April 5, 2011

Financial Incentives for Wellness Program Participation: Employers Beware

The increased use of wellness programs raises issues relating to the Americans with Disabilities Act (ADA) (see Health Risk Assessments: Where Do They Stand? from the June 2009 edition of the Benefit Beat).    The potential risk can arise in a couple ways, such as inquiring about non-job related disability, or making coverage under a health plan contingent upon completing a health risk assessment.  The EEOC has not provided formal guidance on this matter; however, have issued two informal opinions. 

In an opinion rendered in March, 2009, the EEOC contemplated the scenario of participation in the health plan being contingent upon completing a health risk assessment. According to the EEOC, this kind of arrangement violates the ADA. Making eligibility for health coverage contingent upon completing a health risk assessment is an impermissible use of medical information, in contravention of the ADA.

In August, 2009, the EEOC issued a second informal opinion letter relating to the use of a health risk assessment as a condition of receiving a contribution to an employer-sponsored health reimbursement arrangement.  The required health risk assessment asked a series of over 100 questions, including family health history, self-care, personal health, women’s health, nutrition/health choices, physical activity, and alcohol and tobacco usage, many of which were determined by EEOC to be disability-related.  The EEOC concluded that these questions were not job-related, nor justifiable as a business necessity.  Disability-related inquiries and medical examinations are permitted as part of a voluntary wellness program. A wellness program is considered ‘voluntary’ if employees are neither required to participate nor penalized for non-participation.

The EEOC contemplated whether the Health Insurance Portability and Accountability Act of 1996 (HIPAA) nondiscrimination based on health status rules could be used as a roadmap for determining “voluntariness”. These HIPAA rules prohibit group health plans from discriminating against individuals based on health-status related factors, such as current or prior medical conditions, claims experience, etc. HIPAA’s nondiscrimination rules specifically address wellness programs.

Voluntary Wellness Program?

A recent class action lawsuit filed in Florida bears monitoring.  The case (Bradley Seff v. Broward County, Case 0:10-cv-61437-KMM) centers around an employer offering financial incentives for participating in a group “voluntary” wellness program.  The program requires employees to undergo an on-line health risk assessment and complete a biometric screening (finger stick for glucose and cholesterol).   Employees who choose not to participate in the health risk assessment and biometric screening are charged an additional $20 bi-weekly by automatic payroll deduction, on top of their health premium.  In March, 2011, a class action, representing approximately 267 Broward County’s current and retired employees affected by the additional charge for non-participation in the wellness program, was certified by the U.S. District Court of the Southern District of Florida as a valid class action case.   According to the Complaint, the crux of the matter questions whether Broward’s “voluntary” wellness program violates the ADA against making disability-related inquiries or conducting medical examinations.

At this point, the issue is far from resolved.  It will be helpful to get some guidance on what constitutes “voluntary”, specifically as it relates to wellness programs.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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