EEOC Targets Wellness Programs
The Equal Employment Opportunity Commission has filed suit against three employers for violating the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) with their company wellness programs.
Honeywell, Orion Energy Systems and Flambeau Inc. are all facing litigation over penalties and fines levied against employees who refused to participate in company wellness programs.
Employers that offer voluntary programs may ask participating employees disability-related questions and collect results from biometric testing and other medical exams, as long as they keep the information confidential — and the program is truly “voluntary.” The EEOC has determined that if an employee faces any kind of discipline for refusing to participate, such as a fine or becoming responsible for the full cost of their health plan premium, then the program is in essence involuntary.
“The EEOC describes it as ‘you can’t penalize employees,’ but they have not defined what constitutes a penalty,” said Debra Friedman, attorney with Cozen O’Connor’s labor and employment practice group.
On its surface, the EEOC stance appears to collide with the ACA. The federal rule on “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans,” in fact, allows for penalties in certain circumstances. By defining “reward,” for the sake of the ACA, as meaning either incentives or penalties, the law’s language allows a maximum permissible wellness program incentive (or penalty) of up to 30 percent of the cost of health care coverage, jumping up to 50 percent for programs designed to prevent or reduce tobacco use.
However, the ACA is clear that these reward rules apply to health-contingent wellness programs that are tied to a desired outcome. The law contains no direct guidelines for rewards associated with participatory wellness programs, such biometric testing programs where employees are not obligated to take further action to meet a specific standard (such as attain a specific blood-pressure range or BMI level).
Is It Really Voluntary?
In its litigation against Honeywell, the third employer sued by the commission, the EEOC pointed out that employees not participating in the company’s program would have to pay up to $2,500 in “direct surcharges,” as well as lose “up to $1,500 in contributions” to their health savings accounts. While they don’t need to achieve any particular results, employees must submit to biometric testing in order to receive a premium discount.
“The EEOC describes it as ‘you can’t penalize employees,’ but they have not defined what constitutes a penalty,” — Debra Friedman, attorney, Cozen O’Connor’s labor and employment practice group
At Flambeau and Orion Energy, employees who opted out of the wellness program were forced to pay 100 percent of their health insurance premium. The EEOC asserted that these penalties were so extreme and had such “dire consequences” that, in practice, they rendered the wellness programs involuntary.
In programs and required medical exams that are involuntary, the ADA states that employers cannot ask disability related or other personal medical questions that are not “job-related and consistent with business necessity.” There are some exceptions to this rule, but none that apply to the three employers facing suits.
On Nov. 3rd, however, the U.S. District Court for the District of Minnesota denied the EEOC’s request for a temporary restraining order and preliminary injunction against Honeywell, stating that the company’s program aims to raise awareness among its employees about their health indicators, but does not break any laws because it doesn’t require any behavior changes. The court did note, though, that the case raises interesting questions as to how the ACA, ADA and GINA will work together.
Wellness and Workers’ Comp
The Affordable Care Act requires employers to make wellness a priority in the workplace, and employers have much to gain by doing so. While there’s little research that shows a direct effect of wellness programs on workers’ comp costs, more information is coming out that supports how reducing certain risk factors can shorten claim duration and minimize claim costs. Modifiable risk factors like obesity, COPD and depression can lengthen injury recovery time.
“We see a trend in employers implementing wellness programs because they are interested in the health, welfare and longevity of their workforce,” said Bob Stoner, SVP of operations for BTE Workforce Solutions. “Healthier employees are more productive employees.”
While wellness programs typically fall in the realm of employee health benefits, administrators of workers’ comp programs should take an equal interest and work internally to coordinate their efforts.
“If you’re 50 years old and depressed, your workers’ comp claim is going to cost more than someone who is 50 but has a great support network and positive outlook,” said Karen Curran, director of health risk management at Pinnacol Assurance.
“Employers need to understand this is an evolving area, and there’s a lack of guidance from the EEOC, so we need to wait and see whether EEOC and courts will find wellness programs that are compliant with the ACA regulations to be compliant with ADA and GINA,” Friedman said. “Employers should make sure there is no discipline against an employee for refusing to participate, and I would recommend not shifting full costs of premium to employee. The safest route is to stick to participatory programs.”
