As the economy tightens, employers increasingly are looking for ways to promote good health among employees as a means of combating increasing health care costs. Healthier employees generally use fewer resources and file fewer claims, thereby lowering the premiums paid for health care coverage. Workplace and employer-sponsored wellness programs have emerged as one tool employers are using to that end. But as such programs emerge, so, too, do questions about such programs' legality and limitations of mixing wellness and work.
The good news is that you, as an employer, generally have good grounds on which to proceed with such programs. The keys lie in ensuring participation is voluntary, potential disabilities are considered, and personal information and privacy are honored in the process. These safeguards are dictated largely by the Americans with Disabilities Act (ADA) and Health Insurance Portability and Accountability Act (HIPAA).
Starting a program
Initially, you must determine what your wellness program will entail and how employees will be encouraged to participate. If employees are encouraged to participate regardless of their individual health status or factors, a wellness program will be less-regulated. Such programs may include, for example, providing incentives for employees to:
Such wellness programs are not subject to regulation as long as incentives are offered fairly to all similarly situated employees and are based merely on participation and not any health-related results of participation, such as a level of cholesterol or blood sugar achieved or health status reported.
If your wellness program offers incentives and benefits without regard to individual health status or factors, you need not worry about HIPAA-related issues. But if you choose to use incentives based on specific employee health factors (for example, encouragement based on the type of help or treatment an employee needs from a health perspective), financial incentives offered to such employees must satisfy HIPAA's Wellness Program Rules.
HIPAA's rules
Health factors for the purposes of HIPAA's Wellness Program Rules include health status, claims experience, receipt of health care, medical condition, genetic information, disability and evidence of insurability. Wellness programs premised on health factors might consist of, for example, fluctuating premiums based on whether an employee has smoked cigarettes during the past year or lowering or waiving premiums for employees with cholesterol below a certain level or a body mass index of a certain level.
Ordinarily, programs that would provide financial incentives based on health-related factors would run afoul of HIPAA. HIPAA prohibits health plans sponsored by employers or unions or underwritten by insurers from using health factors to discriminate against individuals with respect to plan enrollment, benefits or premiums.
But the Wellness Program Rules, which became effective July 1, 2007, provide an exception to this prohibition by permitting employers and health insurers to use meaningful financial incentives (up to 20 percent of the cost of coverage in such programs) to encourage employee participation in wellness programs.
The Wellness Program Rules also require that employers with regulated wellness programs provide reasonable alternative modes of participation for employees who have "a health factor [that] makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard" for earning an incentive.
If covered by such rules, you must provide alternatives for employees who present verification from a physician confirming an employee's inability to meet the original standard as a result of a health factor. This might include, for example, offering such employees the opportunity to:
A second reasonable alternative must be offered if the first alternative is unattainable because of verified health reasons.
If your wellness program encourages participation based on health factors, it is critical the program strictly complies with and meets all the criteria and qualifications of the Wellness Program Rules. You should consult legal counsel concerning compliance before proceeding.
The ADA
Assuming your wellness program is not based on health factors or is exempt from HIPAA's Wellness Program Rules, the next question is whether your program complies with the ADA and other similar state and local laws.
The ADA prohibits employers from discriminating against individuals with disabilities with respect to any terms, conditions and/or privileges of employment. Generally speaking, the ADA requires workplace wellness programs to be wholly voluntary; provide reasonable accommodation for employees with disabilities; and limit what is disclosed to employers regarding an employee's participation in a wellness program and the employee's medical condition and/or disabilities.
The ADA prohibits employers from requiring (or conditioning employment on) participation in programs that may have a discriminatory effect on disabled employees. Under the ADA, participation is considered "voluntary" only if no term, condition, privilege or benefit of employment (and no employment decision) is in any way contingent upon participation. You cannot, for example, make eligibility for health benefits (which are a benefit or privilege of employment) or placement into a particular position, job or shift contingent upon participation in a wellness program.
An open question regarding the ADA is whether providing minor financial incentives to employees who participate in a wellness program could violate the ADA. This question arises when an employer, rather than using a wellness program as a condition of health benefits, offers financial incentives to employees who participate in certain programs. Many employees have argued such financial incentives violate the ADA because individuals with disabilities may not be able to qualify for the incentives.
For example, if you offer a $100 wellness bonus to employees who participate in a walking program, you may be accused of violating the ADA because individuals who have disabilities that prevent them from walking regularly or fulfilling the distances required by the program would not be able to participate.
Those employees, solely because of their disabilities, would have no opportunity to earn the same bonus as their co-workers. This, in ADA parlance, would create a situation in which disabled employees are disadvantaged or discriminated against because of their inability to participate.
Nonbinding guidance from the Equal Employment Opportunity Commission suggests these employees have a point. However, that guidance was published before HIPAA's Wellness Program Rules. Many argue the Wellness Program Rules (which allow minimal financial incentives) serve as a "safe harbor" under the ADA. If you stay within the bounds of the Wellness Program Rules, the argument goes, your wellness program and its financial incentive may be acceptable under the ADA and its state and local counterparts.
