Wellness Plans and Penalties: Waiting for the EEOC

Wellness Plans and Penalties: Waiting for the EEOC

According to the media reports this week, CVS Caremark which has 200,000 employees is implementing a health screening and wellness review which will require employees to have weight, height, body fat, blood pressure, glucose and body lipids taken by a physician by May 1. The company will pay for the testing, and employees will have to sign an agreement stating the screening is voluntary and the medical information can be provided to WebMD which provides health management programs and benefit support to CVS. Failure to sign up will result in a monthly increase of $50 increase in their health insurance costs.

The health information will not be available to company employees or supervisors. Obviously, the company will know who opts out of participation.

The requirement for testing appears to be the first step in the implementation of a wellness program. CVS is not the first company to implement testing as part of a wellness program. The question is not settled whether and to what extent wellness plans that offer "incentives" are legal under the ADA.

While the EEOC has issued a number of informal discussion letters which do not establish the agency's formalposition, they are really the only indication of the agency's position on the issue. The most recent letter is dated January 13, 2013 and addresses the issue of voluntary wellness programs and reasonable accommodation obligations. The plan in question is offered to employees with diabetes on a voluntary basis, and the annual deductible is waived if the employee meets certain conditions such as enrollment in a disease management program or adherence to a doctor's exercise and medication recommendations.

Contrary to the company's assertion, the plan is considered a wellness plan since a wellness plan encourages employees to live a healthier lifestyle and reduce the risk of disease. Plans can include disease management programs. While the company indicated it did not envision a health risk assessment, in its letter, the EEOC assumed that a condition of participation is that the employee disclose if they have qualifying health conditions which would be a disability related inquiry.

The letter repeated the EEOC's position that a wellness program is voluntary as long as the employer neither requires participation nor penalizes employees who choose not to  participate. The plan described provides a reward for participation--waiver of the annual deductible. The letter repeated the now familiar statement that the EEOC has not taken a position on whether and to what extent a reward amounts to a requirement to participate and whether withholding the reward from non-participants constitutes a penalty, making the plan involuntary. The letter went on to state that an employer must provide reasonable accommodation  absent undue hardship, to those individuals who are unable to meet the outcomes or engage in specific activities due to a disability.

If the CVS program is considered a wellness plan, the issue becomes its voluntary nature. Employees who do not get the tests taken by May 1 will pay $ 600 a year more for coverage. That seems like a penalty. If CVS had stated that employees who complete the testing by May receive a $ 600 reduction in the cost of coverage, that reduction would be a reward. The open issue that the EEOC will hopefully address soon is whether a reward amounts to a requirement and whether withholding a reward from employees who do not participate is a penalty making the plan involuntary.

Employers who want to implement wellness plans should carefully consider the reward/penalty aspect of the plan and keep in mind what the EEOC has said in the informal discussion letters

For additional Labor and Employment law insights from John Holmquist, visit the Michigan Employment Law Connection.

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