Participatory programs would include things like no-cost health seminars and positive rewards for submitting to a health risk assessments, said Terri Rhodes, executive director of the Disability Management Employer Coalition. The ACA also allows for biometric screenings to be considered participatory as long as employees are not penalized based on the results or required to take further action to change the results.
Health-contingent or outcome-based programs, on the other hand, attach significant rewards or penalties to meeting specific goals, such as in a smoking-cessation or weight loss target, or anything measured around biometric standards, such as blood pressure or cholesterol. These types of programs run a higher risk of running afoul of the ADA and GINA.
“Employers need to be very careful about collection and handling of any family medical history,” Stoner said. “Employee information must be provided voluntarily and with clear written consent, and kept separate and confidential from personnel records. Wellness programs that incorporate financial penalties or incentives must be carefully crafted in order to be compliant.”
Culture Is Key
Curran said the best way for employers to avoid running afoul of the ADA and GINA is to retool their workplace safety culture to make unhealthy behaviors more difficult.
For example, one of her clients had an enclosed sunroom on their property where workers were permitted to smoke. The room was equipped with picnic tables, comfy couches, and plenty of windows and natural light.
“They were making it an enjoyable environment and making it easy for people to smoke,” she said. “That makes it hard for people to quit.” She advised that the smoking area be moved from the sunroom to an outdoor area underneath an umbrella, with no tables or chairs. That makes smoking less enjoyable and quitting a little bit easier to commit to. It also doesn’t violate any laws because the company was not taking away any employee’s right to smoke nor asking them to join a cessation program, but simply asking them to smoke in a different area of the campus.
“It’s not so much about the program as it is about engaging your workforce,” Rhodes said. “I think that’s something employers struggle with, especially with a multi-generational workforce.”
Curran also advised sprucing up stairways with colorful paint and adequate lighting and slowing down elevators to encourage taking the stairs. Adding healthy snacks to vending machines and raising the price of candy bars slightly to offset the expense is another way to “make the healthy choice the easy choice.”
“Look at what you can do to create a culture of wellness, and the ADA doesn’t even come into play,” she said.
Workers’ Comp Docket
Fall injuries Compensable Despite Visible Intoxication
St. Regis Hotel, 114 NYWCLR 148 (N.Y. W.C.B., Panel 2014)
Ruling: The New York Workers’ Compensation Board held that a server was entitled to benefits for his ankle injury from a fall.
What it means: In New York, no compensation is awarded when the worker’s intoxication from alcohol or a controlled substance while on duty was the sole cause of the worker’s accident.
Summary: The board found that a banquet server for the St. Regis Hotel was entitled to benefits for an injury to his left ankle when he tripped and fell. He was carrying a tray of wine glasses when he opened the door to the ballroom in the kitchen, stepped on something, twisted his left foot, and fell. The server testified he was a recovering alcoholic but had two glasses of wine that evening and was on medication to treat his HIV. The server also said that the medication gave him side effects such as stomach problems, dizziness, lack of sleep, and tiredness, but he was on the medication for so long that he was used to the side effects. In finding that the workers’ compensation law judge properly established the claim, the board noted that the server had been working the entire evening before the accident. The injury did not occur solely from alcohol the server had consumed but rather arose in and out of the course of employment. The board found that walking down a ramp with a heavy tray of glasses, alone, could have contributed to the server’s accident.
A security officer said there was no liquid on the ramp, and the catering supervisor said the server was incoherent and slurring after the accident. The board found this testimony did not establish that alcohol and intoxication were the sole cause of the accident. Therefore, the hotel could not establish the intoxication defense.
Employer Not Liable for Stolen Workers’ Comp Checks
Yerdon v. Eihab Human Services, 29 PAWCLR 149 (Pa. W.C.A.B. 2014)
Ruling: The Workers’ Compensation Appeals Board affirmed the workers’ compensation judge’s decision that the employer/insurer was not required to issue new compensation checks or pay a penalty for nonpayment.
What it means: In Pennsylvania, where the employer properly issued compensation checks in a timely manner, but the worker never received those funds because her signature was forged on the checks and they were cashed by a third party, the employer is not required to issue new checks to the worker.
