TABLE OF AUTHORITIES........................................................................................................... ii

INTRODUCTION............................................................................................................................ 1

ARGUMENT.................................................................................................................................... 2

1. Wellness programs are permissible under the ADA, but only if voluntary............... 2

2. 29 C.F.R. § 1630.14(d)(6) is entitled to deference.......................................................... 4

a. EEOC had authority to issue § 1630.14(d)(6)..................................................... 4

b. § 1630.14(d)(6) accords with the statute’s language and history................... 6

c. § 1630.14(d)(6) reflects EEOC’s longstanding views and applies here............. 7

3. Flambeau did not show on this record that it was “underwriting risks, classifying

risks, or administering risks.”........................................................................................... 9

4. Flambeau forfeited its § 12201(c)(3) argument, which lacks merit............................ 15

5. Flambeau has not established that the wellness plan was a “term”

of its health plan.................................................................................................................... 18

6. Flambeau used the safe harbor as a subterfuge to evade the ADA’s ban on unlawful medical exams and disability-related inquiries.......................................................................... 19

7. Flambeau’s wellness plan was not voluntary, precluding summary judgment........ 21

CERTIFICATE OF COMPLIANCE WITH RULE 32(a)(7)........................................................ C-1

CERTIFICATE OF SERVICE......................................................................................................... C-2

Table of Authorities

Cases

Chevron, U.S.A., Inc., v. Natural Res. Def. Council, Inc.,
467 U.S. 837 (1984)......................................................................................................... 5, 23

City of Arlington, Texas v. FCC,
133 S.Ct. 1863 (2013)............................................................................................................. 5

Clay v. Johnson,
264 F.3d 744 (7th Cir. 2001)......................................................................................... 8, 23

EEOC v. Grane Healthcare Co.,
2 F. Supp. 3d 667 (W.D. Pa. 2014)..................................................................................... 21

EEOC v. Prevo’s Family Mkt., Inc.,
135 F.3d 1089 (6th Cir. 1998)............................................................................................. 21

Griffin v. Steeltek, Inc.,
160 F.3d 591 (10th Cir. 1998)............................................................................................. 21

Kasten v. Saint-Gobian Performance Plastics Corp.,
563 U.S. 1 (2011)..................................................................................................................... 6

Koons v. Aventis Pharmaceuticals, Inc.,
367 F.3d 768 (8th Cir. 2004)............................................................................................. 19

Mers v. Marriott International Group Accidental Death & Dismemberment Plan, 144 F.3d 1014 (7th Cir. 1998).............................................................................................................. 19

Oates v. Discovery Zone,
116 F.3d 1161 (7th Cir. 1997)............................................................................................... 16

Robinson v. Shell Oil Co.,
519 U.S. 337 (1997)............................................................................................................... 16

Rouse v. Berry,
848 F. Supp. 2d 4 (D.D.C. 2012).................................................................................. 10, 12

Saks v. Franklin Covey Co.,
117 F. Supp. 2d 318 (S.D.N.Y. 2000).................................................................................. 17

Seff v. Broward County, 778 F. Supp. 2d 1370 (S.D. Fla. 2011), aff’d, 691 F.3d 1221 (11th Cir. 2012).............................................................................................................................. passim

.... TABLE OF AUTHORITIES (cont’d)

Sutton v. United Air Lines, Inc.,
527 U.S. 471 (1999)................................................................................................................. 5

Statutes

29 U.S.C. § 1022(b)..................................................................................................................... 18

42 U.S.C. § 12101(b)(1)............................................................................................................... 21

42 U.S.C. § 12112(d)(1)............................................................................................................... 21

42 U.S.C. § 12112(d)(4)(A)................................................................................................ passim

42 U.S.C. § 12112(d)(4)(B)................................................................................................ passim

42 U.S.C. § 12201(c)........................................................................................................... passim

42 U.S.C. § 12201(c)(1)............................................................................................................... 16

42 U.S.C. § 12201(c)(2).............................................................................................................. 16

42 U.S.C. § 12201(c)(3)...................................................................................................... passim

42 U.S.C. § 12203.......................................................................................................................... 5

42 U.S.C. § 12116........................................................................................................................... 4

Regulations and Interpretive Guidance

29 C.F.R. pt. 1630, App. § 1630.14(d)......................................................................................... 7

29 C.F.R. pt. 1630, App. § 1630.16(f)........................................................................................ 17

29 C.F.R. § 1630.12....................................................................................................................... 6

29 C.F.R. § 1630.14................................................................................................................... 3, 4

29 C.F.R. § 1630.14(d).................................................................................................................. 7

29 C.F.R. § 1630.15(g).................................................................................................................. 5

29 C.F.R. § 1630.16(f)............................................................................................................... 4, 5

Regulations Under the Americans with Disabilities Act, 81 Fed. Reg. 31129 (May 17, 2016) (to be codified at 29 C.F.R. § 1630.14(d))................................................................ passim

TABLE OF AUTHORITIES (cont’d)

EEOC Compliance Manual, Section 8: Retaliation, No.915.003 (May 20, 1998), available at https://www.eeoc.gov/policy/docs/retal.html........................................................... 6

EEOC Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans With Disabilities Act (ADA), No. 915.002 (July 27, 2000), available at http://www.eeoc.gov/policy/docs /guidance-inquiries.html 2, 22

Interim Enforcement Guidance on the Application of the [ADA] to Disability-Based Distinctions in Employer Provided Health Insurance, 1993 WL 1497027 (June 8, 1993)............................................................................................................................................. 5, 10

Other Authority

H.R. Rep. No. 101-485, pt.2 (1990), reprinted in 1990 U.S.C.C.A.N. 303............ 7, 9, 17, 18

Jill R. Horwitz, et al., Wellness Incentives in the Workplace: Cost Savings through Cost Shifting to Unhealthy Workers, 32 Health Aff. 468 (2013), available at http://content.healthaffairs.org/content/32/3/468..................................................... 3

INTRODUCTION

The picture Flambeau and its amici paint of the ADA is stark. Under their view of the statute, employers can declare by fiat that health insurance is contingent upon employees answering questions about their medical history and conditions, having a needle stuck in their arm for the withdrawal of a vial of blood to be tested, and having their weight, height, and blood pressure measured. Flambeau bases this view on an impermissibly expansive view of the safe harbor provision, 42 U.S.C. § 12201(c), and of the “voluntary” exception for medical exams and disability-related inquiries that are part of an employee health program, 42 U.S.C. § 12112(d)(4)(B). Flambeau’s view of the ADA is incorrect.

