On August 20, 2012, the Eleventh Circuit Court of Appeals upheld a district court ruling that a basic wellness program feature—a $20 penalty for failing to complete a health risk assessment—did not violate the Americans with Disabilities Act (ADA). According to the court, the wellness program at issue satisfied the ADA bona fide plan safe harbor. Seff v. Broward County, Florida, No. 11-12217, Eleventh Circuit Court of Appeals (August 20, 2012).

The Eleventh Circuit ruling will be helpful for employers, as it addresses an avenue for compliance under the ADA that does not involve asking whether the “voluntary” requirement of the ADA was violated (which is the typical question employers struggle with in designing their wellness programs). Rather, the court’s focus was on whether the wellness program fell into the “bona fide plan” safe harbor provided under the ADA.

How Does the ADA Impact Wellness Plans?

The ADA generally prohibits employment discrimination against disabled individuals and limits the circumstances in which an employer may require physical exams or answers to questions about employee medical conditions. Voluntary medical exams and inquiries may be permitted as part of an employee health program so long as: participation is voluntary; information obtained about employee conditions is kept confidential; and information obtained is not used to discriminate against employees. An employment lawyer should be consulted in designing a wellness program to ensure that the design is considered “voluntary” and compliant with the ADA.

There is little guidance, either from the courts or the Equal Employment Opportunity Commission (EEOC), explaining whether or how an employer-sponsored wellness plan may encourage participation, or penalize non-participation, and still be considered “voluntary” under the ADA. For example, employers regularly avoid conditioning health plan eligibility on participation in the wellness program, for fear that it would render participation “involuntary” and thus violate the ADA. At one point, the EEOC issued an opinion letter stating that requiring a health risk assessment as a condition for health plan enrollment meant that a wellness plan could not be considered “voluntary.” That letter also indicated that an incentive of up to 20% of the total cost of coverage could be offered without violating the “voluntary” standard. However, the latter portion of the letter was later withdrawn and the EEOC still has yet to take a formal position on the question.

The ADA has certain safe harbors for insurers and bona fide plans that exempt such programs from ADA restrictions. Under these safe harbors, employers, insurers, and plan administrators are permitted to establish a health insurance plan (or a self-insured plan) that is “bona fide” based on underwriting risks, classifying risks, and administration that is not used as a “subterfuge” to evade the purposes of the ADA. The EEOC has generally stated that the safe harbor is to allow the development and administration of benefit plans in accordance with accepted principles of risk assessment.

Seff v. Broward County

Beginning in 2009, Broward County offered a wellness program (generally composed of a biometric screening and health risk assessment) to employees who participated in the group health plan. Participation in the wellness program was not a condition for coverage under the group health plan. However, those enrolled in the group health plan that did not participate in the wellness program were subject to a $20 charge each paycheck. In response to this practice, a class action was filed claiming that the wellness program participation was not voluntary due to the charge and therefore violated the ADA.

Being the first court to analyze this issue, the district court found that the Broward County wellness program met the ADA safe harbor for bona fide plans (which, as stated above, allows an employer to administer the terms of a bona fide benefit plan without running afoul of the ADA). The district court found the Broward County wellness program was a term of the group health plans and thus the safe harbor applied.

In hearing the appeal, the Eleventh Circuit had to consider the Broward County’s benefits manager’s testimony that the wellness program was not a term stated in the relevant benefit plans. After stating that the benefits manager’s legal opinion would not prevent the district court from granting summary judgment, the Eleventh Circuit analyzed the issue of whether the wellness program failed to be a bona fide plan because it was not clearly part of the plan document. On the issue of the application of the ADA safe harbor, the court stated that there was no specific authority that a 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 safe harbor. Based on the facts that the wellness program (1) was only available to individuals who enrolled in the group health plan and (2) was presented as part of the group plan in multiple handouts, the Eleventh Circuit found that the district court did not err in finding the wellness program was a term of the group health plan and within the ADA safe harbor.

So What Does This Mean for Employers?

This ruling gives employers additional guidance and considerations—in the right direction—in structuring their wellness programs under the ADA. As a start, employers will want to take steps to show that their wellness programs are part of a bona fide plan (which would include incorporating the program into the plan documents). By clearly making the wellness program part of a bona fide plan, employers can point to the safe harbor for ADA compliance and thus alleviate concerns regarding whether the wellness program violates the ADA’s otherwise applicable “voluntary” rules.

With the court’s use of the safe harbor, some employers may be tempted to push the “voluntary” limits in designing their wellness programs—and, for example, condition eligibility for the health plan on participation in the wellness program in reliance on the safe harbor. However, we would continue to caution employers from being aggressive in this regard, as the opinion in the court ruling is not necessarily consistent with where the EEOC would land.

Also, while not at issue in the opinion, the Employee Retirement Income Security Act and Health Insurance Portability and Accountability Act contain strict rules regarding wellness programs that also need to be taken into account in designing a wellness program.

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