Health legalities Featured

8:00pm EDT June 25, 2009

As a result of the skyrocketing costs of health care benefits, many employers have adopted wellness or health promotion programs aimed at improving and maintaining the physical and mental health of employees and their families.

“Wellness programs can help employers reduce health care costs and sick leave use and improve employee morale and productivity,” says Patty Starr, the senior director of health insurance and benefits for the Council of Smaller Enterprises (COSE). “Workers who maintain healthful habits usually have fewer illnesses, experience less stress and have more energy.”

However, wellness programs must be crafted carefully. When developing a program, employers must be aware of the legal requirements that may impact their decisions, in terms of reasonable accommodation, privacy, confidentiality of personal health information, and rewards and incentives provided. Employers should consider having a legal review of their wellness program before it’s offered to employees.

Smart Business spoke to Starr about wellness programs and how to ensure that your program follows the letter of the law.

What are the legal considerations to remember when developing a wellness program?

First and foremost, you have to be aware of the Americans with Disabilities Act (ADA) and the Health Insurance Portability and Accountability Act (HIPAA).

The ADA protects the disabled in the workplace. Under ADA, employers cannot discriminate in pay or benefits based on a legally defined disability. Worksite wellness programs must conform to the following ADA requirements:

  • All components of the program must be voluntary.
  • Strict confidentiality of all medical records must be maintained.
  • Health risk appraisals, medical and health questionnaires, and medical screening tests cannot be mandatory.
  • Post-employment physical examinations cannot be required, unless they are job-related and consistent with business necessity.
  • Employees’ medical information must be maintained separately from personnel files, with access limitations clearly defined.
  • HIPAA prohibits employers from denying eligibility for benefits or charging more for coverage because of any health factor. There is an exception to this requirement for wellness programs that condition a reward on an individual satisfying a standard related to a health factor if the wellness program satisfies the following criteria:
  • Reward should not exceed 20 percent of total cost of the employee’s (or the employee’s family) coverage.
  • Reasonable structures are created to promote health and prevent disease.
  • All employees have the opportunity to qualify for a reward at least once a year.
  • Alternative standards are provided for participants with medical conditions that prevent them from reaching a goal, or for those it is medically inadvisable to do so.
  • The availability of alternatives or waivers is described in all program communications.
  • All other applicable federal and state laws, such as the ADA, Title VII and, in some cases, state insurance laws, are satisfied.

What liabilities do companies face when it comes to wellness programs?

In setting up a wellness program, employers should be aware of their potential liabilities and take action to minimize the risk of lawsuits. Employers are advised to take precautions in the following areas:

  • Educational instruction: Employers should be certain that the health and fitness information provided to employees, directly or through an instructor or service provider, is medically correct. Employers must ensure that all instructors or other health professionals are certified or licensed and that reputable medical personnel have reviewed the materials provided to employees.
  • Exercise programs: Employers should warn employees of the risks associated with taking part in a physical fitness program and strongly encourage them to consult with their doctors before participating in strenuous activities. Also, fitness equipment should be checked frequently and repaired when necessary, and areas set aside for exercise should be kept in a clean and safe condition.
  • Emergency procedures: An employer can be liable for not having an emergency plan in place at a fitness center or sponsored event if an employee is seriously injured. Emergency measures should be established and posted, and employees with injuries should not be permitted to participate in activities unless they have a doctor’s permission.

How does the tax treatment work for athletic facilities?

Employee use of an employer-provided athletic facility can be excluded from employee gross income as long as the facility is located on the employer’s premises, operated by the employer and used primarily by employees and their dependents. Facilities with public access through rental or membership purchases, such as country clubs, are excluded. Employers can deduct the costs of operating an on-site athletic facility for employees.

Employers have many options when it comes to designing wellness programs. Seeking a legal review of the programs before implementation will help ensure compliance with appropriate laws. While creating wellness programs involves careful planning, employers can see a return on their investment. Having healthier employees can reduce absenteeism, increase productivity, boost morale and reduce health care costs. All and all, good health makes for better business. <<