Congress enacted the ADA, in part, to protect applicants and employees against unlawful medical exams and disability-related inquiries. Such exams and inquiries not only lead to disability-based discrimination but are damaging in their own right because they require employees to disclose confidential medical information and undergo intrusive medical testing, which can be sigmatizing. Contrary to the argument of Flambeau and its amici, the ADA’s text and legislative history lead inexorably to the conclusion that the insurance safe harbor provision does not apply to the prohibition on employee medical exams and disability-related inquiries at § 12112(d)(4)(A). If there were any doubt about this interpretation, EEOC put it to rest with its informal guidance documents and the agency’s regulation at 29 C.F.R. § 1630.14(d)(6), which became final May 17, 2016, and is effective July 18, 2016. See EEOC’s Rule 28(j) letter (citing 81 Fed. Reg. 31126).

But even if the insurance safe harbor applies, it provides no shelter to Flambeau’s wellness program. Flambeau’s interpretation of “underwriting risks, classifying risks, or administering risks” as encompassing anything tangentially related to an insurance plan lacks textual support and contravenes the legislative history. Flambeau’s expansive definition of “term” likewise lacks textual support or legal authority and would impermissibly allow employers to announce by fiat new plan “terms.” Flambeau’s belated argument that § 12201(c)(3) saves the day was forfeited and is incorrect. Flambeau’s “subterfuge” argument fails because the text of § 12112(d)(4)(A) makes it self-evident that a purpose of the ADA is to prohibit unlawful employee medical exams and disability-related inquiries. Summary judgment cannot be affirmed on the alternate ground that the wellness program was “voluntary” because having to choose between foregoing health insurance, or submitting to an intrusive medical exam and having to disclose confidential medical information, is a Hobson’s choice that flunks the ADA’s “voluntary” standard.

ARGUMENT

1. Wellness programs are permissible under the ADA, but only if voluntary.

The underlying theme of Flambeau’s brief, and its amici, is that EEOC is on a campaign to stamp out wellness programs. See, e.g., Business Roundtable Br.18 (EEOC’s argument “jeopardizes the vitality of all wellness programs”). Not so. Consistent with the ADA’s plain language, EEOC has consistently recognized that voluntary wellness programs are permissible. See EEOC’s “Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans With Disabilities Act (ADA),” No. 915.002 (July 27, 2000), available at http://www.eeoc.gov/policy/docs /guidance-inquiries.html (Q/A #22) (employers may “conduct voluntary medical examinations” and “voluntary medical histories” as part of an employee health program, such as blood pressure, cholesterol, or cancer screenings).

EEOC’s final rule amending 29 C.F.R. § 1630.14 also recognizes the prevalence and importance of wellness plans, and the new rule provides employers wide latitude to implement such plans.[1] See 81 Fed. Reg. 31126 (to be codified at 29 C.F.R. § 1630.14) (May 17, 2016). The preamble acknowledges that wellness programs are permissible under the Health Insurance Portability and Accountability Act (HIPPA), as amended by the Affordable Care Act (ACA). 81 Fed. Reg. at 31126-31129. The preamble also clarifies that the final rule, and its limitations, do not apply to wellness programs that merely provide “general health and educational information.” 81 Fed. Reg. at 31126.

As for wellness programs with medical exams and disability-related inquiries, § 1630.14(d)(1) requires that employee health programs “be reasonably designed to promote health or prevent disease.” 81 Fed. Reg. at 31139. Consistent with the “voluntary” requirement of § 12112(d)(4)(B), the final rule provides that a plan is involuntary if participation is “require[d]” or if non-participation is met with retaliation or termination of health insurance. 81 Fed. Reg. at 31139 (to be codified at 29 C.F.R. § 1630.14(d)(2)). But the rule also clarifies that employers can offer incentives—in the form of a “reward or penalty”—up to 30% of the cost of self-only coverage under a group health plan. 81 Fed. Reg. at 31140 (to be codified at 29 C.F.R. § 1630.14(d)(3)(i)). Thus, employers may offer $1,800 incentives where self-only coverage costs $6,000. 81 Fed. Reg. at 31141. By any measure, this is a “substantial” incentive that cannot credibly be said to hobble employer efforts to encourage wellness plan participation. 81 Fed. Reg. at 31133; cf. HR Policy Ass’n Br.21 (complaining that without the safe harbor provision, employers could “only” offer voluntary wellness programs).

2. 29 C.F.R. § 1630.14(d)(6) is entitled to deference.

As EEOC’s Rule 28(j) letter states, § 1630.14(d)(6) provides that the “‘safe harbor’ provisions in [29 C.F.R.] § 1630.16(f)”—which mirror § 12201(c)—“do not apply to wellness programs, even if such plans are part of a covered entity’s health plan.” 81 Fed. Reg. at 31140. Flambeau and its amici do not dispute that the regulation went through notice-and-comment rulemaking or that EEOC has substantive rulemaking authority under Subchapter I of the ADA. 42 U.S.C. § 12116. But they argue this Court should not defer to § 1630.14(d)(6) because EEOC lacked authority to issue it, it conflicts with the statute’s plain language, and it announced a new statutory interpretation. These arguments fail.

a. EEOC had authority to issue § 1630.14(d)(6).

