EEOC’s Wellness Lawsuits Target Incentives, Spark Criticism

Tying biometric screenings to premium reduction is a common program feature

By Stephen Miller, CEBS Nov 3, 2014

Update: On April 20, 2015, the Department of Labor published in the Federal Register its long-awaited proposed rule on ensuring that worksite wellness programs that include financial incentives comply with the Americans with Disabilities Act and other federal statutes. The proposed rule included a 60-day public notice and comment period through June 19, 2015. See the SHRM Online article EEOC Issues Proposed Wellness Incentives Rule.

The U.S. Equal Employment Opportunity Commission (EEOC) sued a third employer-sponsored wellness program, following on the heels of two suits brought earlier in 2014. Filed in federal district court in Minnesota on Oct. 27, the EEOC's petition in EEOC v. Honeywell International Inc. originally sought to enjoin Honeywell from implementing its wellness program, charging violations of both the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

Although on Nov. 3 the district court denied the EEOC’s request for a temporary restraining order and preliminary injunction, based on a finding that Honeywell’s program did not pose “irreparable harm” to participants, the judge did not address the EEOC’s likelihood of success in the litigation and the suit is poised to go forward.

“We expect this case will be watched more closely by employers and wellness vendors alike as the program the EEOC describes in its petition is similar to popular wellness programs,” commented Joseph Lazzarotti, an attorney with Jackson Lewis P.C., in an online post.

“The timing of the lawsuit poses problems for employers, many of whom are in the middle of open enrollment and, often, conducting their own health risk assessments. Employers should quickly review the lawsuit and strategize on how best to minimize their risks,” advised an alert from law firm Quarles & Brady LLP.

Others had more severe responses. “This is an outrageous development, and one that could potentially jeopardize not only the health of America’s workers, but also that of their spouses,” said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee (ERIC), in a released statement.

Violations Charged

Starting in 2015, the biometric testing for Honeywell's employees and their spouses will be part of a screening to help identify health risks. It will include checks for blood pressure, HDL and total cholesterol, nonfasting glucose levels, body mass index (BMI) and waist circumference. Blood will also be screened to determine whether the employee or spouse smokes tobacco. ​

Employees will be penalized (or lose incentives) if they or their spouses do not take the biometric tests, including the blood draw. They would be subject to:

A $500 surcharge applied to the employee’s medical plan costs.

A $1,000 “tobacco surcharge” even if the employee declines to participate in the biometric testing for reasons other than smoking (since, presumably, absence of tobacco can’t be verified).

An additional $1,000 “tobacco surcharge” if the employee's covered spouse does not submit to the testing, even if the spouse declines to participate for reasons other than smoking.

Loss of health savings account contributions from Honeywell, which range up to $1,500 depending on the employee’s annual base wage and type of coverage.

Honeywell says its financial incentives fall within the range specified as allowable under the Affordable Care Act (ACA): for wellness programs generally up to 30 percent of the cost of annual health coverage, and for tobacco cessation programs up to 50 percent of the cost of health coverage.

In addition, the ACA and its implementing regulations require that wellness programs provide a reasonable alternative or waiver for achieving the incentive if someone cannot participate or achieve program goals due to a health condition or disability, a standard that Honeywell says its program also met.

But the EEOC claims that Honeywell’s incentives violate the ADA because employees are penalized in order to induce them to go through medical examinations that are not job-related or consistent with business necessity. Although there is an exception to this rule for “voluntary” health exams, the EEOC claims that these exams are not voluntary because Honeywell imposes a penalty on employees who decline to participate.

The EEOC says the program is involuntary
because it imposes a penalty on those
who decline to participate.


GINA and ‘Family Medical History’

The EEOC also claims that Honeywell’s wellness programs violate GINA because employees are penalized if their spouse does not complete the biometric testing.

“Honeywell is offering an inducement within the meaning of GINA to obtain medical information of its employees’ spouses, including information that can show hypertension, diabetes, and potentially other conditions,” the EEOC charged. “Medical information relating to manifested conditions of spouses is family medical history—or genetic information—under GINA.”

This is something of a departure, as most interpretations of "family medical history" regarding GINA suggest the phrase relates to close blood relations whose genetic predispositions to medical conditions such as heart disease, cancer or diabetes might predict the employee's likelihood for developing those conditions. Some wellness program advocates, in fact, have decried the proscription on collecting family medical history, as that information could allow for early targeted interventions or at least be used to encourage increased health vigilance.

A Popular Feature

Wellness programs with biometric screenings have become widespread, as are financial incentives to promote health participation in these screenings. Overall, among large U.S. employers that offer wellness programs, about three in four use incentives to engage employees in these programs—although not necessarily in health screenings—according to the nonprofit National Business Group on Health (NBGH).

“Employer-sponsored wellness programs and the associated financial incentives are intended to maintain and improve the health of employees and their families and not to penalize them,” the NBGH said in a released statement. “Well-designed wellness programs, those generally adopted by large employers, safeguard privacy and are designed to promote health, not to discriminate in employment or health coverage which is prohibited by the ADA and GINA.”

Moreover, the NBGH warned that “Adverse legal actions will have a chilling effect on these programs and will jeopardize incentives for all employees who have benefited from them.”

“Our primary concern is that it apparently is no longer enough for an employer-sponsored wellness plan to comply with the applicable requirements under the ACA,” commented ERIC’s Young. “The EEOC has apparently decided that it will be playing by a different set of rules, with no forewarning to companies whatsoever.”