Summary: In affirming the WCJ, the board held that although the worker did not receive four compensation checks that were sent to her, the employer/insurer was not required to issue new checks or pay a penalty for nonpayment. It was undisputed that the worker did not sign the four compensation checks that were sent to her. It was also undisputed that the checks were sent to the appropriate address and never returned to the employer/insurer. The worker’s signature was apparently forged on the checks, and they were cashed by someone other than the worker. The board ruled that although the worker argued she never actually received her compensation payments because somehow those payments were intercepted by a third party, the employer/insurer honored its obligation to make payment of compensation. The employer/insurer could not be made responsible for the actions of a third party.
Therefore, although the worker technically never received her payment of indemnity benefits, this was not due to any action on the part of the employer/insurer, and it should not be forced to pay twice.
Widow Wins Four Years of Interest on Death Benefits
Stenz v. Industrial Commission of Arizona, No. 2 CA-IC 2013-0022 (Ariz. Ct. App. 10/08/14)
Ruling: The Arizona Court of Appeals held that a widow was entitled to interest on death benefits dating back to a worker’s death.
What it means: In Arizona, interest on benefits begins to accrue when there is a legal indebtedness or other obligation to pay benefits and the carrier has notice of this obligation to pay.
Summary: A worker for the City of Tucson suffered a compensable injury. The insurer, Pinnacle Risk Management, accepted the claim and paid benefits. Later, the worker died, and his widow sought death benefits. Pinnacle denied the claim for death benefits. Subsequently, an administrative law judge granted the widow’s claim for death benefits. The following month, Pinnacle paid the benefits dating back to the worker’s death but did not pay any interest. The widow asserted that she was entitled to interest on the unpaid death benefits for the four-year period between the worker’s death and their payment. Pinnacle asserted that no interest was due because it timely paid the claim following the ALJ’s award. The Arizona Court of Appeals held that the widow was entitled to interest on the death benefits.
The court explained that a workers’ compensation claimant is owed interest on benefits not timely paid. Interest begins to accrue when there is a legal indebtedness or other obligation to pay benefits and the carrier has notice of this obligation to pay. Interest is allowed on “liquidated claims” but not “unliquidated claims.” Liquidated means the evidence furnishes data that makes it possible to compute the amount with exactness without reliance on opinion or discretion. The court explained that death benefits are “susceptible to mathematical computation” and subject to a “statutory payment schedule.” Therefore, the death benefits the widow was awarded were liquidated and constituted a legal indebtedness or other obligation to pay upon the ALJ’s award.
The court found that Pinnacle had notice of its obligation to pay when it received notice of the widow’s claim. It could have begun payments to the widow after receiving notice of her claim and before the Industrial Commission made its determination. The court found the benefits were not timely paid, and interest began to accrue from the time Pinnacle received notice of the widow’s claim.
The court found its decision was supported by the public policy considerations underlying the workers’ compensation law. An award of interest serves to compensate the injured party. The court pointed out that Pinnacle’s initial challenge to the widow’s entitlement to benefits did not affect its analysis. Also, permitting carriers to avoid paying interest on liquidated benefits from the time they are notified of a claim provides carriers a disincentive to pay legitimate claims because there would be no penalty for contesting payment until a final award is issued.
Inadequate Protective Equipment Doesn’t Prove Intentional Wrong
Blackshear v. Syngenta Crop Protection, Inc., No. A-3525-12T1 (N.J. Super. Ct. App. Div. 10/06/14)
Ruling: The New Jersey Superior Court, Appellate Division held that the exclusive remedy provision barred a widow’s suit against an exterminator’s employer.
What it means: In New Jersey, the intentional wrong exception to the exclusive remedy provision applies when the employer possesses a “substantial certainty” that harm will result from the action.
Summary: An exterminator for Corbett Exterminating died from brain cancer. His widow sued Corbett, asserting that his death was connected to the pesticides to which he was exposed at work. The New Jersey Superior Court, Appellate Division held that the exclusive remedy provision barred the widow’s suit.
The widow asserted that the intentional wrong exception to the exclusive remedy provision applied. The intentional wrong exception applies when the employer possesses a “substantial certainty” that harm will result from the action. The widow’s proof at most demonstrated that Corbett, by providing the exterminator with inadequate personal protective equipment, knowingly exposed him to cancer-causing pesticides and concealed that information from him. The court found this failed to meet the substantial certainty test.