Flambeau contends that § 1630.14 was issued ultra vires because EEOC lacks rulemaking authority under Subchapter IV of the ADA (Title V), which houses the safe harbor provision. Br.30. The flaw in this argument is that the insurance safe harbor explicitly cross-references Subchapter I, which gives EEOC rulemaking authority. 42 U.S.C. § 12116. Specifically, § 12201(c) states that “Subchapters I through III . . . shall not be construed to prohibit or restrict” an entity from administering plan terms based on underwriting, classifying, or administering risks. Because EEOC has rulemaking authority under Subchapter I, which § 12201(c) cross-references, and because § 1630.14(d)(6) is not “arbitrary, capricious, or manifestly contrary to the statute,” it must be given “controlling weight”. Chevron, U.S.A., Inc., v. Natural Res. Def. Council, Inc., 467 U.S. 837, 844 (1984).

Even if EEOC’s authority to interpret the safe harbor is ambiguous, § 1630.14(d)(6) is entitled to deference. The Supreme Court recently considered whether Chevron deference is owed “to an agency’s interpretation of a statutory ambiguity that concerns the scope of the agency’s statutory authority (that is, jurisdiction).” City of Arlington, Texas v. FCC, 133 S.Ct. 1863, 1866 (2013). The Court answered the question affirmatively, holding that “where Congress has established an ambiguous line” as to an agency’s statutory authority, the agency’s view of its own authority is entitled to deference when “‘based on a permissible construction of the statute.’” Id. at 1874 (quoting Chevron, 467 U.S. at 842). Here, EEOC determined it “has authority to interpret the safe harbor provision because, by its express terms, this provision applies to Title I[.]” 81 Fed. Reg. at 31130. Cf. Sutton v. United Air Lines, Inc., 527 U.S. 471, 479 (1999) (noting no agency was given authority to issue regulations “implementing the generally applicable provisions of the ADA” that “fall outside Titles I-V”). That view was reasonable, given the safe harbor’s cross-reference to Subchapter I.

EEOC’s view of its authority to issue § 1630.14(d)(6) is consistent with the agency’s longstanding view that it retains regulatory authority under the insurance safe harbor and the ADA’s anti-retaliation provision, 42 U.S.C. § 12203, which also resides in Subchapter IV (Title V). In 1991, EEOC issued 29 C.F.R. § 1630.15(g), which states that “it may be a defense to a charge of discrimination” that the action is permitted by “§ 1630.16,” which includes the safe harbor provision at § 1630.16(f). In 1993, EEOC issued its “Interim Enforcement Guidance on the Application of the [ADA] to Disability-Based Distinctions in Employer Provided Health Insurance,” 1993 WL 1497027 (June 8, 1993), which addresses the safe harbor provision. EEOC also issued 29 C.F.R. § 1630.12 (“Retaliation and Coercion”), and EEOC’s Compliance Manual, Section 8: Retaliation, No.915.003 (May 20, 1998), available at https://www.eeoc.gov/policy/docs/retal.html, addresses ADA retaliation.

b. § 1630.14(d)(6) accords with the statute’s language and history.

Contrary to Flambeau’s arguments, § 1630.14(d)(6) accords with the ADA’s plain language. EEOC agrees with Flambeau that statutes should be construed such that “‘no clause . . . shall be superfluous, void, or insignificant.’” Br.25 (quoting Stapleton v. Advocate Health Care Network, 817 F.3d 517, 523 (7th Cir. 2016)). But this cardinal principle of statutory construction shores up EEOC’s plain language argument, not Flambeau’s. Applying the safe harbor provision would essentially “void” – or at least would render “insignificant” – the statute’s ban on employee medical exams and inquiries that are neither job-related nor part of a voluntary employee health program. Flambeau’s other arguments underscore this, as Flambeau contends it can make a wellness plan a “term” of its insurance plan by fiat, “underwriting” refers to anything tangentially related to insurance plans, and “subterfuge” pertains only to disability discrimination, not to the ban on medical exams and inquiries. Flambeau’s broad view of the insurance safe harbor would permit employers offering health insurance plans a means to evade § 12112(d)(4), thereby rendering it “insignificant,” if not “void.” See also Kasten v. Saint-Gobian Performance Plastics Corp., 563 U.S. 1, 7 (2011) (statutory interpretation depends upon reading the whole statutory text and considering the statute’s purpose and context).

Flambeau skims over EEOC’s argument that the legislative history supports the agency’s plain language interpretation. EEOC Br.19-21. As EEOC stated, the sole reference in the legislative history to wellness programs is the House Report’s statement that wellness programs are lawful so “long as the programs are voluntary” and “not used for the purpose of limiting health insurance eligibility[.]” H.R. Rep. No. 101-485, at 75, reprinted in 1990 U.S.C.C.A.N. 303, 357. Flambeau has no response to this convincing legislative history, which confirms that whether medical exams and inquiries are a permissible component of a wellness program is governed by § 12112(d)(4)—where they are expressly addressed—not by § 12201(c), where they are not.

c. § 1630.14(d)(6) reflects EEOC’s longstanding views and applies here.

Flambeau disputes that EEOC’s longstanding view is that the safe harbor provision does not apply to § 12112(d)(4). Br.29. Engaging in rank speculation about what the agency thinks, Flambeau contends that EEOC did not clarify the inapplicability of the safe harbor provision before 2015 because the agency thought all along that it applied to § 12112(d)(4). This assertion is misguided.

As EEOC discussed, Br.21-25, the agency’s regulations and informal guidance have never suggested that the insurance safe harbor provided a third exception to the prohibition on employee exams and inquiries. To the contrary, the clear import of the agency’s longstanding regulations and guidance is that voluntariness determines whether employee medical exams and disability-related inquiries are permissible in wellness programs. See, e.g., 29 C.F.R. § 1630.14(d) (“voluntary” exams and medical histories permissible); 29 C.F.R. pt. 1630, App. § 1630.14(d) (same). Also, EEOC issued a 2009 informal discussion letter stating that requiring employees to complete a health risk assessment (including disability-related questions, a blood pressure test, and a blood draw) “would violate the ADA” because it would be neither job-related nor consistent with business necessity. See EEOC Br.25.

