The Law

Before passage of the ACA, employee wellness programs were governed largely by the Americans with Disabilities Act (ADA) and Health Insurance Portability and Accountability Act (HIPAA). Under these laws, all plans with employee wellness programs must be reasonably designed to promote health and prevent disease, and must be reasonably available to similarly situated individuals, or else have a reasonable alternative available to accommodate individual disabilities.[1]  The extent of the incentives offered was limited to no more than 20 percent of the cost of the employee’s coverage, though the Equal Employment Opportunity Commission (EEOC) has argued that even 20 percent is too high an incentive.[2]

Almost all large employers in the United States, and over half of small employers offered wellness incentives prior to the passage of the ACA.[3]  Beginning in 2010, the ACA made some changes to the way employer wellness programs could be implemented. The law increased the limit on incentives to 30 percent of the employee’s coverage, and reserved to the Department of Health and Human Services (HHS) the option to increase the limit to 50 percent for tobacco cessation programs.

The ACA also requires all large and medium-size employers to offer health insurance to their employees. Because of this requirement, employers have a new and increased interest in the health and well-being of their employees. Employers, and the insurers that they contract with, may use wellness programs to help maintain good health among their employees and keep down the cost of coverage by encouraging healthy behaviors.

The ACA makes many changes to the relationship between employers and employees when it comes to health insurance and wellness programs. The ACA explicitly states that compliance with the ACA’s requirements for employee wellness programs does not guarantee that compliance requirements in other federal or state laws have been satisfied. This means that the ACA was not intended by Congress to be the final authority on employer wellness programs and previous laws must still be consulted when they are being developed. There is also no indication that Congress understood the text of the ACA to be in direct conflict with any other previous federal law. 

The Case

The ADA restricts the ways in which an employer may induce employees into wellness programs or screenings. Such tests are illegal under the ADA unless they are voluntary or part of a bona fide benefits plan. Federal law limits the incentives that an employer may offer an employee to induce voluntary participation in a wellness program to 30 percent of the cost of employee’s insurance coverage.

Honeywell, the defendant in EEOC v. Honeywell, is an employer that offers health insurance coverage to its employees.[4]  Honeywell has also established an incentives program to encourage employees to participate in wellness programs. If an employee completes a health risk assessment and biometric screening, regardless of what the outcome of the exams may be, Honeywell has offered to make contributions to the participating employees’ Health Savings Accounts (HSAs). However, employees who do not participate in the program are assessed a surcharge, and those who use tobacco or refuse to submit to screening are assessed an additional tobacco premium surcharge. These penalties do not surpass the legal limit.

The EEOC filed a lawsuit in federal district court in Minnesota that the screenings required by Honeywell to receive the HSA contribution and avoid penalty are so large as to be de facto mandatory, and therefore involuntary and in violation of the ADA.[5]

The Court

The question the courts have been asked to address in EEOC v. Honeywell is “at what point does a reward for participating in a wellness program become so inducing as to make participation in the program essentially involuntary?” In order to answer this question, the courts will first have to decide whether to first apply the ACA or ADA.

As a rule, the most recent legislation should be applied first, and only if it does not speak to an issue should the court look to the previous legislation for further guidance. If there is a gray area where either law could be considered to be controlling, the courts have an obligation to try to find a way to apply the laws so that they do not directly conflict with one another. In this case, that would mean that the court would likely apply a stricter interpretation of the ADA so as to avoid the conflict. This means that the court could rule that the use of the incentives such as contributions to an HSA after an employee has participated in wellness programs, do not make participation involuntary.

The district court in EEOC v. Honeywell may also have shown its hand a bit in this case in its denial of the plaintiff’s request for a preliminary injunction. Preliminary injunctions should only be granted if the court finds that the plaintiffs have a substantial likelihood of winning or else that the plaintiffs would suffer irreparable harm without the injunction. In this case, though, the court denied the request because it was not clear to the court that the plaintiffs were likely to suffer any irreparable harm.

Without the preliminary injunction, the case will have to go to trial; a date for such a trial has not yet been set.

Congress

In the past year Congress has held hearings involving both the EEOC and employer groups where each argued its side. The EEOC continued its objection to the increased penalties for non-participation in wellness programs, claiming that these amounted to discrimination against those with disabilities who do not want to participate (there is no implication that these individuals are unable to participate in the plans at issue). Employers, on the other hand, point out that they have requested guidance from the EEOC multiple times since 2010, and have received none. Employers then had nothing on which to base their actions other than the text of the ACA, which authorizes the use of incentive programs like the one at issue at Honeywell.

For its part, Congress seems to be concerned about the mixed messages being sent to employers as a result of the possible conflict between the ACA and ADA. Last week the Senate Health, Education, Labor, and Pensions (HELP) Committee announced that it was working on producing a bill that will aid employers in designing their wellness programs that fully comply with the law. The text of that bill has not yet been released. Should the bill pass before a decision is entered, the courts would be forced to dismiss the case in EEOC v. Honeywell.