The court noted that the coverage of occupational diseases under the workers’ compensation law reflected a general awareness of potentially hazardous conditions in the workplace that can result in debilitating diseases necessitating compensation. Assuming the exterminator’s brain cancer was a result of his exposure to pesticides at work due to inadequate personal protective equipment, the court could not conclude that such was beyond what the legislature intended to be covered under workers’ compensation. The court found the exterminator’s exposure could be fairly “viewed as a fact of life of industrial employment” for which recovery under workers’ compensation was designed.
Policy Violation Doesn’t Bar Coverage of Knee Injury
Best Western Inn v. Paul, No. CV-14-277 (Ark. Ct. App. 10/01/14)
Ruling: The Arkansas Court of Appeals held that a housekeeper was entitled to benefits for her knee injury, including additional medical treatment.
What it means: In Arkansas, a compensable injury does not include an injury inflicted upon the worker at a time when employment services were not being performed.
Summary: A housekeeper for Best Western was cleaning a room and discovered that she needed new towels. As she was walking downstairs to the laundry room to retrieve some towels, she slipped and fell on water, injuring her knee. She was also carrying food that she found in one of the hotel rooms to put in the refrigerator in the laundry room. Best Western claimed that the housekeeper was not acting in the course and scope of her employment at the time of the incident because she was taking food to the laundry room refrigerator for her own benefit when she fell. The housekeeper denied that the food was for her own personal use. The Arkansas Court of Appeals held that the housekeeper was entitled to benefits, including additional medical treatment.
Best Western asserted that the housekeeper was not performing employment services when she was injured because she was taking food from the room of a former hotel guest for her own use in violation of hotel policy. The court rejected the argument, finding that the housekeeper was performing employment services at the time she was injured.
Best Western also asserted that the housekeeper was not entitled to additional medical treatment because she only suffered a sprain and additional diagnostic testing was related only to her long-standing and ongoing right knee problems that resulted in surgery just months before the accident. The housekeeper’s surgeon examined her after the work injury, determined that she suffered a new injury, and was worried about a re-tear. The surgeon recommended an MRI to understand the extent of her injury. The court found that the housekeeper was entitled to the additional medical treatment.
Nurse Fails to Obtain Reimbursement for Ayurvedic Therapy
Babu v. Workers’ Compensation Appeal Board, No. 166 C.D. 2014 (Pa. Commw. Ct. 09/15/14)
Ruling: The Pennsylvania Commonwealth Court held that a nurse was not entitled to reimbursement of bills for Ayurvedic therapy and treatment performed in India.
What it means: In Pennsylvania, services provided by non-licensed medical providers are not compensable if they are not provided under the supervision of or upon referral by a licensed practitioner.
Summary: A nurse sustained two work-related injuries to her shoulders and neck. She received indemnity benefits and sought reimbursement for Ayurvedic treatment, a type of holistic massage, which she received while in India. The Pennsylvania Commonwealth Court held that the nurse was not entitled to reimbursement for the Ayurvedic treatment.
The court explained that the practitioners who performed the Ayurvedic treatment were not licensed providers in Pennsylvania and the services were not performed under the supervision of a licensed Pennsylvania health care practitioner. Also, the medical certificates did not describe the treatment, what body parts the treatment was applied to, or include any medical reports required by the workers’ compensation law. Neither of the nurse’s physicians ever recommended such treatment to a patient. No evidence showed that the treatment was pursuant to a prescription or referral.
The nurse argued that she should be deemed the “supervising health care practitioner” over her own care in India. The court rejected the argument, finding no evidence that she was trained in massage therapy or that she exercised supervisory control over the practitioners in India or guided them during the treatment.
The court also rejected the nurse’s assertion that the workers’ compensation law that limits payment of medical bills to services by Pennsylvania licensed health care providers is unconstitutional. The court explained that the requirements for Pennsylvania licensing of health care providers promotes legitimate state interests of cost containment and cost certainty, and any classification of injured workers is related to promoting those interests.
