Yale's Settlement of Wellness Lawsuit Shows Risks of Health-Screening Incentives

Absent new regulations, only minimal wellness program incentives seem permissible

Stephen Miller, CEBS By Stephen Miller, CEBS March 10, 2022
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Yales Settlement of Wellness Lawsuit Shows Risks of Health-Screening Incentives

With new regulations on incentive-based wellness programs still in limbo, offering more than minimal incentives to participate in activities such as health screenings—or imposing more than minimal penalties for not participating—could be risky.

That's a key takeaway from a recently announced motion to settle a class-action lawsuit against Yale University's employee wellness program. If approved by a federal district court in Connecticut, the lawsuit, Kwesell v. Yale University, will be resolved with Yale paying $1.29 million to be distributed among employees covered by the program, minus attorneys' fees and costs.

The lawsuit alleged that Yale's Health Expectations Program violated federal statutes because it required some 6,000 union employees at Yale and their spouses to either participate in its employee wellness program or pay a weekly opt-out fee. By charging some employees $25 per week ($1,300 annually) if they did not participate in the wellness program—which required employees to receive medical screenings and share the results with Yale's health care providers—the suit alleged that Yale violated the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

Under the settlement agreement, Yale will stop collecting the opt-out fees and will change its practices regarding the transfer of health data in connection with the program.

Disputed Program

Yale implemented the program as part of a collective bargaining agreement with two of its unions, under which most union employees paid no premium for their health plan coverage. At the time the program was developed, the Equal Employment Opportunity Commission (EEOC) had authorized the charging of opt-out fees within employer-sponsored wellness programs.

"We are very pleased with the settlement in this important case, both because of the significant amount of compensation for Yale's employees and because of the example Yale is setting for other employers by eliminating their opt-out fees," said William Alvarado Rivera, senior vice president for litigation at AARP Foundation, whose attorneys represented Yale's employees. "We believe participating in a wellness program should be entirely voluntary, with no element of coercion, financial or otherwise."

Stephanie Spangler, Yale's vice provost for health affairs and academic integrity, said in a statement, "We designed the Health Expectations Program with our union partners and the advice of health care and legal experts. Nevertheless, we feel it is best to resolve what would have been expensive litigation and move forward. Our relationship with our employees is an important priority."

Conflicting Statutes

The Affordable Care Act (ACA) amended the Health Insurance Portability and Accountability Act (HIPAA) to allow employers to encourage participation in certain types of wellness programs by offering incentives of up to 30 percent of the total cost of an employee's health insurance premiums for self-only coverage, rising to 50 percent of individual-coverage costs for employees who participate in programs that prevent or reduce tobacco use.

The ADA and GINA, however, require employee participation in a wellness program that includes medical questions and exams to be "voluntary," creating the issue of whether high-value incentives (i.e., "carrots") or penalties (i.e., "sticks") coerce employees into disclosing health information.

Employees can sue a wellness plan sponsor under the ADA and GINA if they first complain to the EEOC and the EEOC refuses to act.

Pros and Cons of Wellness Incentives

Advocates for wellness program participation incentives (or opt-out penalties) argue that routine health screenings can inform participants of risk factors such as high blood pressure and elevated cholesterol levels so they can begin treatment and avoid developing heart disease or other illnesses. Screenings can also reveal conditions such as diabetes and certain cancers before they worsen and become life-threatening and more expensive to treat.

Opponents of wellness incentives, such as AARP Foundation, fear that despite HIPAA protections, employers might gain access to the program's findings and use them to discriminate against workers with health risks, which may be more prevalent among older workers. Others contend that whether to participate in screenings is a personal health decision that should not be subject to pressure from employers.

Conflicting Regulations

In 2016, the EEOC issued regulations allowing employers to provide incentives for participating in workplace wellness programs. These regulations reflected the incentive caps under HIPAA, as amended by the ACA. However, AARP sued the EEOC over these rules, which AARP argued coerced employees to disclose ADA- and GINA-protected personal health information.

In 2017, the district court for Washington, D.C., ordered the EEOC to replace its guidance with revised rules that comply with the ADA and GINA. When the EEOC failed to do so, the court subsequently vacated the EEOC's existing rules as of Jan. 1, 2019, leaving many incentive-based wellness programs in legal limbo and resulting in legal uncertainty regarding the permissible use and amount of incentives or opt-out fees.

Confusion Continues

On Jan. 7, 2021, the EEOC released a set of proposed rules limiting the value of incentives or penalties employers may use to encourage employee participation in wellness programs that track employees' health data. If program incentives were too high, for instance, they would be considered in violation of the ADA and GINA by coercing participation in these programs. The proposed rules, however, contained exceptions that, critics argued, could still be used to coerce participation in wellness screenings.

On Jan. 20, 2021, the Biden administration withdrew the proposed regulations from publication in the Federal Register. The EEOC subsequently confirmed that the proposed rules "have been withdrawn from the Office of the Federal Register and removed from the EEOC's website."

A Warning for Wellness Programs

Al Lewis, co-founder and CEO of Quizzify, a firm that educates employees about health and wellness, advised the following when the 2021 proposed regulations were withdrawn:

"The EEOC's proposed rules are officially dead. New rules, months away, will propose de miminis incentives and penalties only, for clinical programs. No more loopholes, as in the [Jan. 7, 2021] version. In the absence of rules, the word 'voluntary' itself applies. If your program heavily weighs screens, risk assessments and coaching in incentives or penalties or [uses] premium differentials or incentives-in-kind like vacation days, it is out of EEOC compliance, period."

On the subject of the Yale settlement, Lewis observed in an e-mail that the university "capitulated in the ADA violation lawsuit brought by its nonexempt employees and AARP over its employee wellness program. Clearly, they recognized that the EEOC now has 'teeth' and no longer looks the other way when wellness programs include high forfeitures (penalties or incentives, when the 'incentives' offset higher deductibles)" in the health plan.


Related SHRM Articles:

Study Stokes Fresh Scrutiny of Wellness Programs' Value, SHRM Online, June 2021

Do Corporate Wellness Programs Work?, HR Magazine, March 2021

EEOC Proposes—Then Suspends—Regulations on Wellness Program Incentives, SHRM Online, January 2021

Workers Sue Yale University Over Workplace Wellness Penalties, SHRM Online, July 2019

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