For most businesses, workforce costs rank at or near the top of their cost structure. These costs are increasing sharply, thanks in no small part to the rising cost of healthcare and workers’ compensation insurance premiums. Because of this, as well as for more altruistic reasons, employers are looking to help employees become, or stay, healthy by implementing wellness programs.
An employee wellness program should be a win-win proposition. The employer gets the benefit of a better insurance experience, less time missed from work, and hopefully more content and productive employees. Employees get the benefit of an employer-sponsored plan, for little or no cost, designed to foster personal improvement and well-being. To achieve a win-win result, however, employers must carefully follow the rules that apply to employee wellness programs.
The Health Insurance Portability and Accountability Act (HIPAA) and Wellness Programs.
Under HIPAA, an employer cannot deny eligibility for benefits, or charge more for health insurance coverage, because of any “health factor.” Health factors include an individual’s health status, medical condition, genetic information or disability, medical history, healthcare and claims experience, and evidence of insurability. Despite this prohibition, employers still can take action to lower costs by focusing on the health of their employees.
Under HIPAA, employers can implement and maintain wellness programs that promote employee health and disease prevention.
There are two primary types of programs that employers can implement without violating the law, as long as they follow certain HIPAA rules.
- No Reward – No Risk.
Wellness programs that do not condition any “reward” on an individual satisfying a standard related to a health factor are freely permissible under HIPAA. For example, employers may maintain programs that subsidize memberships at a fitness center, sponsor health education seminars, or encourage preventative care by waiving the co-payment costs for prenatal care or well-baby visits. The only requirement that employers must satisfy is that the program be offered to all similarly situated employees.
- Reward-Type Programs.
In some cases, employers want to go beyond merely offering a wellness benefit by conditioning a reward based on results. Examples of reward-type programs include reduced health insurance premiums for non-smokers or for employees who maintain low cholesterol levels.
Such programs are permissible under HIPAA, but any wellness program that conditions a reward on an employee satisfying a standard related to a health factor must meet stringent HIPAA rules. Specifically, all reward-type wellness programs must satisfy the following five criteria:
- The reward must not exceed 20% of the cost of coverage under the plan.
- The program must be reasonably designed to promote health and prevent disease.
- The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
- The reward must be available to all similarly situated individuals.
- The program must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard. All materials describing the program must disclose the availability of a reasonable alternative standard.
The first four factors are fairly easy to understand and apply. The fifth factor -- the reasonable alternative -- requires more analysis. Suppose, for example, that an employer sponsors a group health plan that waives the annual deductible for participants who have a body mass index (“BMI”) between 19 and 26 (assume the first four factors are satisfied). The plan must also offer -- and notify participants about -- a reasonable alternative for those for whom it is medically inadvisable, or who have a medical condition that makes it unreasonably difficult, to achieve this standard. One way an employer could satisfy this requirement is by offering the same deductible waiver to a participant for walking 20 minutes three days per week.
Keep in mind that the plan should go beyond offering just a single alternative option, although not all options have to be listed in the program materials. Employers should list an option, such as walking 20 minutes three times per week, and then invite participants who cannot follow the listed alternative to contact a designated person to discuss other alternatives. That way, for example, a participant who does not meet the body mass index criteria and who also cannot walk for 20 minutes three days a week because of a medical condition may be given the deductible waiver by following his or her physician’s recommendations for achieving better health.
Of course, if an employer simply offers free BMI testing and health education regarding body mass to all similarly situated individuals, it does not need to satisfy the reward-type program rules.
Employers implementing wellness programs should also be careful not to run afoul of the Americans with Disabilities Act (ADA) or similar state laws. Under the ADA, an employer may request medical information as part of a “voluntary” health program, but that information must be maintained in separate medical files and treated as confidential medical information. In addition, some state laws protect off-duty conduct such as smoking. Employers are advised to consult with counsel of their choosing in states where such laws may be in effect.
Implemented properly, a wellness program can truly be a win-win situation.