As employers search for ways to reduce skyrocketing health care costs, the idea of implementing a wellness program to improve employees' health seems like a simple, appealing way to help accomplish that goal. But employers should be aware that some wellness programs can run afoul of federal and state laws in terms of reasonable accommodation, privacy, confidentiality of personal health information, and protection of off-duty conduct.
Wellness programs encourage employees to adopt or maintain healthy lifestyles - or at least take the first steps toward learning about healthy alternatives. Choosing healthier alternatives to reduce cholesterol levels, for example, may reduce an employee's chances of suffering from heart disease. Less disease means employers can lower their plan utilization, thus lowering health benefits costs, and in turn, increasing profits. There are additional benefits too, such as increased productivity, fewer workers' compensation claims, better attendance, and improved morale.
But wellness programs must be carefully crafted. For example, a wellness program that offers financial incentives to employees who walk a certain number of miles per week may discriminate against employees whose disabilities preclude them from reaching the target number. When developing a program, therefore, employers must be aware of the legal requirements that may impact their decisions. Offering a reasonable alternative that allows a disabled worker to earn the financial incentive may satisfy certain legal requirements - but crafting such alternatives may be challenging. Employers should have their legal counsel review a wellness program before it's presented to employees.
There are several federal and state laws that impact the design of a wellness program. For example, the Americans with Disabilities Act (ADA) requires employers to offer a reasonable accommodation to an employee with a known disability, and it prohibits employers from making medical inquiries or requiring medical examinations (unless job-related and consistent with business necessity). It's also unlawful under the ADA to take any adverse employment action based on an individual's actual or perceived disability.
The Equal Employment Opportunity Commission (EEOC) has offered employers some guidance with regard to the ADA's restrictions on medical inquiries and examinations. Under the guidelines, an employer may conduct medical examinations and activities that are part of a voluntary wellness and health screening program. Therefore, offering employees the opportunity to voluntarily participate in health screening programs for high blood pressure and cholesterol monitoring are not likely to violate the ADA, as long as there is no penalty (economic or otherwise) for not participating. Employers must treat any information acquired as a confidential medical record.
The Health Insurance Portability and Accountability Act (HIPAA) makes it illegal for group health plans to base eligibility on the following health-related factors: health status, medical condition (including physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of domestic violence), or disability. Therefore, under HIPAA's provisions, a group health plan can't require an individual to pay a greater premium on the basis of any "health status-related factor." However, adopting a wellness program that offers incentives for behavior, rather than health status, would likely be in compliance with the law. Group health insurance plans are permitted to provide discounts on premiums, or to adjust co-payments or deductibles for employees who participate in a "bona fide wellness program."
The U.S. Department of Labor, the U.S. Department of Health and Human Services, and the Internal Revenue Service jointly issued a proposed regulation describing four requirements for a "bona fide wellness program" that would comply with HIPAA:
The regulation provides examples, including the following scenarios:
- The rewards that are offered to an individual must be limited (the departments suggest a limit of 10 to 20 percent of the total cost of employee-only coverage).
- The program must be reasonably designed to promote good health or prevent disease for the individuals in the program, and must give eligible individuals the opportunity to qualify for the reward at least once per year.
- The reward must be available to all similarly situated individuals, and a reasonable alternative standard must be made available for any individual for whom, due to a health factor, it would be unreasonably difficult to meet the initial standard (or for whom it is medically inadvisable to attempt to satisfy that standard).
- All plan materials that describe the terms of the wellness program must disclose the availability of a reasonable alternative standard.
Example #1 -- A group health plan gives an annual premium discount for the cost of employee-only coverage to participants who adhere to a wellness program. The wellness program consists solely of giving an annual cholesterol test to participants. Those participants who achieve a count under 200 receive the premium discount for the year.
Example #1 is not a bona fide wellness program because it does not satisfy the requirement of being available to all similarly situated individuals. Some participants may be unable to achieve a cholesterol count of under 200 and the plan does not make available a reasonable alternative standard for obtaining the premium discount. (In addition, plan materials describing the program are required to disclose the availability of the reasonable alternative standard for obtaining the premium discount.) Thus, the premium discount violates the requirements because it may require an individual to pay a higher premium based on a health factor of the individual than is required of a similarly situated individual under the plan.