It is easy enough to identify the reason EEOC never explicitly announced that the insurance safe harbor does not permit an end-run around § 12112(d)(4)(A): until Seff v. Broward County, 778 F. Supp. 2d 1370 (S.D. Fla. 2011), aff’d, 691 F.3d 1221 (11th Cir. 2012), EEOC was unaware any court had held than an employer could rely on the safe harbor to justify forcing its employees to have blood drawn and to answer intrusive medical questions. When it became apparent that employers would invoke the safe harbor for this purpose, EEOC acted expeditiously to revise its regulations to clarify that the insurance safe harbor does not apply. Because the rule is clarifying, it applies here. See 81 Fed. Reg. 31129-30 (rule is clarifying, except as to notice and incentive provisions); Clay v. Johnson, 264 F.3d 744, 749 (7th Cir. 2001) (courts give “great deference” to agency’s “expressed intent” its rule clarifies existing law).

This Court should also reject Flambeau’s argument that due process precludes applying § 1630.14(d)(6). Br.32. The thrust of this undeveloped argument is that Flambeau was unaware before April 2015 of EEOC’s view of the safe harbor provision’s inapplicability and that Flambeau was therefore entitled to rely on Seff. This argument holds no water. As stated, EEOC’s pre-2015 regulations and guidance never mention the safe harbor as a defense to § 12112(d)(4)(A), and EEOC’s 2009 informal discussion letter states affirmatively that conditioning health insurance upon submitting to medical exams and disability-related inquiries would violate the ADA. Flambeau’s claimed reliance on Seff rings hollow, since Seff was decided in 2011 but Flambeau did not invoke the safe harbor provision until this 2014 litigation. R.17-25, p.1 (July 3, 2012, position statement) (asserting the wellness plan was “entirely voluntary” and mentioning nothing about the safe harbor provision or underwriting).

3. Flambeau did not show on this record that it was “underwriting risks, classifying risks, or administering risks.”

Flambeau and its amici urge an expansive interpretation of “underwriting risks, classifying risks, or administering risks” that this Court should reject because it would render the safe harbor provision the rule, not the exception.

Flambeau first contends that “underwriting risks,” “classifying risks,” and “administering risks” have separate and distinct meanings, but Flambeau does not tell us exactly what they are. Br.20. Nor does Flambeau cite any textual or legislative authority to support its view that these terms have independent meaning. Certainly, nothing in § 12201(c) suggests this. The legislative history (which Flambeau does not discuss) also belies Flambeau’s argument. As EEOC discussed, Br.19-20, the legislative history shows that Congress included the safe harbor provision for a single purpose: to clarify that the ADA would not disrupt traditional underwriting practices, which are “based on classification of risks[.]” H.R. Rep. No. 101-485, at 136, 1990 U.S.C.C.A.N. at 419. The House Report further states that the safe harbor does not permit an individual’s coverage to be denied or limited, or a different premium to be charged, “because of a physical or mental impairment, except where . . . based on sound actuarial principles or [the action] is related to actual or reasonably anticipated experience.” Id. at 137, 1990 U.S.C.A.A.N. at 420.

Flambeau also criticizes EEOC for advancing an “exceedingly narrow reading of the word ‘underwriting.’” Br.36. But the definition of “underwriting” advanced by EEOC at pages 27-28 of its brief is not unreasonably narrow. Rather, EEOC cited district court cases, this Circuit’s precedent, and EEOC’s Interim Enforcement Guidance for the proposition that – as the legislative history indicates – “underwriting” generally refers to the application of individual or group risk factors for the purpose of making coverage determinations. See Interim Guidance, 1993 WL 1497027, at *6 n.15 (underwriting refers to application of risk factors to individuals or groups to determine whether to provide insurance); Rouse v. Berry, 848 F. Supp. 2d 4, 5 (D.D.C. 2012) (“Underwriting is the process of reviewing health and medical information provided during the insurance application process in order to determine whether an application presents a level of risk acceptable to the insurer.”). Flambeau does not explain why the definition advanced in these cases, and EEOC’s guidance, do not apply.

Rather than address this case law or the legislative history, Flambeau instead urges this Court to embrace one of the 2016 dictionary definitions of “underwrite” as “to set one’s name to (an insurance policy)” to cover “loss or damage on consideration of receiving a premium percent.” Br.36. This vague dictionary definition does nothing to inform this Court’s interpretation of the insurance safe harbor provision, which was designed by Congress with a specific intent in mind: to clarify that traditional underwriting, based on risk classification, could continue without running afoul of the ADA’s prohibition on disability discrimination. Flambeau, in fact, fails to cite the legislative history at all when advancing its view of “underwriting.” Br.20-23, 36-37. That omission is telling, as the legislative history supports EEOC’s argument, not Flambeau’s.

Flambeau also relies on an extended block quotation from the district court’s Seff decision, seeming to suggest that it provides the correct definition of underwriting, administering, or classifying risks. Br.21. But Seff is unpersuasive for the same reason Flambeau’s argument fails: it lacks any textual or legislative support. In Seff, the district court conceded that the employer was not utilizing the wellness plan for “underwriting or classifying risks on an individual basis.” 778 F. Supp. 2d at 1374. But the court went on to essentially create its own definition of “underwriting and classifying risk” out of whole cloth by declaring that the wellness plan was used for “underwriting and classifying risks on a macroscopic level” to enable the employer to make “economically sound benefit plans for the future.” Id. But § 12201(c) does not speak of classifying risk on a “macroscopic level,” or of facilitating the ability of employers to make sound economic decisions “for the future.” The Seff court also declared that the wellness program fell under the safe harbor because it was “designed to mitigate risks” by increasing employee health and reducing costs, but, again, § 12201(c) does not provide safe harbor for those plan terms “designed to mitigate risk” by making workers healthier.

