Employers are too familiar with the ongoing struggle to contain health-care costs. Statistics show that health-care costs increased by 14.7 percent in 2002, by 10.1 percent in 2003 and are projected to increase by 12 percent in 2005. It is, therefore, not surprising that employers are developing and implementing innovative programs to tackle this significant problem. Some employers are developing employee wellness programs designed to induce employees to adopt healthier behavior.
As employers increasingly turn to creative solutions to the health-care problem, such as wellness programs, they are running into numerous complex legal issues. Simple wellness programs implicate a number of federal and state statutes. Some of these laws touch on only portions of wellness programs, while leaving many open questions involving the interplay of the Americans with Disabilities Act (ADA), state disability discrimination laws and the Health Insurance Portability and Accountability Act (HIPAA).
Legal boundaries of wellness programs
A wellness program may take many forms. It may offer programs, such as health club membership discounts, or company-provided workout equipment. It may also involve multiple components with incentives for reaching specific health goals. At this stage, exactly where the law will set the boundaries with respect to each of the different types of wellness programs is open to question.
Regulations under both HIPAA and the ADA address and allow for certain types of wellness programs. For example, although the ADA severely limits an employer from conducting medical examinations in the workplace, the Equal Employment Opportunity Commission (EEOC) permanent regulations permit wellness programs as an exception as long as the plan meets the following criteria.
- It must be a voluntary plan.
- Medical information obtained in the course of conducting the plan must remain confidential.
- It must not penalize nonparticipants.
Exactly what voluntary and penalize mean, however, has yet to be addressed by the EEOC or by the courts. For example, could an employer provide free health care to employees who participate in a wellness plan, while charging employees who choose not to participate a significant premium surcharge? At some point, does the size of the incentive to join the wellness plan render it involuntary?
HIPAA also weighs in on what employers can and cannot do to condition health care premium amounts on participation in a wellness plan. For example, HIPAA prohibits a group health plan from discriminating on eligibility or premium contributions based on any health-status related factor.
However, in its proposed regulations to HIPAA, the U.S. Department of Labor (DOL) asserts that a health plan may provide premium differentials based on health status, but only if provided under the DOL’s definition of a bona-fide wellness plan. According to the DOL, a bona-fide wellness plan must, among other things, provide rewards, in the way of certain discounted premiums; limit those rewards to a small percentage of the cost of coverage; and make rewards available to all similarly situated individuals.
Employers implementing wellness programs will need to be careful in navigating the legal limits. At a minimum, employers interested in implementing wellness programs should consider the following recommendations in this unsettled area.
- Frame incentives in a wellness plan as rewards, rather than penalties or disincentives.
- Provide accommodations for individuals with disabilities who choose to participate in a wellness plan. If providing health premium discounts or other health insurance rewards to plan participants, provide accommodations for those whose medical condition makes it inadvisable to participate.
- Avoid setting wellness plan incentives on specific weight-related criteria (i.e. reaching a specific BMI).
- Keep all medical information obtained as part of a wellness plan confidential, and segregate the information from other personnel documents. Where possible, have a third party administrator handle all medical information and have them shield the information from the employer.
Kristine M. Moore is an associate in Dickinson Wright’s Lansing office. For additional information, please visit www.dickinsonwright.com.