11th Circuit Agrees Wellness Incentive Not Discriminatory

August 29, 2012 (PLANSPONSOR.com) - A federal court has agreed that a Florida county’s wellness program did not violate the Americans with Disabilities Act (ADA).

The 11th U.S. Circuit Court of Appeals agreed with a district court’s grant of summary judgment to Broward County, finding that the ADA’s safe harbor provision for insurance plans exempted the employee wellness program from any potentially relevant ADA prohibitions (see “Court Finds Wellness Program Incentives Not Illegal”).   

The appellate court pointed out that under the ADA, a “covered entity” is prohibited from “requir[ing] a medical examination” and “mak[ing] 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.” However, the legislation contains a safe harbor provision that exempts certain insurance plans from the ADA’s general prohibitions. This includes the prohibition on “required” medical examinations and disability-related inquiries, which states that the ADA “shall not be construed” as prohibiting a covered entity “from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law.”  

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On appeal, Bradley Seff argued that the district court ignored testimony of Lisa Morrison, Broward’s corporate representative and acting benefits manager, who testified that the employee wellness program was not a term of Broward’s benefit plan and that the employee wellness program was not a term contained in Broward’s health and pharmacy plans.

The 11th Circuit said if Morrison’s testimony was construed as her legal opinion, it was not enough create a factual dispute precluding summary judgment. If her testimony was construed as addressing an issue of fact regarding the contents of Broward’s plan documents, it presents no substantive argument that the issue of whether the employee wellness program was a written term contained within the physical plan documents for Broward’s group health plan is material to the determination of the safe harbor provision’s applicability.  “The parties do not cite, nor are we independently aware of, any authority suggesting that an employee wellness program must be explicitly identified in a benefit plan’s written documents to qualify as a ‘term’ of the benefit plan within the meaning of the ADA’s safe harbor provision,” the court said in its opinion.  

In 2009, Broward County implemented a wellness program to address rising health care costs and its aging work force, according to court documents. Under the program, employees were required to take a health assessment test and produce a blood sample to determine glucose and cholesterol levels. The following year, the county decided to incentivize its work force by applying a $20 surcharge per paycheck for individuals not participating in the wellness program. The county has since dropped the surcharge.  

Seff, a former Broward employee who incurred the $20 charges on his paychecks from June 2010 until January 1, 2011, filed a class action lawsuit, alleging that the employee wellness program’s biometric screening and online Health Risk Assessment questionnaire violated the ADA’s prohibition on non-voluntary medical examinations and disability-related inquiries.    

The 11th Circuit’s opinion is at http://www.ca11.uscourts.gov/opinions/ops/201112217.pdf.

Unfunded Pension Liabilities Most of States' Debt

August 29, 2012 (PLANSPONSOR.com) - Debt across the 50 states amounts to $4.19 trillion, according to a report from State Budget Solutions.

Market-valued unfunded public pension liabilities make up more than half of all state debt, accounting for $2.8 trillion of the total. These market-valued pension liabilities provide a realistic view of the money owed to public pension systems as a result of years of skipped payments, borrowed funds and inaccurate discount rate assumptions, the report contends.  

The latest traditionally calculated figures total only $760 billion in unfunded pension liabilities. “Total state debt using these figures is still over $2 trillion, but a comprehensive view of state debt without accurately assessed public pension liabilities disguises the problem,” the report said.  

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States and other sources have not yet released market value pension liability figures for fiscal year 2011, so this year’s report uses the same market-valued pension liability figures first published in 2010 and used in the previous year’s report. Even so, growth in traditionally calculated unfunded pension liability totals indicates that if updated numbers were available, aggregate state debt would have continued to increase. 

Outstanding debt and other post-employment benefit liabilities each contribute approximately $600 billion to total debt. Outstanding debt includes bonds, leases and other regularly assessed components of primary government debt. Post-employment benefits include health care and other non-pension benefit guarantees owed to public employees.  

The final two items included in the total state debt calculation are outstanding unemployment trust fund loans and fiscal year 2013 budget gaps. Unemployment trust fund loans represent payments due to the federal government, often to cover rising unemployment costs as a result of the recent economic downturn. The fiscal year 2013 budget gap is the gap between revenues and expenditures in each state's most recent budget year. Both of these figures declined from last year's report; the budget gap total decreased by more than half.   

“However, these totals failed to make a sizable impact on state debt; their totals are dramatically overshadowed by pension liabilities, OPEB liabilities and outstanding debt,” the report concluded.  

More information is here.

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