Flambeau makes the confusing, and misleading, assertion that “As set forth in Merriam-Webster [dictionary] (and as alluded to by the District Court), the ordinary meaning of ‘underwriting’ is to insure a risk and/or ‘the process of developing an insurance plan.’” Br.37 (citing A-12). The sentence suggests that the dictionary defines “underwriting” as meaning “the process of developing an insurance plan.” It doesn’t. It was the district court in Seff that equated “underwriting” with “the process of developing insurance plans.” Seff, 778 F. Supp. 2d at 1374; see A-12 (opinion) (quoting Seff). But Seff had no support for this expansive interpretation of underwriting, which is nowhere to be found in the ADA.

Flambeau’s amici also urge an unjustifiably broad definition of “underwriting risks, classifying risks, and administering risks.” The Business Roundtable, for instance, asserts that “administering risks” means “reducing costs by improving health.” BR Br.10. Tellingly, it cites no textual or legislative authority for its made-up definition of “administering risks.” Had Congress meant for “administering risks” to encompass cost reduction efforts, Congress could have written the statute to say so. Likewise, the HR Policy Association contends that underwriting risks, classifying risks, and administering risks refers to an employer’s “decisions about plan design and pricing, including deductible amounts, copay amounts, and coverage provision.” HR Br.20-21. In other words, § 12201(c) refers to literally anything having to do with the design and pricing of a benefit plan. This is not what Congress said, and it is not what Congress intended.

Case law is replete with tangible illustrations of what “underwriting” means, which is the use of individual or group risk factors to make coverage decisions. In Rouse for instance, the plaintiff brought suit after his application for long-term care insurance was denied because his wheelchair use placed him in “the risk class of individuals automatically ineligible for standard coverage.” 848 F. Supp. 2d at 7. Likewise, in Cloutier v. Prudential Insurance Co., the defendant denied the plaintiff a life insurance policy after reviewing his medical records, “in accordance with [the company’s] standard individual policy underwriting procedures[,]” and learning that his partner was HIV-positive. 964 F. Supp. 299, 300 (N.D. Cal. 1997). Similarly, Doukas v. Metropolitan Life Insurance Co., involved the denial of the plaintiff’s application for mortgage disability insurance on the ground that her history of bipolar disorder “did not meet [the company’s] underwriting standards.” 950 F. Supp. 422, 424 (D.N.H. 1996). Finally, the employer in Barnes v. Benham Group, Inc., engaged in group underwriting when it elicited disability-related information about its employees to price out group insurance policies. 22 F. Supp. 2d 1013, 1017 (D.Minn. 1998).

Unlike the defendants in the above cases – who were all using risk classification to determine whether to provide insurance coverage, or at what level – Flambeau is a self-insured employer and therefore already agreed to assume the risk of insuring all of its employees and their spouses and dependents. Flambeau simply was not using anyone’s individual risk factor to determine whether to offer him or her health insurance, or at what rate. Nor was Flambeau using the wellness data to price out group insurance plans, as in Barnes. (And it could not do this anyway, as it lacked data as to spouses and dependents.). Flambeau, in fact, fails to respond to EEOC’s observation that HIPPA, as amended by the ACA, has all but done away with the traditional practice of underwriting when it comes to health insurance. EEOC Br.39 (discussing how individuals can no longer be excluded due to pre-existing conditions and that discrimination in terms of premiums, benefits, and eligibility based on health factors is no longer permitted).

Although Flambeau does not dispute that it was not using individual or group risk factors from the wellness plan data to make coverage or individual premium determinations, Flambeau still insists it was “underwriting.” This assertion simply is not credible. As EEOC already pointed out, Flambeau did not assert until litigation that it was underwriting. The company’s July 3, 2012, position statement asserts that the wellness plan’s “sole purpose” was to enable employees to “learn about their own medical conditions.” R.17-25, p.2. Flambeau tries to paper over this admission by asserting the position statement focused simply on the ADA’s “central purpose—to prohibit disability-based discrimination.” Br.41. Flambeau seems to suggest that Dale Arnold’s charge alleged only disability-based discrimination, not unlawful medical exams and inquiries. But the position statement, which Flambeau’s General Counsel signed, expressly notes that the charge alleged the wellness plan “included prohibited medical inquiries and examinations which were not job-related or consistent with business necessity.” R.17-25, p.1. Flambeau therefore had every reason to assert the safe harbor defense, had the company actually been using the wellness plan for underwriting.

Flambeau tries to shoehorn its wellness plan into the safe harbor provision by claiming that the “undisputed evidence” shows it used the data to inform its premium rates. Br.38. To support this contention, Flambeau cites to a broad array of record evidence without discussing any of it. Evidently, Flambeau means to rely on its proposed findings of fact (R.14), the Trotter Wellness report (R.12-4), Rieland’s deposition (R.21), Rieland’s Affidavit (R.12), the premium level chart (R.12-7), and Hames’ affidavit (R.13). See Br.38. But Flambeau does not dispute that the Trotter Wellness report lacks actuarial or risk analysis data, EEOC Br.31, and the report is indisputably devoid of premium recommendations. The premium level chart (R.12-7), says nothing about whether the wellness data was used to set premium rates.

As for Rieland’s deposition testimony and his affidavit, they show that Flambeau was not using the wellness data to set premium rates. See EEOC Br.30-31. Rieland twice testified the data was not used to determine premiums, and he conceded that the next year’s premiums were the “direct result” of the previous year’s expenses. R.30-9, pp.5-6 (Rieland Depo.71-72) (agreeing data was “not used by you to determine” individual premium rates, and “was not used at any time to determine . . . premiums”), p.27 (Rieland Depo.213). Flambeau accuses EEOC of misconstruing Rieland’s testimony, asserting that Rieland testified only “that he did not personally use the information” to establish premiums. Br.40. But that is not a fair characterization of Rieland’s testimony, who testified as a Flambeau representative. At a minimum, his testimony creates a fact question as to whether the wellness data was used to set premium rates. EEOC also explained in its opening brief why Hames’ vague affidavit fails to establish that Flambeau used the wellness data for underwriting. See EEOC Br.35. And Flambeau does not respond to EEOC’s assertion that the wellness data could not have reasonably informed the setting of the next year’s premium rates when it omitted spouses (nearly 25% of plan participants) and dependents.

