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Yale Reaches Settlement in Employee Health Wellness Program Lawsuit

On March 4, 2022, Yale University agreed to settle a class-action lawsuit over its employee wellness program for $1.29 million, subject to court approval. The lawsuit alleged that Yale’s Health Expectations Program (Program) violated federal statutes because it required employees and their spouses to either participate in the Program or pay a weekly opt-out fee. This article discusses some of the issues that can arise in wellness program design 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 that is designed to incentivize participants to voluntarily improve their health and fitness, so that the improvements in healthy behaviors reduce the cost of healthcare claims over time. Wellness programs come in many different forms and can be subject to a variety of federal laws, including the Employee Retirement Income Security Act of 1974 (ERISA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Genetic Information Nondiscrimination Act of 2008 (GINA), and the Americans with Disabilities Act of 1990 (ADA).

Yale’s Health Expectations Program

Yale implemented the Program as part of a collective bargaining agreement with two of its unions, under which most union employees paid no premium for their health plan coverage. Approximately 6,000 union employees and their spouses were required to either share their private medical information with their employer or pay a fine. By charging some employees $1,300 annually if they did not participate, the suit alleged that Yale violated both the GINA and the ADA because the amount of the opt out fee made participation in the Program involuntary. The American Association of Retired Persons (AARP) successfully used this argument in a previous lawsuit against the U.S. Equal Employment Opportunity Commission (EEOC) to invalidate ADA regulations that established limits on the reward amount a wellness program could offer and still be considered “voluntary.” However, Yale did not modify its opt out program in response to the EEOC litigation and subsequent regulatory changes.

Program participants also alleged that Yale violated HIPAA when it shared the results of the medical exams with its outside wellness vendors without prior authorization. Yale partnered with an outside vendor to review Program participant testing and claims data, which was then shared with a second vendor that paired Program participants with a health coach. The vendor conducting data review was a business associate of Yale’s and subject to HIPAA, but the second entity was not. Participants were asked to sign a form waiving their HIPAA rights so that information could be shared with the second vendor, but data was still shared in some instances where the Program participant did not sign the waiver.

The Settlement

Yale will pay $1.29 million, which will be distributed to employees who were covered by the Program and to cover plaintiffs’ attorneys’ fees and costs if approved by the Court. In addition, Yale will cease imposing what it calls opt-out fees for a four-year period or earlier if there is a change in law that Yale University reasonably interprets to permit the collection of fees associated with non-participation or non-compliance with an employee wellness program or employee health program. Finally, Yale has also agreed to change its practices regarding the transfer of health data in connection with the program.

Key Takeaways for Employers

In consideration of the above, employers should:

  • Review their wellness programs to ensure compliance with applicable laws (such as HIPAA, GINA, ADA, etc.);
  • Review any offered incentives/penalties to determine if they are appropriate in type and amount;
  • Ensure HIPAA compliance in applicable service agreements;
  • governance procedures to make decisions and appropriately monitor third parties with respect to the above items; and
  • Monitor regulat
  • Ensure proper ory guidance (Note: Guidance was last proposed by the EEOC in early 2021, but it was subsequently rescinded by the Biden Administration).

About the Author

Steph Kramer

Steph joined McKonly & Asbury in 2016 and is currently a Manager in the firm’s Audit & Assurance Segment. Steph audits a broad spectrum of employee benefit plans, including 401(k), 403(b), retirement, profit sharing, health and… Read more

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