When Wellness Incentives Backfire

Employers, take warning!

A federal judge in Illinois refused this week to dismiss a class action lawsuit brought under the Americans with Disabilities Act based on a "voluntary" wellness program.

Employers should review their wellness programs and determine whether any monetary incentives for participation are so sweet that employees may feel they have no choice but to participate. If so, then the program may not be "voluntary," and any requests for medical information in connection with the program could run afoul of the ADA.

ADA review

In addition to prohibiting discrimination based on disabilities and requiring reasonable accommodations, the ADA has some significant provisions relating to employees' medical information. Those provisions apply to all employees, not just employees with disabilities.

Here is the quick and dirty:

• An employer cannot request medical information from an applicant before a conditional offer of employment has been made. Period.
• After a conditional offer of employment has been made, the employer can require the offeree to have a medical examination or fill out a medical questionnaire as long as it does the same for all offerees in the same job category. And, of course, with limited exceptions the medical information obtained cannot be used against the offeree.
• Once the offeree becomes an "employee," the employer can request medical information only if the request is "job-related and consistent with business necessity."
• BUT . . . if the employer has a voluntary wellness program, it can ask for employee medical information in that connection without violating the ADA. This could include tons of information that is not "job-related and consistent with business necessity," such as routine blood work, weigh-ins, BMI measurements, blood pressure readings, and the like.
• Any medical information obtained from an employee must be kept confidential and separate from the employee's personnel file.

Again, these rules apply to everybody -- employees with disabilities, and employees without disabilities.

The wellness incentive lawsuit

A Wisconsin-based employer and its Illinois subsidiary had a wellness program that it (they?) considered to be "voluntary." No one was fired for refusing to participate. No one, as far as we can tell, was denied a promotion or subjected to unfair terms and conditions of employment because they refused to participate.

That sounds pretty "voluntary" to me, Robin!

Me too. Except for one thing. According to the lawsuit, participants in the wellness program got a nice financial "discount" on their health insurance premiums. Non-participants, including the plaintiffs, were not eligible for the discount.

The additional cost of health insurance coverage for one of the plaintiffs, who had family coverage, was more than $1,800 a year ($34.81 per week).

To many people, $1,800 a year is a lot of money. It may even be enough to "incentivize" them to participate in an employer wellness program and submit to biometric and health screening when they'd really prefer not to.

In other words, the plaintiffs argue that the discount for participation is so significant that it makes participation in the wellness program "not voluntary." And if participation is not voluntary, then requesting the information is a violation of the ADA.

The employer tried to get the lawsuit dismissed, arguing that it wasn't "penalizing" employees for non-participation but only "incentivizing" participation. Therefore, the employer argued, the program was voluntary, and the lawsuit had no merit.

But the plaintiffs argued that the lack of incentives for non-participants was, in effect, a penalty for non-participation.

The judge ruled this week that the lawsuit could proceed based on what the plaintiffs had alleged.

And did I mention that it's a putative class action?

Much more to come!

The court was ruling on a motion to dismiss for failure to state a claim for which relief may be granted (also known as Rule 12(b)(6) of the Federal Rules of Civil Procedure). Motions to dismiss are generally heard at the very earliest stages of the litigation, and the court is required to assume that the facts alleged in the complaint are true. If, with that assumption, the lawsuit states a valid legal claim, then the judge has to let the case move forward. The parties will then engage in discovery and file appropriate motions later, based on the evidence in the case.

So, it is possible that this employer will prevail later on. Even if the class is certified, maybe it will turn out that the employees all make $1 million a year, in which case the $1,800 annual hit on health insurance may not be a big deal. Or maybe the plaintiffs' figures on the discount are not accurate, and the incentive is really only 34 cents a month, not $34.81 a week.

But litigation is expensive, and class litigation significantly more so. Employers who offer incentives for participation in wellness programs should determine whether any changes should be made to minimize their litigation risks.

Oh, one more thing. Liability under the Genetic Information Nondiscrimination Act is also a possibility. In another case from a couple of years ago, a federal judge refused to dismiss all GINA claims in a lawsuit against the City of Chicago based on similar allegations. In the Chicago case, the City required non-participating employees to pay a monthly penalty of $50. If their covered spouses also declined to participate, the employees had to pay $100 a month. The GINA claims of employees with individual coverage were dismissed because no "genetic information" was sought. But the GINA claims of the employees whose spouses were covered were allowed to proceed. (Under the GINA, information about a spouse's health is the employee's "genetic information." This never made sense to me because spouses are not relatives, but Congress didn't ask for my opinion.)