Flambeau asserts that it was underwriting because Hays’ recommendation to purchase stop-loss insurance and charge smokers a higher premium was based on the wellness data. Br.38. But Flambeau concedes that Hays’ recommendation to purchase stop-loss insurance was based on data from the “fall of 2010,” when the wellness plan was not required. EEOC Br.33 (citing R.13, ¶¶ 7-8). Flambeau declares this “insignificant” but fails to explain why. Likewise, Flambeau concedes it adopted non-smoking incentives and started charging smokers a higher premium before the wellness plan became mandatory for the 2012 benefit year. EEOC Br.35; Flambeau Br.38. The company tries to brush aside the significance of these concessions, but they underscore that Flambeau was not using data from the 2012 and 2013 wellness plans for underwriting, even if “underwriting” includes generic recommendations to purchase stop-loss insurance and charge smokers higher premiums.

4. Flambeau forfeited its § 12201(c)(3) argument, which lacks merit.

For the first time ever in this litigation, Flambeau asserts that because its plan is self-funded, § 12201(c)(3), not § 12201(c)(2) applies. Flambeau further contends that unlike (c)(2), (c)(3) permits self-funded employers to administer plan terms “without regard to whether [those] terms . . . are based on underwriting risks, classifying risks or administering such risks.” Br.24. Flambeau’s eleventh hour argument fails for two reasons.

First, Flambeau forfeited this argument by failing to raise it earlier. See Oates v. Discovery Zone, 116 F.3d 1161, 1168 (7th Cir. 1997) (“[I]t is axiomatic that arguments not raised below are waived on appeal.”) (citation omitted). Presumably, Flambeau only ever argued (c)(2) because Seff relied on (c)(2). Second, Flambeau’s contention that (c)(3) does not pertain to underwriting is based on a misreading of the statute and lacks legislative support. To be sure, (c)(3) does not include the “underwriting risks, classifying risks, or administering such risks” language of (c)(1) and (c)(2), but it does contain the same language as (c)(2) referring to an organization “establishing, sponsoring, observing or administering” plan terms, which suggests insurance activity. Because the meaning of (c)(3) is neither “plain nor unambiguous” (c)(3) must be interpreted in the “broader context” of § 12201(c) as a whole. Robinson v. Shell Oil Co., 519 U.S. 337, 340, 345 (1997). That context shows that the safe harbor provision permits insurers and other organizations, including employers with self-funded plans and commercially-funded plans, to administer only those plan terms based on underwriting, classifying, or administering risk. To read (c)(3) otherwise leads to an absurd result, as it would mean that self-insured employers could avoid the ADA’s prohibitions entirely when administering any plan term (barring subterfuge), while commercially-insured employers would be able to do so only when the term related to underwriting, classifying, or administering risks. Flambeau offers no explanation for why Congress would have intended this anomalous result.

Legislative history confirms EEOC’s reading of § 12201(c)(3) as pertaining to underwriting. The House Report states that § 12201(c) was added to “make clear” that the ADA would not “disrupt the current nature of insurance underwriting or the current regulatory structure for self-insured employers . . . in . . . underwriting . . . and similar insurance related activities based on classification of risks as regulated by the States.” H.R. Rep. No. 101-485, at 136, 1990 U.S.C.C.A.N. at 419 (emphasis added). The House Report further states that “Point (3) simply clarifies that self-insured plans, which are currently governed by the preemption provisions of [ERISA], are still governed by that preemption provision and are not subject to state insurance laws.” Id. at 137, 1990 U.S.C.C.A.N. at 420.

Even if the statute and legislative history were unclear, this Court should defer to EEOC’s consistent view that (c)(3) pertains to underwriting. EEOC’s 1991 interpretive guidance describes the safe harbor exception as a “limited exemption” with the “purpose” of permitting the “development and administration of benefit plans in accordance with accepted principles of risk assessment.” 29 C.F.R. pt. 1630, App. § 1630.16(f) (also stating that this provision will not disrupt the “current nature of insurance underwriting”). Further, the safe harbor provision permits disparate treatment of individuals with disabilities only where based upon “risk classification.” Id. The interpretive guidance therefore establishes that the safe harbor exempts only those entities using “risk classification,” i.e., underwriting; no separate exemption exists for self-funded employers who are not engaged in underwriting.

The sole case Flambeau cites to support its argument that (c)(3) gives self-funded employers a free pass to avoid the ADA when implementing a plan term (barring subterfuge), is Saks v. Franklin Covey Co., 117 F. Supp. 2d 318, 327 (S.D.N.Y. 2000), aff’d on other grounds, 316 F.3d 337 (2d Cir. 2003). But Saks did not offer a considered analysis of the question, fails to consider the legislative history, and has been cited for this point by a single out-of-circuit district court.

5. Flambeau has not established that the wellness plan was a “term” of its health plan.

Flambeau has no convincing response to EEOC’s argument that the wellness plan was not a “term” of its insurance plan. Flambeau does not dispute that neither the 100+ page summary plan description nor the collective bargaining agreement mention the wellness plan requirement. Nor does Flambeau dispute that its health plan must comply with ERISA, that ERISA requires a summary plan description to identify “a plan’s requirements respecting eligibility for participation and benefits,” 29 U.S.C. § 1022(b), or that precedent from this Court and others suggests that a handout is insufficient to alter the terms of a written benefit plan. EEOC Br.40-42. Flambeau instead relies on the Eleventh Circuit’s statement in Seff that there is a lack of authority suggesting that wellness plans must be identified in written benefit plans to constitute a “term” under § 12201(c). 691 F.3d at 1224. Respectfully, this observation adds nearly nothing to the discussion of what constitutes a benefit plan “term,” as EEOC is equally unaware of any authority—besides Seff and the court’s decision below relying on Seff—deciding that “term” in § 12201(c) encompasses an employer’s handout or bulletin board posting. Moreover, the legislative history suggests ERISA governs what is a “term.” See H.R. Rep. No. 101-485, at 137, 1990 U.S.C.C.A.N. at 420 (“[U]nder the ADA, the provisions of [self-insured] plans must conform with the requirements of ERISA”.).

