Eligibility for Health Insurance Can Be Tied to Participation in a Wellness Plan

Published by Meg Vergeront on

A federal district court judge sitting in the Western District of Wisconsin recently held that an employer that conditioned eligibility for health benefits on participation in its wellness plan did not violate the Americans With Disabilities Act (ADA) because the terms of its health plan brought it within the Act’s “safe-harbor” provision.  See Equal Employment Opportunities Commission v. Flambeau, Inc., 2015 WL 9593632 (W.D. Wis. 2015).  This is a case of first impression in the Seventh Circuit. 

In Flambeau, the employer offered its employees health benefits provided by a self-funded, self-insured plan administered by a third party.  Participation in the plan was voluntary.  Those who elected to participate, however, were also required to participate in Flambeau’s wellness plan.  Participation in the wellness plan obligated employees to complete a health risk assessment and a biometric screening test.  Flambeau used the assessment and test results to classify plan participants’ health risks and calculate Flambeau’s projected insurance costs for the benefit year.  This information was then used to calculate how much the plan should charge plan participants for maintenance medications and preventive care, as well as the amount of premiums.  After identifying these risks based on information from the wellness plan participation, Flambeau decided to purchase stop-loss insurance to protect against the possibility of large claims. 

The Equal Employment Opportunities Commission (EEOC) sued, claiming that tying the eligibility for insurance to participation in the wellness plan violated the ADA.  Specifically, the EEOC claimed that Flambeau’s practice violated the ADA’s prohibition on requiring employees to submit to medical exams that are not job-related and consistent with a business necessity.  See 42 U.S.C. § 12112(d)(4)(A).  Flambeau, however, argued that its wellness plan fell within the safe-harbor provision in 42 U.S.C. § 12201(c)(2).

The court sided with Flambeau.  Subsection (c)(2) of the ADA safe-harbor provision, among other things, permits employers to establish, sponsor or administrate a bona fide benefit plan that is based on underwriting risks, classifying risks or administering such risks, as long as the employer’s actions are not designed to evade the reach of the ADA.  The court held that Flambeau’s wellness program was a “term” of its plan and that the term was included in the plan for the purpose of underwriting, classifying and administering health insurance risks.  It therefore fell squarely within the safe-harbor, unless it appeared that requiring participation in the wellness plan was designed to evade the ADA’s provisions.  The court determined that it was not because the terms of the plan did not involve a disability-based distinction used to discriminate.

At a glance, Flambeau offers needed guidance on the lawfulness of wellness programs.  It is too soon to say whether employers will be able to continue to rely on Flambeau in the future, however, because the EEOC filed an appeal on February 25, 2016.  Stay tuned to see what happens next. 

Filed Under: employment law, ADA, EEOC, safe-harbor provisions, wellness plan

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