued coverage through 2012, but Arnold declined because he though the insurance under Flambeau's plan was too expensive without the subsidy.

After losing his coverage, Arnold filed a union grievance, a complaint with the Department of Labor and a complaint with the EEOC.  Flambeau then decided to reinstate Arnold's insurance if Arnold completed the plan's required testing and assessment and made his premium contributions.  Arnold agreed and Flambeau retroactively reinstated his insurance, but the EEOC stilled filed this lawsuit on behalf of Arnold asserting that the plan's testing requirement violated section 12112(d)(4)(A)'s ban on employer mandated medical examinations.

Issue

The sole issue in the case surrounds section 12112(d)(4)(A), which states 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 argued that Flambeau violated this section by requiring its employees to complete the wellness program's health risk assessment and biometric screening tests before they could enroll in their health insurance plan.  Flamebeau argued that its practice of conditioning enrollment in its benefits plan on completion of the wellness program is protected by the ADA's "safe harbor" for insurance benefit plans set forth in 42 U.S.C. section 12201(c)(2), which provides, in relevant part, 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." 

Opinion

As the Court noted a couple times in the opinion, the application of the safe harbor provision to employer-sponsored wellness programs is a matter of first impression in this circuit.  Thus, Flambeau urged the court to follow the approach taken by courts in other jurisdictions, specifically, Seff v. Broward County, Florida, 691 F.3d 1221 (11th Cir. 2012).

In discussion the two cases proffered by Flambeau, the court discussed the differences between two sections of the ADA:  12201(c)(2) and 12112(d)(4)(B).  Section 12201(c)(2)'s safe harbor provides an exception for medical examinations that are tied to employers' insurance plans, while section 12112(d)(4)(B) provides an exception for medical examinations that are part of "employee health programs" regardless whether the employer sponsors any sort of employee benefit plan at all.  The court noted, "in some instances the exception and protections set forth in 12201(c)(2) and 12112(d)(4)(B) may overlap but the latter exception is rendered irrelevant only when the wellness program at issue is included as part of an employer's benefit plan.  That is, when an employer sponsors a wellness program that is NOT part of the employer's benefit plan, it cannot avail itself of section 12202(c)(2)'s safe harbor, but it might still rely on the employee health program exception in sectioon 12112(d)(4)(B) if it satisfies that provision's requirements.

The EEOC unsuccessfully attempted to argue that section 12201(c)(2) should have been construed so narrowly as to render the wellness program requirements to fall outside the safe harbor provision, regardless whether the wellness program is part of an employer's insurance benefit plan.  Unpersuaded, the court then had to decide whether the wellness program requirement is a "term" of defendants' insurance benefit plan and is based on "underwriting risks, classifying risks, or administering such risks."  42 U.S.C. 12201(c)(2).  The court held that the wellness program requirement is clearly a "term" of defendant's benefit plan.

The case is EEOC v. Flambeau, Inc., No. 14-cv-638-bbc (W.D. Wisc.) and more can be found about the case here and here.

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