Flambeau contends that even if ERISA informs the meaning of “term” and thereby requires terms of eligibility to be in the summary plan description, the wellness plan did not have to be in the summary plan description because, although required, it was a “term of enrollment,” not a “term of eligibility.” Br.45. This argument is a stretch at best, and specious at worst. Flambeau cites no authority for its proposition that “enrollment” and “eligibility” carry different meanings under ERISA. Flambeau’s argument that the wellness plan was a term of “enrollment” also contradicts the company’s assertion in its position statement and this litigation that employees who refused to participate in the wellness plan could enroll in the health insurance plan at 100% of the COBRA rate. This fact compels the conclusion that the wellness plan was not a “term” (either of eligibility or enrollment) of the health plan under § 12201(c), as employees did not have to complete it to enroll.

Finally, Flambeau’s reliance on Koons v. Aventis Pharmaceuticals, Inc., 367 F.3d 768, 775-76 (8th Cir. 2004), and Mers v. Marriott International Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1023 (7th Cir. 1998), are baffling in light of Flambeau’s repeated reminder that, unlike in those cases, in this case there was no underlying health insurance plan. Br.46. It is therefore hard to understand how Koons’ holding – that eligibility rules present in a benefit plan, but not a summary plan description, still apply – advances Flambeau’s position. Likewise, Mers, which held that a summary plan description’s silence does not estop reliance on terms included in the underlying policy, does not support Flambeau, since there was no underlying policy here.

6. Flambeau used the safe harbor as a subterfuge to evade the ADA’s ban on unlawful medical exams and disability-related inquiries.

Flambeau’s subterfuge argument is based on a selective interpretation of the ADA and the record. Flambeau first contends that “subterfuge” pertains only to disability discrimination in non-fringe-benefits of employment, not to “the general bar against medical examinations and inquiries contained in § 12112(d) . . . .” Br.48. Flambeau cannot have its cake and eat it too. If, as Flambeau insists, the EEOC is wrong and the insurance safe harbor applies to § 12112(d)(4)(A)’s ban on medical exams and inquiries, then it necessarily follows that “subterfuge” also applies to § 12112(d)(4)(A).

Besides being internally inconsistent, Flambeau’s argument contradicts the statute’s plain language. Nothing in the insurance safe harbor limits the subterfuge clause to disability discrimination under § 12112(a)-(b). To the contrary, § 12201(c) states broadly that subsections (1)-(3) “shall not be used as a subterfuge to evade the purposes of subchapter I[.]” Because § 12112(d)(4)(A) resides within Subchapter I, the plain reading of the statute is that subterfuge can be shown where an employer “use[s]” the safe harbor provision to evade the purpose of that provision, which is to protect employees from unlawful medical exams and disability-related inquiries.

Flambeau, however, asserts that subterfuge does not pertain to § 12112(d)(4) because the prohibition on unlawful medical exams and inquiries was not one of the “central” purposes of the ADA. Br.48. Flambeau is doubly wrong. The word “central” does not appear in § 12201(c); it is Flambeau who injected it there. In any event, outlawing unlawful medical exams and disability-related inquiries was one of the central purposes of the ADA. This is evident from the fact Congress devoted an entire provision of the ADA – § 12112(d) – to protecting individuals from unlawful medical examinations and inquiries (at the pre-employment stage, the post-offer stage, and during employment). It is also evident from the forceful language Congress used in § 12112(d)(4)(A): employers “shall not require” medical exams or make disability-related inquiries, except in two circumstances.

Flambeau’s argument also fails because it is based on the misconception that

subjecting employees to unlawful medical exams and inquiries is not discrimination. It is. The ADA states, inter alia, that “[i]t is the purpose of this chapter . . . to provide . . . for the elimination of discrimination against individuals with disabilities.” 42 U.S.C. § 12101(b)(1). Section 12112(a) prohibits discrimination based on disability. Section 12112(d)(1) then states that “the prohibition against discrimination as referred to in subsection (a) of this section shall include medical examinations and inquiries.” 42 U.S.C. § 12112(d)(1) (emphasis added).

Courts have also recognized that Congress was concerned with the stigma of unlawful medical exams and disability-related inquiries. See Griffin v. Steeltek, Inc., 160 F.3d 591, 594 (10th Cir. 1998) (stating that Congress was concerned with “the potential stigmatizing effect of medical inquiries and examinations”); EEOC v. Prevo’s Family Mkt., Inc., 135 F.3d 1089, 1094 n.8 (6th Cir. 1998) (noting Congress’ concern that employee medical exams allow “unwanted exposure of the employee’s disability and the stigma it may carry”). “A violation of § 12112(d) [thus] occurs as soon as a covered employer conducts an improper medical examination or asks an improper disability-related question, regardless of the results or response.” EEOC v. Grane Healthcare Co., 2 F. Supp. 3d 667, 692 (W.D. Pa. 2014) (internal quotation marks and citation omitted). Punitive and compensatory damages are available for a violation of § 12112(d), regardless of whether any “personnel decisions” flowed from the violation. Id. at 696.

7. Flambeau’s wellness plan was not voluntary, precluding summary judgment.

Contrary to Flambeau’s argument at pages 51-57, summary judgment cannot be affirmed on the alternate ground that the medical exams and inquiries were a “voluntary” component of its employee health program under § 12112(d)(4)(B), which is a question the district court did not address. As Flambeau notes, the A DA does not define voluntary but the dictionary defines it as “done or given by choice.” Br.51. Consistent with the ordinary meaning of “voluntary,” EEOC issued informal guidance in 2000 stating that “[a] wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.” EEOC’s “Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans With Disabilities Act (ADA),” available at http://www.eeoc.gov/policy/docs /guidance-inquiries.html (Q/A #22).

