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ADA Safe Harbor Loses Wellness Program Potential in Orion Energy Decision

Posted by Barbara J. Zabawa | Sep 20, 2016 | 1 Comment

On the same day that I blogged about the appellate oral argument in the Flambeau case, the district court in the EEOC v. Orion Energy case issued a decision and order.  Similar to the Flambeau case, the employee in Orion Energy had to pay 100% of her health insurance premium for refusing to participate in the company's health risk assessment.  Also similar to the Flambeau case, Orion Energy made the argument that the safe harbor in the Americans with Disabilities Act (ADA) shielded the company from violating the ADA.  The safe harbor allows group health plans to collect health information for purposes of underwriting or administering insurance risks.   

That's where the similarities in the two cases end, however.  The court in Orion Energy took a surprising turn from the decisions made in the Seff v. Broward County and Flambeau cases by concluding that the ADA safe harbor does NOT apply to Orion Energy's wellness program.  The court concludes that applying the safe harbor to workplace wellness program is at odds with the safe harbor's intended purpose, which is to allow plans to conduct basic underwriting and risk classification.  Orion Energy's wellness program, as is the case with many wellness programs, was unrelated to basic underwriting and risk classification.  Instead, the wellness program was a separate program from the company's health benefit plan: it was implemented after premiums had been set, it was not part of the company's health benefits summary plan, and participation in the wellness program was not required in order to enroll in coverage under the group health plan.  The court adopts the EEOC's argument that allowing the safe harbor to apply to workplace wellness programs would read the voluntary medical exam provision, which permits the collection of health information if such collection occurs as part of a voluntary wellness program, out of the ADA.    

Although the ADA safe harbor does not apply to Orion Energy's wellness program, the court found that Orion Energy's program did not violate the ADA because ultimately, the wellness program was voluntary.  The court reasons that even though employees who refused to participate in the health risk assessment had to pay 100% of their health insurance premium, it was still a choice they could make.  According to the court, employers are not required to offer health insurance (although that is arguable under the Affordable Care Act employer mandate), and therefore if an employee chooses not to participate in the wellness program and instead pay 100% of their premium, that is still offering the employee more than an employer is required to offer under the law.  As stated by the court, "a hard choice is not the same as no choice."  Because the employee had a choice, albeit a "hard choice," the wellness program was still voluntary and therefore not in violation of the ADA.

Of course, the Orion Energy case occurred before the EEOC released its final rules under the ADA limiting financial and nonfinancial incentives to no more than 30% of the total cost of self-only coverage.  Imposing a 100% premium penalty no longer works under the final rules, and the EEOC is not applying that 30% maximum incentive requirement retroactively - meaning wellness programs that exceeded that 30% maximum incentive in the past (like Orion Energy did) will not be punished for doing so.  Going forward, however, companies must adhere to the 30% maximum incentive rule if their wellness programs collect health information.  

Speaking of the final rules, the Orion Energy court also determined that the EEOC properly exercised its authority when issuing the final rules.  Orion Energy tried to argue that the court should not defer to the EEOC's judgment in issuing the final rules.  The court disagreed stating that the EEOC had Congressional authority to issue the final ADA rules and that the rules were reasonable.  

What does this decision mean for workplace wellness programs?

The Orion Energy decision creates less certainty with relying on the ADA safe harbor and strengthens the case for following the ADA final rules, which take effect starting January 1, 2017.  Orion Energy may appeal the case to the Seventh Circuit, which may give that court another chance to evaluate the applicability of the safe harbor and the final ADA rules.  But if and when that happens is speculation at this point.  What we do know is that the final ADA rules will take effect well before any other court decision is rendered regarding the ADA safe harbor or final rules.  As a result, it is extremely important that your wellness program is compliant with the final ADA rules as well as all the other federal and state laws that impact workplace wellness.  The Center for Health and Wellness Law, LLC can help you get there with our numerous compliance options:  help desk, compliance evaluation, compliance program implementation, and training opportunities.  Visit our website to learn more.

About the Author

Barbara J. Zabawa

Barbara is lead author of the book Rule the Rules on Workplace Wellness Programs, published by the American Bar Association. She is a frequent writer and speaker on health and wellness law topics, having presented for national organizations such as WELCOA, National Wellness Institute, HPLive, Healthstat University and HERO. Barbara J. Zabawa is a Clinical Assistant Professor for the University of Wisconsin Milwaukee College of Health Sciences, Department of Health Services Administration where she teaches graduate and undergraduate courses in health law and compliance, US health care delivery and health professions career development. Barbara also owns the Center for Health and Wellness Law, LLC a law firm dedicated to improving legal access and compliance for the health and wellness industries.  Before graduating with honors from the University of Wisconsin Law School, she obtained an MPH degree from the University of Michigan. Immediately prior to starting her own firm, she was Associate General Counsel and HIPAA Privacy Officer for a large health insurer where she advised on Affordable Care Act matters. She was also a shareholder and Health Law Team Leader at a large Wisconsin law firm. Barbara serves health and wellness professionals and organizations across the country as an advocate, a transactional lawyer and a compliance resource. Her commitment to improving health and wellness also shows through her community service. Barbara founded the Wellness Compliance Institute, a nonprofit organization that seeks to improve wellness program and activity compliance. She also is a Board Member for the Rogers Memorial Hospital Foundation, a health care organization that specializes in treating mental illness and she chairs the State Bar of Wisconsin Health Law Section. Barbara is licensed to practice law in both Wisconsin and New York.


Susan Caldwell Reply

Posted Sep 21, 2016 at 16:26:53

Very interesting article!

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