Example #2 has the same facts as Example #1, except that if it is unreasonably difficult due to a medical condition for a participant to achieve the targeted cholesterol count (or if it is medically inadvisable for a participant to attempt to achieve the targeted cholesterol count), the plan will make available a reasonable alternative standard that takes the relevant medical condition into account. In addition, all plan materials describing the terms of the program include the following statement: ''If it is unreasonably difficult due to a medical condition for you to achieve a cholesterol count under 200, or if it is medically inadvisable for you to attempt to achieve a count under 200, call us at the number below and we will work with you to develop another way to get the discount.''
Example #2 is a bona fide wellness program because it is reasonably designed to promote good health or prevent disease. The reward under the program is available to all similarly situated individuals because it accommodates individuals for whom it is unreasonably difficult due to a medical condition to achieve the targeted count (or for whom it is medically inadvisable to attempt to achieve the targeted count) in the prescribed period by providing a reasonable alternative standard. Also, the plan discloses in all materials describing the terms of the program the availability of a reasonable alternative standard.
National Labor Relations Act
Employers who have negotiated a collective bargaining agreement with a union are required by the National Labor Relations Act to bargain over "wages, hours, and other terms and conditions of employment." Therefore, a union may claim that a wellness program is a term or condition of employment that mandates bargaining. Employers should also check the governing collective bargaining agreement to see if a wellness program falls under a subject they have agreed to negotiate. For example, a bargaining agreement may mandate negotiation over the amount of employee-paid insurance premiums, but not health insurance or other employee insurance benefits.
State Laws that Protect Off-Duty Conduct
Several states have laws protecting the off-duty conduct of employees. Some laws are limited to smoking, the use of tobacco products, or the use of "lawful products," but others, such as California, have broader coverage that includes any lawful activity occurring away from the employer's premises during nonworking hours. When designing a wellness program, employers should review state laws prohibiting employment discrimination to be sure the program complies with state requirements. Once a program is in place, employers should take steps to ensure that employment decisions are not based on conduct that's protected by law. Employers will want to keep in mind that ERISA may preempt state law when a wellness program is part of an employee benefit plan. However, ERISA will not preempt state laws that have only a "tenuous, remote or peripheral connection" to employee benefit plans, nor will it preempt state insurance laws. If an employer's wellness program is challenged based on a state law that protects off-duty conduct, ERISA's preemption clause may come into play-but it would depend on whether the program is part of an employee benefit plan within the meaning of ERISA's preemption clause.
Keeping the legal aspects in mind, employers can put any combination of wellness programs in place, including:
Employers have a great deal of flexibility in designing wellness programs and should work closely with insurance providers when developing programs that provide financial incentives or benefits through group plans. Obtaining a legal review of the programs before implementation will help ensure compliance with applicable laws. Although implementing a wellness program can require careful planning, employers can reap the benefits: having healthier employees can reduce absenteeism, increase productivity, boost morale, and reduce healthcare costs - all of which contribute to keeping a business fit and healthy.
- Raising Awareness -- Most employers already have programs to help employees learn about the benefits of a healthy lifestyle and what they can do to improve their personal health. Whether the information takes the form of brochures, emails, tips given during daily meetings, or full fledged employer-sponsored health fairs; a program designed to increase employees' awareness of how lifestyle choices influence physical and mental health is an easy initial step for employers to take.
- Health Assessments -- Some employers offer employees the opportunity to voluntarily have their health evaluated so that they'll know what kinds of behaviors or habits may be detrimental or beneficial to their health. In return for having a health assessment, employers provide a discount on health insurance premiums or other financial incentives. Sometimes, in addition to completing a questionnaire, employers provide health care counselors who can meet with employees to discuss ways to improve their health - through smoking cessation programs, starting exercise, meditation, or any other variety of methods to encourage good health. Employers should take reasonable steps to protect the confidentiality of employees' individual health information when bringing in vendors or counselors to assist in this way.
- Employee Assistance Programs -- Employee assistance programs (EAP) are designed to identify and resolve problems concerning health, marital difficulties, family, finances, alcohol, drugs, the law, emotions, stress, or other factors that affect an employee's health. Because depression and other mental illnesses can be both a primary and secondary cause of disabilities and increased absenteeism, EAPs are becoming increasingly important as employee problems affect the workplace to a greater degree.
- Health Promotion -- Some employers encourage employees to have an annual physical examination (by a doctor of the employee's choosing) by reducing or eliminating any co-payment an employee would usually pay for a doctor's visit. Offering discounts for memberships in health clubs or gyms is another popular way employers promote healthy lifestyle choices. Employers can also compile a directory of local health service providers to raise employees' awareness of available resources. Because these promotions are provided regardless of health status, they are not subject to the requirements of a "bona fide wellness program" under HIPAA.