Call for Guidance

“Employers have been seeking guidance from EEOC regarding how the ADA and the GINA apply to wellness programs for years and the EEOC has yet to issue clear guidance,” said Brian Marcotte, NBGH president and CEO. “The EEOC has had numerous opportunities to provide that guidance but has failed to do so. Their lack of clear guidance, plus the recent legal action conflicts with the message of HIPAA [Health Insurance Portability and Accountability Act] and the Affordable Care Act, which encourages the adoption and expansion of programs that benefit the health of employees and their families.”

“This is very frustrating for employers who care about the well-being of their employees and take seriously their compliance obligations. It is impossible for employers to abide by rules that do not exist,” added James Klein, president of the American Benefits Council, in an e-mail to SHRM Online.

“Like many other council-member companies, Honeywell has devoted substantial time and resources to the development and implementation of these programs,” Klein added. “The recent legal action by the EEOC, particularly in the absence of formal guidance on wellness programs from the commission, sends the wrong message.”

Defensive Actions

“An employer which faces such a lawsuit would likely have some defense,” the attorneys at Quarles & Brady advised. “For example, an employer does not violate the ADA’s ‘no medical examination’ rule if the medical examination is done to ‘underwrite,’ ‘classify’ or ‘administer’ medical risks. An employer may also argue that its program does not violate the ADA under the ‘voluntary’ wellness program exception. The EEOC has acknowledged these exceptions exist, but has generally taken a narrow reading of the exceptions.”

“Companies that have to date considered only the ACA requirements for their wellness programs should re-evaluate the programs in light of ADA and GINA risks,” said Lazzarotti of Jackson Lewis. “At a minimum, employers should monitor the developments in this case and the EEOC’s overall enforcement of these programs.”

Eric S. Dreiband, a Jones Day partner and former general counsel of the Equal Employment Opportunity Commission, writing in Forbes, advised:

What should workers and their employers do about this? One option: stay the course. To date, no court has endorsed the EEOC’s position, and those courts that have considered the issue have ruled against the EEOC. The public should pay careful attention to any proposed regulations that the Commission issues and be prepared to explain to the EEOC and its investigators and lawyers why wellness plans are both lawful and important.

The Controversy Continues

The Business Roundtable (BRT), a group of chief executives of more than 200 large U.S. corporations, sent a letter to the Labor, Treasury and Health and Human Services cabinet secretaries on Nov. 14, 2014, asking them to "thwart all future inappropriate actions against employers who are complying with" the ACA's wellness provisions, and warning of "a chilling effect across the country." In response, an administration official told Reuters that it supported workplace health promotion "while ensuring that individuals are protected from unfair underwriting practices that could otherwise reduce benefits based on health status."

In criticizing the BRT’s letter, health policy analysts Al Lewis and Vik Khanna, writing at The Health Care Blog on Nov. 29, argued: “The BRT’s goal is to allow companies to punish unhealthy workers to the limits of the Affordable Care Act’s wellness provision. … These CEOs must know that these ‘let’s play doctor’ programs and fines are expensive, intrusive, ineffective and embarrassing for the employees…. So why go to the mat with the President over these programs? Perhaps because these companies are all self-insured, and they believe that unhealthier people cost them more.”

Dave Cote, Honeywell chairman & CEO, responded to critics of his company's wellness program and shared his thoughts on the EEOC suit in this video clip, from CNBC’s “Squawk Box” on Dec. 3, 2014.

Republicans Introduce Bill in Support of Wellness Programs

In March 2015, Senate and House Republicans introduced legislation “to provide legal certainty—and eliminate confusion caused by the Equal Employment Opportunity Commission (EEOC)” for employers offering employee wellness programs that reward healthy lifestyle choices, according to a release from the House Committee on Education and the Workforce.

"The Preserving Employee Wellness Programs Act ... will reaffirm existing law, which allows for employee wellness programs tied to a financial reward,” the release stated. “The legislation clarifies that an employee's spouse may participate in the program as well. It also provides employees up to 180 days to request and complete an alternative wellness program if it is medically inadvisable or unreasonably difficult for an employee to participate in the original employee wellness program."

“More and more, employers are using outcomes-based programs to make health insurance less expensive for their employees,” said Sen. Lamar Alexander, chairman of the Senate Health, Education, Labor, and Pensions Committee. “Nearly half of all large employers say they plan to adopt these innovative plans by 2017, making it even more important to eliminate confusion caused by the EEOC and restore certainty for employers who want to reward their employees for leading a healthy lifestyle.”

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

Related External Articles:

EEOC's Strange War Against ObamaCare and Employer Wellness Plans, Forbes, February 2015

Workplace Wellness Battle Could Jeopardize Firms’ Support for Obamacare, Insurance Journal, November 2014

Biggest Loser Contests at Work? Only If They Pass Muster with the EEOC, Fisher & Phillips LLC, November 2014

Related SHRM Articles:

EEOC Readies Wellness Incentives Rule; Congress Responds, SHRM Online Benefits, March 2015

EEOC’s Silence on Wellness Programs Criticized, SHRM Online Legal Issues, February 2015

EEOC Challenges Involuntary Wellness Programs (EEOC v. Flambeau Inc.), SHRM Online Legal Issues, October 2014

EEOC Sues Employers’ Wellness Programs (EEOC v. Orion Energy System), SHRM Online Benefits, August 2014

Legal Implications of Employer-Sponsored Wellness Programs, SHRM Online Legal Issues, January 2014

Guidance Sought on Wellness Efforts and Anti-Discrimination Laws, SHRM Online Benefits, May 2013

Final Rule Provides Wellness Incentive Guidance, SHRM Online Benefits, May 2013

Employers Link Premiums to Wellness, SHRM Online Benefits, April 2013

Rand Study Provides Pointers on Wellness ROI, SHRM Online Benefits, January 2014

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