On January 29, 2015, the U.S. Senate Committee on Health, Education, Labor & Pensions held a hearing on employer wellness plans. While bipartisan sentiment may be difficult to find in Washington, it is clear that both Republican and Democrat Senators view wellness plans favorably, recognize the crucial role that wellness plans play in lowering health care costs, and are concerned with the Equal Employment Opportunity Commission’s litigation challenging wellness plans, especially in the absence of an articulated policy by the EEOC.
The issue is fairly straightforward. Under the Affordable Care Act (“ACA”), and its implementing regulations issued by the Departments of Labor, Treasury and Health and Human Services, employers may offer financial incentives to employees up to 30% of their health care premiums for participating in and/or reaching certain health outcomes in a wellness plan (and up to 50% for smoking cessation programs). Read more here. Under the Americans With Disabilities Act (“ADA”), medical examinations and/inquiries (including biometric screening) are not permitted unless such inquiries are either job related and consistent with business necessity or voluntary.
Late last year, the EEOC filed litigation against Honeywell International seeking a preliminary injunction to stop it from implementing its wellness plan, which required employees to undergo biometric testing. Employees who chose not to participate forfeited a contribution to a health savings account of up to $1,500, were assessed a $500 surcharge, and were potentially subjected to a $1,000 nicotine surcharge. Ultimately, the EEOC’s theory was that Honeywell’s incentives offered through its wellness program made participation non-voluntary under the ADA even if the incentives complied with the ACA and its implementing regulations. The EEOC lost the first round of motions in the case (here is our post on that litigation). Given the seemingly inconsistent position between the ACA, regulations issued by three Cabinet-level agencies, and the EEOC’s litigation position, some employers have limited their wellness programs and related incentives, or have even chosen not to offer them.
From both sides of the aisle, the tenor of the hearing was clear – Congress permitted incentives for wellness plans that now the EEOC is litigating against. Senator Alexander (R-TN) remarked (link here) that “EEOC is sending a confusing message to employers – reliance on Obamacare’s authorization of wellness programs does not mean you won’t be sued.” Ranking Member Murray (D-WA) said “[I]t has been exciting to see businesses nationwide to respond to incentives included in the [ACA].” In addition, Sen. Mikulski (D-MD) noted that she was “very frustrated to hear that we are now arguing over the EEOC giving regs and rules… [G]iven the uncertainty of the law, the wellness programs are going to pull back.”
These sentiments follow a clear articulation by the White House on December 3, 2014 that the EEOC’s position “could be inconsistent with what we know about wellness programs and the fact that we know that wellness programs are good for both employers and employees.”
Implications For Employers
The Senate HELP Committee clearly expects the EEOC to issue regulations on the issue. Indeed, such regulations have been included on the EEOC’s most recent Regulatory Agenda. However, all stakeholders like to ask for clarity unless the clarity they receive is not the clarity that they want. As such, when proposed regulations are published, it will be critical for employers interested in offering wellness plans to consider submitting comments to reflect their support of wellness plan incentives up to the limits authorized by Congress. We will keep you updated on any additional developments regarding wellness plans and forthcoming EEOC proposed regulations.
Readers can also find this post on our Workplace Class Action blog here.