An employee with lung cancer can cost a company thousands of dollars, increasing each employee’s insurance premiums. The U.S. Center for Disease Control reports that more than 75 percent of health care dollars are spent on chronic diseases such as diabetes and cardiovascular diseases. While some conditions cannot be prevented, employers are working to implement wellness programs to improve overall employee health and increase productivity.
Studies show that every dollar spent on wellness programs saves three dollars in health care costs, says Patricia Diulus-Myers, partner in the Pittsburgh office of Jackson Lewis LLP. Investing in wellness programs reduces short-term sick leave and increases productivity. More employers than ever are sponsoring such programs for their companies because of their proven return on investment, says Diulus-Myers. These programs are beneficial but must be implemented carefully to avoid legal problems.
Smart Business spoke with Diulus-Myers about wellness programs, potential pitfalls and the guidelines employers can use to avoid violation.
What common pitfalls do employers experience when trying to introduce wellness programs?
As with any new idea, there are people who do not view wellness programs as beneficial or necessary. These people do not believe employers should use wellness programs to inject themselves into employees’ personal lives. Wellness programs touch on very personal aspects of an individual’s life, such as family medical history, habits and lifestyle choices. It is important for employers to look at the big picture and determine where to draw the line to avoid intrusion into their employees’ private lives.
The Americans with Disabilities Act was designed to avoid biases against employees with disabilities, which can arise with paternalistic policies. Employers need to be aware of violating this law when implementing wellness programs. This act prohibits making inquiries into employees’ medical history without showing that it is job-related and consistent with business necessity, the very type of information that wellness programs tend to elicit and monitor for the best results. Therefore, foregoing medical questions and focusing on behavior is advised so as not to be considered unlawful.
A wellness program can give rise to termination discrimination. Employees may point to the program upon termination and claim that they were let go unlawfully because the company simply was looking to find healthier employees. The claims likely would attack the reason for termination as being a pretext for the real reason of weeding out perceived ‘unhealthy’ employees.
How do employers implement wellness programs without violating the law?
As long as the employer does not require participation and does not penalize employees who do not participate, wellness programs can pass legal muster. The Equal Employment Opportunity Commission (EEOC) specifies that such programs are acceptable if participation is voluntary, if the information obtained is maintained in a confidential manner and is not used to discriminate.
The EEOC cautions that providing a monetary incentive to successfully participate in the program may render it involuntary. Also, where an employer decreases its share of health insurance premiums and increases the employee’s share if one does not participate or does not meet the criteria of the program, the program may not be voluntary.
To avoid state discrimination claims based on lifestyles, employers can set up bona fide wellness programs under ERISA. If the program qualifies under ERISA, state law discrimination claims generally will be pre-empted.
Can employers provide incentives in wellness programs and avoid group health coverage discrimination?
As long as the nondiscrimination regulations provided by the Health Insurance Portability and Accountability Act (HIPAA) under ERISA, the Department of Labor and the IRS to design bona fide wellness programs are followed, there should be no violation. That is true even if the group health plan establishes discounts or rebates or modifies co-payments in return for adherence to bona fide wellness programs.
HIPAA guidelines state that the total reward for participation must be limited, and they cite 10 percent to 20 percent of employee total coverage cost. Also, such programs must be designed to promote good health; the reward must be available to all similarly situated individuals; and the availability of a reasonable alternative must be disclosed for individuals unable to comply because of an outstanding medical condition.
How can employers create wellness programs that are not viewed as an attempt to control an employee’s personal life?
Employers should communicate their intent. Educational programs should be utilized through open forums so employees feel comfortable asking questions. Advance notice also is important so employees can prepare for changes.
PATRICIA DIULUS-MYERS is a partner in the Pittsburgh office of Jackson Lewis LLP. Reach her at email@example.com or (412) 232-0180.