Comp Doesn’t Cover After Hours Death From Hurricane Sandy
Empire Parking, 114 NYWCLR 141 (N.Y. W.C.B., Panel 2014)
Ruling: The New York Workers’ Compensation Board held that the death of a worker, who drowned during Hurricane Sandy while in his employer’s parking garage, did not arise out of and in the course of his employment.
What it means: In New York, where a worker chooses to remain on the employer’s premises even though his shift has ended and he has been instructed repeatedly to leave for his own safety due to an impending storm, the worker’s resulting death does not arise out of his employment.
Summary: The board held that the death of a worker, who drowned during Hurricane Sandy while in his employer’s parking garage, did not arise out of and in the course of his employment. The worker’s manager testified that the worker’s shift ended earlier in the day and that he instructed the worker several times to leave the premises. The manager also testified that on previous occasions he had allowed employees to spend the night in the garage.
In denying benefits, the board noted that for reasons unknown the worker chose to remain on the employer’s premises even though he was repeatedly told to leave the area. The worker’s shift had ended, and it was unreasonable for him to have remained at the garage since the garage was located in a mandatory hurricane evacuation zone.
The board said there was no work-related reason for the worker to be in the garage that evening. His decision to remain there was strictly a personal one, as evidenced by the fact that he refused to leave after numerous attempts to get him to do so.
Worker Allowed Travel Reimbursement for Weekly Rx Runs
Burkhamer v. AT&T Corp., No. 13-0521 (W.Va. 09/29/14)
Ruling: The West Virginia Supreme Court of Appeals held that an operator was entitled to travel reimbursement to pick up her prescriptions once per week.
What it means: In West Virginia, a worker is not entitled to reimbursement for travel expenses to pick up prescriptions when the worker traveled an excessive and unreasonable number of times.
Summary: A telephone operator for AT&T was injured in the course of her employment when she was electrocuted. She took nearly 30 medications and traveled 157 miles roundtrip from her home to pick up her prescriptions. The claims administrator sent the operator a letter stating that there had been an excessive amount of trips to pick up medication. The trips were often one or two days apart. The claims administrator authorized reimbursement for previous trips but stated that the operator needed to arrange to pick up her medications once per month. The claims administrator also stated that if she needed assistance organizing the pick-up, the claims administrator would provide it. The claims administrator also offered to set up a mail order pharmacy program. The operator continued to travel to pick up her medications twice per week. The claims administrator denied travel reimbursement to pick up medications. The West Virginia Supreme Court of Appeals held that the operator was entitled to travel reimbursement to pick up her prescriptions once per week.
The operator asserted that she had problems in the past with mail being taken from her rural mailbox. Also, she argued that some of her medications were narcotics and could not be filled early, making it difficult to pick up all of her prescriptions at once. The court agreed with the Workers’ Compensation Board of Review’s decision finding that the operator traveled an excessive and unreasonable number of times. She took numerous medications and possibly had problems obtaining them. However, AT&T asserted its willingness to assist her in organizing her medications to be picked up once per month. The court allowed reimbursement for trips made once per week.
Construction’s New World
Get off a plane at Logan Airport and cross the harbor toward Boston and you will see construction cranes, a lot of them.
Grab an Amtrak train from Philadelphia into New York and pulling into Penn Station, you will see more construction cranes, many more of them. The same scene repeats in Denver, Los Angeles, San Francisco and Chicago.
All that steel and cable in the skyline signifies a construction industry that is growing again, after having the rug pulled out from under it in the Great Recession of 2008-2010.
The cranes these days look the same as cranes looked in 2008, but the risk management and insurance environment in construction is anything but the same now.
A variety of factors are now in play that have drastically changed construction risk underwriting, according to Doug Cauti, a senior vice president and chief underwriting officer with Boston-based Liberty Mutual’s construction practice.
Doug Cauti characterizes the current construction market.
Talent and Margins
For one thing, according to Cauti, the available talent pool in construction is nowhere near what it was pre-recession.
“When the economy went into its downturn, a lot of talent left the business and hasn’t returned,” Cauti said.
Cauti said recent conversations with large contractors in Ohio and Pennsylvania confirmed once again that contractors are facing a workforce that is either aging or very inexperienced. That leads to safety management and project quality concerns at just the moment in time that construction is rebounding.
