Written by: Kara M. Maciel and Adam C. Solander

While some employers may have been disappointed with the U.S. Supreme Court’s recent decision affirming the constitutionality of the Patient Protection and Affordable Care Act (“PPACA”), there may be a silver lining to the seemingly dark cloud.  By virtue of upholding PPACA, the Supreme Court also upheld Section 2705 of PPACA, the provision of the law that will allow employers to provide their employees incentives, up to 30 percent of their premiums, in return for participation in an employer-sponsored wellness program.  Wellness programs benefit employers because they can reduce health care costs and increase productivity among healthy employees.  However, employers also risk claims of discrimination by certain employees if incentives are based on specified health factors and participation in the program.  The benefits that wellness programs provide could quickly diminish in light of recent class action litigation that has been brought against employers based on claims of discrimination.

Earlier this year, a class action complaint was filed against the Oregon Department of Corrections, the Oregon State Police, and the Oregon Department of Administrative Services (“Defendants”) resulting from their use of an incentive to encourage participation in an employer-provided wellness program.  Like many employers, the Defendants adopted a voluntary wellness program that utilized a Health Risk Assessment (“HRA”) to identify employee health risk factors.  Covered employees who did not participate in the program were assessed a fee of $20 to $35 per month.  The lawsuit alleges that the wellness program is discriminatory based on a disability and violates the employees’ right to be free from searches and seizures by unlawfully compelling disclosure of medical information through penalizing employees who do not participate in the wellness program.

A similar wellness program was challenged last year in Broward County, Florida.  In that case, the wellness program sponsored by Broward County consisted of an HRA and a biometric screening to diagnose employee glucose and cholesterol levels.  Employees who chose not to participate were allowed to enroll in coverage, but were assessed a $20 penalty each bi-weekly pay period.  The plaintiff’s complaint alleged that the employer violated the Americans with Disabilities Act (“ADA”) by requiring employees, by virtue of providing a penalty, to undergo a medical examination and making medical inquires of its employees.  The court granted summary judgment in favor of the defendants and held that the program fell under the insurance safe-harbor provision of the ADA.

Although not included in the class action complaints thus far, the Genetic Information Nondiscrimination Act (“GINA”) prohibits the provision of incentives for “genetic information” and could be used as a basis to challenge wellness incentives in the future.  In the context of a HRA, if an employer offers an incentive to induce participation in a wellness program, the HRA must be bifurcated and the incentive offered only in connection with the portion of the HRA that does not solicit genetic information.

While the likelihood that these legal challenges will be successful in court remains to be seen, the concern remains that these suits could become more prevalent, thereby exposing employers to increased litigation costs that outweigh the costs saved by a wellness program.  Yet, as it stands, wellness programs are one of the only tools employers have to bring their health care costs under control.  Therefore, employers should carefully weigh these considerations in deciding whether to implement a wellness program and how to structure that program.  If the employer chooses to establish a wellness program, it should be thoroughly reviewed by legal counsel before implementation to ensure its initiatives will not create a discriminatory impact.  Finally, employers should continue to monitor these types of class action cases to evaluate future exposure and liability.  Wellness programs constitute an essential tool employers can use in moderating health care costs, but for this tool to be effective, employers must take into account the legal implications of the program’s initiatives.

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