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What is a Wellness Program?

August 15, 2009

Wellness programs are designed to encourage employees to engage in a healthier lifestyle, thereby preventing the onset or worsening of health conditions/sickness.

Wellness programs come in many forms. Examples include employee assistance programs, discounts on fitness club memberships or reimbursing gym membership fees, drug and alcohol abuse prevention, smoking cessation programs, weight management programs, employer-sponsored sports teams, healthier choices in vending machines, health risk surveys, and health screenings (e.g., high blood pressure screening, cancer screening and flu shots).

Why Do Employers Provide Wellness Programs?

Employers typically provide wellness programs to (1) combat the rising costs of healthcare and (2) increase overall employee productivity and job performance.

Wellness programs decrease healthcare costs because a large percentage (over 75% according to the Center for Disease Control) of those healthcare costs can be attributed to preventable illnesses. By decreasing preventable illnesses/disabilities (e.g., diabetes, obesity, cardiovascular disease), employers can lower employee absenteeism, thereby increasing employee productivity and job performance.

“Bona Fide” Wellness Programs

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits using a health factor as a basis for discrimination with regard to either eligibility to enroll or premium contributions under a group health plan. Examples of “heath factors” include health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.

Wellness programs that provide incentives based on mere participation (e.g., a program that reimburses the cost of a gym membership or provides an incentive to participate in cholesterol screening, regardless of the outcome) are generally considered non-discriminatory under HIPAA.

However, programs that provide a reward based upon the achievement of a health factor (e.g., a program that reimburses the cost of gym membership if a stated weight loss goal is achieved) must be considered “bona” wellness programs.

In 2006, the Departments of Labor (DOL), Treasury, and Health and Human Services published joint final regulations on the HIPAA nondiscrimination provisions which provided guidance on what makes a wellness program “bona fide.” Under HIPAA, a “bona fide” wellness program must meet the following requirements:

  • The total reward to an individual must be limited to 20% of the total cost of employee-only coverage
  • The program must be reasonably designed to promote good health or prevent disease
  • The program must allow eligible individuals to qualify for the award at least annually
  • The reward must be available to all similarly situated individuals
  • The program must provide a reasonable alternative standard if it would be unreasonably difficult or medically inadvisable for an individual to attempt to satisfy the standard
  • The plan materials must disclose the availability of such reasonable alternative standard.
    The DOL provided additional guidance in February of 2008 in the form of a “Wellness Program Checklist,” which can be found at www.dol.gov/ebsa/regs/fab2008-2.html.

Additional Legal Considerations

Under the Americans with Disabilities Act of 1990 (ADA), wellness programs must be “voluntary” (in that they do not require participation nor penalize non-participation), and employee medical information must be kept strictly confidential and separate from an employee’s general personnel file.

The Age Discrimination in Employment Act (ADEA) and related state/local laws prohibit discrimination in employment on the basis of age. While intentional discrimination garners most of the news headlines, an employer may also violate age discrimination laws by adopting a policy which is neutral on its face, but which ends up having a disproportionate or disparate impact on older employees.

Finally, wellness programs may also raise privacy issues (many states have laws restricting an employer’s right to restrict off-duty behavior), COBRA issues (wellness programs subject to ERISA must be continued for eligible participants), and income tax issues (some of the incentives/benefits provided under a wellness program may be included in an individual’s gross income).

The “Sell”

Just as important as the legal implications of employer-sponsored wellness programs are the effects such programs have on employee morale.

Many individuals see wellness programs as an invasion of privacy. Thus, when designing a wellness program, the focus should not only be on legal compliance, but also on getting employees to “buy into” the concept of whatever program the employer is considering implementing.

Communication is the key to selling any new workplace policy, and employers contemplating a wellness program would be well-advised to talk to their employees and solicit feedback on what type of programs would best fit their workplace culture.

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