Flambeau’s wellness plan plainly flunks the voluntary requirement. It is undisputed that Flambeau cut off Arnold’s health insurance as of December 31, 2011, when he failed to complete the HRA and medical exam. Nearly two weeks later, the company offered to re-enroll Arnold at 100% of the COBRA rate (an increase of 334%, or an additional $300/month), which Arnold could not afford. Each of these actions constituted an impermissible “penalty,” rendering the wellness plan involuntary. See Guidance at Q/A #22 (penalties render plans involuntary).

Flambeau nevertheless contends that the wellness plan was “voluntary” because employees were not required to sign up for health insurance. Br.51. This argument fails because, as just discussed, the penalties imposed for non-participation render the plan involuntary. Additionally, employees did not have a choice about whether to complete the HRA and submit to medical testing. Flambeau’s notices informed employees in stark terms that the HRA and testing were “mandatory to be on Flambeau’s medical insurance” and that “failure to show up at your scheduled time will result in disciplinary action.” R.17-17, p.1. These postings thus made participation mandatory – not voluntary. And contrary to Flambeau’s assertion, the record suggests that Arnold and others were disciplined for failing to show up, as write-ups were put in their files. See R.17-7, p.11 (Axelsen Depo.85) (discussing write-ups); R.33-2 (12/22/11 Axelsen email discussing “write-ups for missed biometric appointments” to be “kept in the employees’ permanent file”).

Flambeau’s argument also fails because giving employees a “choice” whether to sign up for health insurance is only a Hobson’s choice. For most employees, company health insurance is a necessity, not a luxury. See AARP Br.25-29. This is underscored by the fact that, as Flambeau admits, the ACA now imposes monetary penalties on large employers who fail to offer legally compliant healthcare coverage. Br.55 n.7 (citing 26 U.S.C. § 4980H).

On this record, then, there is at least a question of fact as to whether Flambeau’s plan was “voluntary” under § 12112(d)(4)(B), as interpreted by the statute’s plain language and the EEOC’s guidance document. The EEOC’s final wellness rule confirms that the wellness plan was not voluntary. Section 1630.14(d)(2) clarifies that exams and inquiries are “voluntary as long as” an employer does not require participation, does not deny coverage under its group health plan for non-participation, and does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees for non-participation. 81 Fed. Reg. at 31139. Section 1630.14(d)(2) clarifies existing law, 81 Fed. Reg. 31129-30, and therefore applies here. See Clay, 264 F.3d at 749. This rule is also entitled to Chevron deference because EEOC has rulemaking authority and issued the regulation after notice-and-comment, and because the rule accords with the statute’s plain language.

Flambeau’s wellness plan clearly violates the “voluntary” requirement as defined by § 1630.14(d)(2). See 81 Fed. Reg. at 31139. In contravention of § 1630.14(d)(2)(ii), Flambeau denied health insurance coverage for non-participation. Likewise, in derogation of § 1630.14(2)(iii), Flambeau “coerce[d], intimidate[d], or theaten[ed] employees” for non-participation, when it threatened to “discipline” employees who failed to complete the HRA and biometric exam and threatened to deprive them of health insurance guaranteed by the collective bargaining agreement. Flambeau even concedes, as it must, that “its approach undoubtedly had some coercive impact.” Br.54. Flambeau also took an “adverse employment action” against employees for non-participation under § 1630.14(d)(2)(iii) by shifting to non-participating employees 100% of the COBRA premium rate, rather than the 25% rate provided by the collective bargaining agreement. And for reasons discussed above, the wellness plan was not voluntary because Flambeau did “require employees” to participate, which violated § 1630.14(d)(2)(i).

Flambeau disputes that § 1630.14(d)(2)(ii) is entitled to deference, contending that “the statutory language unambiguously points to a different meaning of voluntary.” Br.53. But the statute does not purport to define “voluntary.” Flambeau fails to explain why EEOC was not reasonable in interpreting “voluntary” under 42 U.S.C. § 12112(d)(4)(B) to mean employers cannot deny coverage under a group health plan to individuals who refuse to undergo medical examinations or to answer disability-related inquiries.

Although the amended 29 C.F.R. § 1630.14(d)(3) applies only prospectively to plans beginning on or after January 1, 2017, 81 Fed. Reg. at 31129, Flambeau’s wellness plan would also violate this provision. As discussed, § 1630.14(d)(3)(i) defines voluntary as including plans that offer incentives (in the form of rewards or penalties) up to 30% of the cost of self-only coverage. The EEOC reasonably adopted the “30%” rule because it conforms with the ACA’s provisions governing wellness programs. 81 Fed. Reg. at 31134. Flambeau’s shifting to non-participating employees of 100% of the COBRA premium (i.e., 100% of the cost of self-only coverage) plainly violates this provision, solidifying the conclusion that Flambeau’s wellness plan was not voluntary.

Respectfully submitted,

P. DAVID LOPEZ

General Counsel

JENNIFER S. GOLDSTEIN

Associate General Counsel

LORRAINE C. DAVIS

Assistant General Counsel

s/Anne Noel Occhialino

ANNE NOEL OCCHIALINO

Attorney

Equal Employment

Opportunity Commission

Office of General Counsel

131 M St. N.E., 5th Fl.

Washington, D.C. 20507

(202) 663-4724 (phone)

(202) 663-7090 (fax)

Annenoel.Occhialino@eeoc.gov

[1] Flambeau’s amici tout the purported cost-saving of wellness programs, but it is unclear whether they actually improve employee health or reduce costs. See, e.g., Jill R. Horwitz, et al., Wellness Incentives in the Workplace: Cost Savings through Cost Shifting to Unhealthy Workers, 32 Health Aff. 468 (2013), available at http://content.healthaffairs.org/content/32/3/468 (evidence that wellness program reduce costs is “sparse”). This case underscores that wellness plans do not necessarily reduce costs, as Flambeau dropped its wellness plan requirement because it neither changed employee habits nor reduced costs. EEOC Br.9. Regardless, whether effective or not, wellness plans that do not run afoul of the ADA’s protections are permissible.