Given this question's open nature, if you wish to provide financial incentives for employees who participate in a wellness program, legal counsel should evaluate your overall program to ensure compliance with the ADA. This is especially important if your plan also is regulated by the Wellness Program Rules and you are counting on the exceptions or safe harbor created under such rules to bring your program into ADA compliance.
Until the courts answer such open questions, caution and proper legal review are essential.
A better approach may be to forgo financial incentives in favor of reimbursements for the costs of participating in certain programs, such as health club memberships, exercise equipment, nutrition counselors, etc., making sure there are program and reimbursement options and opportunities, as well as reasonable accommodations, available for all. This will ensure participation truly is voluntary.
In addition, one hallmark of the ADA and its state and local counterparts is that reasonable accommodation be provided to employees who are not otherwise able to meet employment terms and conditions or participate in or enjoy the full benefits offered by such employment because of a covered disability.
You are required to make an individualized inquiry of and engage in a dialogue with each employee with a known or disclosed covered disability to determine whether reasonable accommodation is necessary and appropriate under the circumstances.
You must ensure measures are taken or put in place to allow a disabled employee to participate in a wellness program (and to have the opportunity to attain all the program's benefits) on the same or equivalent footing as other employees.
One example of a reasonable accommodation would be to be open as to what bonuses are given and/or what items qualify for reimbursement. If, for example, reimbursement is limited to health club memberships or the purchase of exercise equipment, individuals with disabilities may be left out. But if the program is expanded to include reimbursement for a nutritionist or participation in broader health-related activities—whether as a matter of course or as an accommodation for a particular employee—disabled employees would be better able to participate.
Another way in which accommodation could be made would be to consider alternative means of achieving various goals. Using the walking program example, you could implement such a program if, in addition to providing bonuses for nondisabled employees who participate in the program, you provide the same bonuses to disabled employees who are able to engage in other similar cardiovascular activities. These might include weightlifting programs, wheelchair fitness regimes, etc.
The key is to ask and listen. When a disabled employee indicates an inability to participate in or attain the benefits of a wellness program or when it is obvious he or she cannot participate or benefit, you must consider alternatives and accommodations just as you would for any other employment term, condition or benefit.
The process of determining the need for and of establishing a "reasonable alternative" under the Wellness Program Rules is quite similar to the interactive process of settling on a reasonable accommodation under the ADA and its counterparts. The key in each case is an individualized inquiry with a goal of broadening a wellness program to apply to and be open to all employees who wish to participate, regardless of any disabilities or other similar conditions.
Except in limited circumstances, the ADA and its state and local counterparts prohibit employers from requiring employees to take tests or provide information that tends to screen out (or even involuntarily identify) those with covered disabilities and respond to "disability-related inquiries."
Therefore, you cannot require participation in a wellness program that involves medical examinations or inquiries that are likely to elicit information about a disability. You cannot require physical or screening examinations as a condition of employment or as a condition of enjoying a benefit or privilege of employment.
However, an employee may voluntarily furnish information about a medical examination, respond to health-related inquiries or choose to undergo various medical-related examinations.
To be voluntary, your wellness program must, at a minimum, provide full information. You must inform employees upfront—and preferably in writing—of the full array of medical examinations they may be required to undergo and information they may be required to provide before they decide whether to participate in such a program.
And employees must have a meaningful opportunity to opt out or decline participation without adversely affecting their employment or any employment term, condition or benefit (or, where the Wellness Program Rules are deemed to apply and create an exception, without adversely affecting any "significant" benefit of employment).
You also must ensure any information you receive from or in connection with the administration of such programs is safeguarded from further disclosure and/or improper use. This applies to information obtained intentionally, inadvertently, expressly or by implication in any form or from any source whatsoever.
For example, as you collect health-related information for voluntary wellness programs, you may learn of an employee's disability. This will trigger your duty to reasonably accommodate the employee and put you at risk of allegations of prohibited discrimination. You can mitigate this risk by either establishing a firewall between employees administering the wellness program and employees performing other functions or by outsourcing the information processing aspects of the wellness program administration.
In the latter situation, an outsourced vendor would gather and retain the health-related information and use it to design effective wellness provisions and incentives. The outsourced vendor could implement education and wellness processes with employees' physicians and other health care providers, as well as with employees, while keeping such information from you to avoid exposure under the ADA.
Whatever approach you take, carefully consider how information will be received and safeguarded.
Welcoming wellness
Workplace and employer-sponsored wellness programs seem to be here to stay. They offer benefits to employees (who are encouraged to improve their health and well-being) and employers (who gain the benefits of lower insurance and benefit costs).
Given their value, wellness programs are worth exploring; you simply need to be sure to follow the rules and not violate applicable laws in the creation, administration and maintenance of such programs.
Victoria L. Donati and Jason C. Kim are partners in the employment law group of the Chicago-based law firm Neal, Gerber & Eisenberg LLP.
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