Doug identifies one of the top risk management issues facing construction firms today.
Workers compensation risks in construction, already a problematic area, are seeing an impact from that dynamic.
Contractors are also facing much more competition. In the past, contractors might have bid on 10 jobs to get one, now they have to bid on 50 or 60 jobs to get one. That’s putting pressure on margins.
“There are a lot of contractors out there competing for business,” Cauti said.
“Margins are going up but not at the same rate as the industry’s recovery,” he added.
Financing and Risk Transfer
Another factor impacting the way construction risk is being underwritten is the size of projects and the way they are being financed. Construction’s recovery from the recession might be slow and steady, but the size of projects requiring risk management and insurance has increased substantially.
In 2010, there were 85 projects under contract nationally that were worth $1 billion or more, according to Cauti. One year later, the percentage of projects of that value or higher had grown by 30 percent, and the trend continues.
A lot of those projects are design-build, a relatively new approach to construction that Liberty Mutual has grown comfortable underwriting over the years. But design-build is still an additional complication, blurring the traditional lines of responsibility.
“We did it when the growth in contractor-controlled insurance programs happened, we did it with the evolution in design-build and we’re laying the groundwork to be a thought leader in public-private partnerships and integrated project delivery.”
– Doug Cauti, Chief Underwriting Officer, Liberty Mutual National Insurance Specialty Construction
Given the funding demands of these much larger and more valuable projects — many of them badly needed public sector infrastructure improvements — public-private partnerships, otherwise known as P3s, are now coming into vogue as a financing option.
But deciding how risk should be allocated, underwritten and transferred in this new arrangement between contractors, the state, and private partners is a relatively new and untested science.
As a thought leader in the underwriting of the design-build approach – and the more traditional design-bid-build – Cauti said construction experts within Liberty Mutual are growing their knowledge to stay in step.
“We did it when the growth in contractor-controlled insurance programs happened, we did it with the evolution in design-build and we’re laying the groundwork to be a thought leader in public-private partnerships and integrated project delivery,” he said.
That means attending relevant industry conferences like the annual IRMI Construction Risk Conference where Liberty Mutual has maintained a significant presence, and engaging in dialogues with contractors and government officials, and maintaining clear and active lines of communications with brokers.
Doug discusses emerging approaches to construction.
Legal and Regulatory
Another change that is creating challenges for construction risk underwriting, according to Cauti, stems from what’s happening in United States courtrooms.
Across the country, how a court interprets coverage can vary widely, especially in the area of construction defect.
“In the past, many jurisdictions viewed construction defect simply as shoddy workmanship and they had to go back and redo it,” Cauti said.
But now, on a state by state basis, courts are ruling that a construction defect is an accident under certain circumstances that may be covered by a contractor’s general liability policy.
In 2014 alone, according to Cauti, Supreme Courts in West Virginia, Connecticut and North Dakota ruled that construction defects can sometimes be considered accidents.
Cauti said doing business with a carrier that pursues contract clarity whenever possible – and that possesses an experienced claims team that can navigate the wide variety of state interpretations – is absolutely essential to the buyer.
Having claim teams not only dedicated to construction but also to construction defect, adds a lot of value to a carrier’s offering.
Doug outlines another top risk management issue facing construction firms in today’s booming market.
Now, as never before, contractors are relying on experienced construction insurance teams to help them address these complexities.
Insurers need to have the engineering expertise to analyze a project, to make sure the right contracting team is in place and to insure that risk exposures are being properly assessed. Another key in a construction insurance team, according to Cauti, is the claims department.
A Strategic Approach
The legal and financing changes that are taking place in the construction market, from a risk transfer standpoint, aren’t going to get ironed out overnight.
Cauti said it could be 10 years until the construction and insurance industries fully understand the complications of public-private partnerships and integrated project delivery, these approaches gain traction, and the state-by-state legal decisions that are causing so much uncertainty can be digested.
In the meantime, an engaged, collaborative approach between carriers, brokers, contractors, and their financing partners will be necessary.
Doug discusses how his area can provide value to project owners and contractors.
For more information on how Liberty Mutual Insurance can help assess your construction risk exposure, contact your broker or Doug Cauti at email@example.com.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.