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Wellness Programs, the ADA, HIPAA, and the Affordable Care Act: The Legal Implications Can Make You Queasy

by Erin Ebeler, Woods & Aitken LLP

The concept of wellness is seemingly everywhere these days, but the many (and arguably conflicting) federal laws on employer wellness programs are difficult to navigate and understand. On November 20, 2012, the legal landscape became even more interesting with the proposal for additional wellness program regulations relating to the Affordable Care Act. The stated purpose of these regulations is to “encourage appropriately designed, consumer-protective wellness programs in group health coverage.” However, the proposed rules would not go into effect until January 1, 2014 (assuming no delays), and were only opened for public comment in the last weeks of November 2012. As such, these proposed rules are far from concrete and likely to change between now and when, if ever, they become effective. So, what are employers to do in the meantime? Generally speaking, employer wellness programs must be designed with the restrictions of the Americans with Disabilities Act (ADA) and the Health Insurance Portability and Accountability Act (HIPAA) in mind.

ADA

The basic components of wellness programs are often directly at odds with general principles that exist under the ADA. As HR professionals know, the key purpose of the ADA is to protect individuals with disabilities against employment discrimination. Therefore, the ADA limits the circumstances in which an employer may require physical exams or answers to disability-related inquiries. Unless otherwise exempt, such exams or inquiries must be job-related or subject to a business necessity exception to comply with the ADA.

Under the ADA, an inquiry is “disability-related” if an individual's response to the inquiry could reasonably be expected to disclose the presence of a protected disability. This presents an interesting dilemma because health risk assessments, generalized medical exams or health screens are typically part of an employer wellness program. Because these types of assessments do not focus on specific job functions of an individual employee, they are not deemed job-related or subject to business necessity under the ADA and, therefore, would be prohibited. The ADA, however, does permit generalized disability-related inquiries if they are completely voluntary.

The ADA also has safe harbors for bona fide employee benefit plans which exempt such plans from the restrictions of the ADA. Among these safe harbors is a statutory exemption that permits employers to establish plans based on underwriting, classifying risks or administering risks as long as the exemption is not used as a subterfuge to evade the purposes of the ADA.

HIPPA

The Health Insurance Portability and Accountability Act (HIPAA) also regulates wellness programs. Notably, the proposed regulations for the Affordable Care Act are expected to replace the HIPAA regulations on wellness programs. At the current time, though, HIPAA specifically allows wellness programs that condition eligibility to participate in the employer's group health plan on an employee's completion of a health risk assessment prior to enrollment.

EEOC Induced Confusion on Intersection of ADA and HIPAA

Although HIPAA’s express allowance of wellness programs appears to state the legislative view on the legality of wellness programs, the Equal Employment Opportunity Commission (EEOC) has created uncertainty. Specifically, the EEOC issued and then withdrew an opinion letter stating that requiring a health risk assessment as a condition for enrollment (i.e., what HIPAA specifically allows) meant that the wellness program could not be considered voluntary (i.e., the ADA requirement). The EEOC’s ultimate position has not been further stated, and it has created a great deal of employer uncertainty regarding the ability to effectively maintain a wellness program that is in compliance with the ADA.

Recent Court Action

Meanwhile, the Eleventh Circuit Court of Appeals weighed in on this issue in an August, 2012 decision. This decision affirmed a district court ruling which held that a $20 per pay period decrease in the employee share of health insurance premium payments upon completion of a health risk assessment did not violate the ADA. Seff v. Broward County, Florida, No. 11-12217, (11th Cir. 2012). In this case, the employee claimed that the County’s wellness program violated the ADA’s prohibition on non-voluntary employee medical examinations and disability-related inquiries. The screening and assessment were intended to identify participants who had one or more of five medical conditions. Those who were identified as having one or more of the five conditions became eligible to participate in disease management programs or for additional benefits aimed at treating and managing those conditions.

The appellate court held that the wellness program was part of the County’s group health plan, making it exempt from the ADA’s restrictions under the ADA’s safe harbor for bona fide plans. As a result, the question of voluntariness under the ADA was irrelevant.

Moving Forward

The Eleventh Circuit’s decision is helpful because it affirms that it is unnecessary to consider whether examinations or inquiries are voluntary when the bona fide plan safe harbor applies. However, whether the EEOC or other courts will agree is unknown at this time.

To qualify for the exemption under the rationale of the Eleventh Circuit case, employers will need to show that their wellness program is part of a bona fide plan. Whether or not the wellness program is provided under the same contract as the employer's health insurance plan, the wellness program needs to be designed in such a way that it is considered part of the overall group health program. The wellness program should be described as constituting a part of the group health plan in all official communication and should be described in the summary plan description. Additionally, the wellness program should not be made available to persons who are not participants in the group health plan.

The Eleventh Circuit decision probably will not be the last word, and the fact that all that was involved was $20 per pay period also may be an important fact. An employment lawyer should be consulted in designing a wellness program to ensure that the design is compliant with the ADA and the possible new regulations that could be forthcoming.