Court Sides with Plan Sponsor in Wellness Program Challenge

Although the Americans with Disabilities Act (ADA) generally prohibits employers from requiring their employees to submit to medical examinations, Flambeau, Inc.’s requirement that employees complete a health risk assessment and biometric test falls within the ADA’s “safe harbor,” which provides an exemption for activities related to the administration of a bona fide insurance benefit plan, a district court judge found.

Beginning in 2012, Flambeau required employees to complete the assessment and test only if they wanted to participate in the company’s insurance plan. U.S. District Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin agreed with Flambeau’s argument that when viewed from this perspective, the assessment and testing were entirely voluntary and therefore not prohibited by the ADA.

According to the court opinion, the information gathered through the wellness program was used to identify the health risks and medical conditions common among the plan’s enrollees. Except for information regarding tobacco use, the health risks and medical conditions identified were reported to Flambeau in the aggregate, so that it did not know any participant’s individual results, indicating that it was not using the wellness program to discriminate against any employees. Flambeau said it used this information to estimate the cost of providing insurance, set participants’ premiums, evaluate the need for stop-loss insurance, adjust the co-pays for preventive exams and adjust the co-pays for certain prescription drugs.

In satisfaction of the ADA safe harbor conditions, Flambeau said the wellness program requirement constituted a “term” of its health insurance plan and that this term was included in the plan for the purpose of underwriting, classifying and administering health insurance risks. 

Crabb agreed, finding that Flambeau distributed handouts to its employees informing them of the wellness program requirement and also scheduled the wellness program’s health risk assessments and biometric testing so that they would coincide with the plan’s open enrollment period. Also, the plan’s summary plan description explained that participants would be required to enroll “in the manner and form prescribed by [Flambeau],” which put employees on notice that there might be additional enrollment requirements not spelled out in the summary plan description. 

In her opinion, Crabb used reasoning found in the 11th U.S. Circuit Court of Appeals decision in Seff v. Broward County. The court in that case found: “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.” 

Crabb rejected the Equal Employment Opportunity Commission’s (EEOC) reliance on a statement in its proposed wellness program regulations. In those regulations, the EEOC says, “The Commission does not believe that the ADA’s ‘safe harbor’ provision applicable to insurance as interpreted by the court in Seff v. Broward County, is the proper basis for finding wellness program incentives permissible.” Crabb noted that the EEOC’s proposed regulation speaks only to the safe harbor’s application to “wellness program incentives.” It says nothing about the safe harbor’s applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer’s health plan. 

The decision in Equal Employment Opportunity Commission v. Flambeau, Inc. is here.