Settlement Reached in Case Alleging Wellness Program Coercion – Employment and HR

United States: Settlement Reached in Case Alleging Wellness Program Coercion

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On March 4, 2022, Yale University agreed to settle a 2019 class action lawsuit brought by participants in Yale’s “Health Expectations” wellness program (the “Program”). The $1.29 million settlement is currently awaiting court approval. This case illustrates the pitfalls that can arise in the design of wellness programs and the importance of closely monitoring and updating wellness programs in a rapidly changing regulatory environment.

Wellness programs

A wellness program is an employee benefit designed to motivate its participants to voluntarily improve their health and fitness, so that improved healthy behaviors reduce the cost of health care claims over time. Welfare programs come in many different forms and, depending on their design, can be subject to a complex variety of federal laws, including the Employees Retirement Income Security Act of 1974 (“ERISA”), the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Genetic Information Non-Discrimination Act of 2008 (“GINA”) and the Americans Act of 1990 Disabled (“ADA”). The Yale case involved the ADA and GINA, which allow employers to obtain medical or genetic information from employees if employees voluntarily participate in a wellness program.

Yale Health Expectations Program

Yale’s collectively bargained program required certain union employees and their spouses to either (a) submit to medical inquiries and examinations (including mammograms, diabetes screenings and colonoscopies), or (b) pay $25 per week ($1,300 per year) to opt out of the program. If a participant chose to withdraw, the fee was deducted directly from the participant’s paycheque.

Current and former participants in the program, with support from AARP, sued Yale, alleging that this “unusually punitive” program violated the ADA and GINA because the amount of the unenrollment fee made participation in the program involuntary. AARP successfully used this argument in a 2016 lawsuit against the U.S. Equal Employment Opportunity Commission (“EEOC”) to strike down ADA regulations that set limits on the amount of the reward that a wellness program could offer and still considered “voluntary”. However, Yale did not change its withdrawal program in response to the EEOC litigation and subsequent regulatory changes.

Program participants also alleged that Yale violated HIPAA by sharing medical exam results with its outside wellness providers without prior approval. Yale partnered with an outside provider to review data on program participants’ testing and claims, which was then shared with a second provider who matched program participants with a health coach. The vendor performing the data review was a business associate of Yale and subject to HIPAA, but the second entity was not. Participants were asked to sign a waiver of their HIPAA rights so that information could be shared with the second provider, but data was still shared in some cases where the program participant did not sign the waiver .

The rule

Several settlement terms should be of interest to plan trustees:

  • Yale will pay $1.29 million, which will be distributed to employees who were covered by the program and to cover the fees and expenses of plaintiffs’ attorneys if approved by the court.

  • Yale may continue to offer the program, but will not charge an opt-out fee for four years.

  • Yale will change its practices regarding the transfer of medical information under the program and will require its affiliated providers to purge data received inappropriately. Information will no longer be shared without proper HIPAA authorization. Participants actively receiving coaching will have the option of continuing to receive coaching (or not) and having their records retained or purged, without penalty.

Next steps

As a result of Yale’s settlement, employers should consider taking the following actions:

  • Employers should review their wellness program design and governing documents to ensure compliance with HIPAA, GINA, ADA, and other laws that govern wellness programs.

  • Employers should review the types and amounts of incentives offered by their wellness programs. The EEOC has not finalized new wellness program regulations under the ADA or GINA to replace the rescinded 2016 regulations.

  • The EEOC first released the proposed regulations in early January 2021, but they were never officially released and were withdrawn by the Biden administration. These unpublished January 2021 regulations would have limited certain wellness program incentives to a minimum amount, such as a “bottle of water or modest value gift card.”

  • Employers should review their service agreements and business partner agreements with wellness program providers to ensure they are properly meeting HIPAA compliance

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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