Having exhausted their options for reducing health care premiums, many companies are turning to wellness programs to encourage
their employees to live healthier lifestyles. The reasoning is that healthy employees are more productive and cost the company less in
terms of health care premiums. But how far can employers go?
“This is an evolving area of the law,” says Ann Carr Mackey, shareholder and director with Sommer Barnard PC, Indianapolis. “Many
of the answers are not crystal clear. Within the next six months, the government is expected to provide more guidance in this area when
it issues final regulations on bona fide wellness programs.”
The decision to implement a wellness program often is made around the time of a health plan renewal. Mackey cautions that companies tread carefully. “Because several laws apply in different ways to different wellness tools,” she says, “employers would be wise to
work with benefits counsel/specialists.”
Smart Business asked Mackey what employers can and cannot require in terms of employee wellness programs.
What is a wellness program?
Wellness benefits are programs employers adopt to encourage employees to seek appropriate medical care and lead a healthy lifestyle.
A company that has a wellness program asks employees to complete Health Risk Assessment (HRA) questionnaires regarding their
health and lifestyle; asks them to undergo health screenings — e.g., medical testing for cholesterol, blood pressure, and sugar levels;
encourages exercise, weight loss and smoking cessation, and generally offers some type of financial incentive, such as a reduced health
care premium, to do so.
What laws regulate wellness benefits?
The Health Insurance Portability and Accountability Act (HIPAA), the Americans with Disabilities Act (ADA), and smokers’ statutes.
Under HIPAA, an employer cannot discriminate based on a health status factor — and nicotine addiction is a health status factor —
unless it has a bona fide wellness program. HIPAA limits the total incentive an employer can give to 20 percent of an employee’s health
care premium. It also allows employees an opportunity to earn their reward every year by requiring the employer to provide an annual
opportunity to meet certain criteria (for instance, to quit smoking).
HIPAA also requires that all materials relating to a wellness program must state that the employer will provide an alternative if an
employee cannot meet certain criteria. For instance, the employer must provide an alternative if it has been shown that it would be
medically inadvisable or unreasonably difficult for a smoker to quit smoking. The alternative could be to offer the financial incentive
to the smoker if he/she completes a smoking cessation class — paid for at the employer’s expense — whether or not the employee
quits smoking.
Also under HIPAA, the employer does not have to have a bona fide wellness program in place in order to ask employees to fill out HRAs
and undergo screenings as long as it is doesn’t ask employees to attain a certain status (e.g., a certain weight or body mass index rating).
What restrictions does the ADA impose on wellness benefits?
Under the ADA, an employer cannot require a medical exam or make a disability related inquiry unless they are voluntary. If the
employer attaches any type of financial incentive, then the exam or inquiry may not be voluntary. An employer should not tell an
employee that they are not eligible for health insurance unless they fill out an HRA or undergo a medical screening.
Also under the ADA, an employer cannot discriminate against the disabled. So if the employer offers an incentive to employees who
walk 10 miles a week, it has to offer an alternative for someone who can’t walk.
Can employers refuse to hire smokers?
At least half the states have statutes that protect the right of employees to smoke off duty. In Indiana, an employer cannot discriminate
if someone smokes. Up until July 2006, no benefit or penalty could be imposed in Indiana on smokers. However, an amendment to the
smokers’ statute passed in July says that an employer can impose financial incentives in conjunction with smoking and health benefits
(e.g., a reduced premium for nonsmokers).
Illinois protects smokers from discrimination by employers unless the employer can show that smoking interferes with the individual’s
job performance, or the employer is a nonprofit entity and its primary purpose is to discourage smoking (like the American Lung
Association). In Kentucky, statutes prohibit discrimination by employers against smokers. However, Ohio and Michigan provide no protections to persons who smoke — employers can refuse to hire and can fire persons who smoke off duty. More states may begin to follow course.
ANN CARR MACKEY is a shareholder and director with Sommer Barnard PC, Indianapolis. Reach her at (317) 713-3467 or [email protected].
