New Year, New You… New Lawsuits?!? Legal Considerations for Employee Wellness Programs

It’s that time of year again where just about everyone suddenly is cognizant of their overall health and wellness (or lack thereof), including employers. To encourage employees to make healthy lifestyle decisions in order to help prevent, identify, treat and manage health issues before they become serious and costly, many employers utilize employee wellness programs. Employee wellness programs have been around for a number of years, but are becoming increasingly popular in light of health care reform. In fact, recent studies have shown that 51% of all companies with 50 or more employees currently are offering these types of programs. There are many different types of employee wellness programs, but the primary motivation for all such programs is the same: to generate lower costs for health insurance, increase employee productivity and morale, and reduce use of sick time.Wellness programs either voluntary or involuntary. Participation in voluntary programs typically is encouraged through incentives or rewards, like a free gym membership, a discount in out-of-pocket insurance premiums, or money deposited into a flexible spending or health savings account. In mandatory programs, employees typically are financially penalized or even fired for opting out. Even ostensibly voluntary programs can become involuntary in practice when the incentive—whether positive or negative— is significant enough to virtually compel participation. While the voluntary programs obviously carry less risk from a legal perspective, almost all employee wellness programs trigger one or more federal and/or state laws, and employers need to be careful to not overstep their boundaries when instituting them.For example:Health Insurance Portability and Accountability Act (HIPAA)Whether or not a wellness program is compliant with the nondiscrimination rules under HIPAA is a complex analysis. Many employers choose to provide discounted health insurance rates to those employees who participate in a wellness program. The HIPAA rules, however, regulate the extent to which employers can charge different insurance premiums to employees based on health factors and thus limit the ability of employers to charge higher rates to those who choose not to participate in a wellness program or who fail to meet the standards of the program. In order to comply with the HIPAA rules, an employer can offer lower health insurance rates to employees based on their attainment of wellness goals only if specific wellness program criteria are met.For instance, the HIPAA rules require that employers offering reduced rates to employees meeting a standard related to a health factor provide certain reasonable alternative standards. Thus, an employer may offer premium discounts to workers who don’t smoke so long as workers who do smoke are eligible for the same discount if they participate in a program to help them stop smoking.It is important to note that a wellness program that is operated separately from an employer’s group health plan (such as one in which an employer provides a gift certificate, movie tickets or other non-benefit perk for employee participation) is not subject to HIPAA rules, regardless of whether the employee is enrolled in the company health care plan.American with Disabilities Act (ADA)Nothing in the ADA prohibits employers from implementing wellness programs that are generally geared toward promoting good health. In order to monitor whether or not employees have attained wellness-related goals, however, employers often must inquire into the health status of their employees, which the ADA does prohibit unless such medical inquiries are “job-related and consistent with business necessity.”The EEOC currently maintains the general position that medical inquiries as part of purely “voluntary” wellness programs do not violate the ADA. However, the EEOC has not yet provided interpretive guidance regarding the extent to which medical inquiries would be allowable under a wellness program that provides awards or incentives to employees who participate, implicitly making participation less than an absolutely voluntary choice. The EEOC’s Enforcement Guidance on Disability-Related Medical Inquiries and Medical Examinations states that a wellness program is “‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.” However, the EEOC has recently sued three employers over their wellness programs, alleging the programs were not “voluntary” under the ADA when they imposed financial penalties upon employees who failed to submit to medical exams and inquiries that were not job-related or consistent with business necessity. Unfortunately, the EEOC has not provided any updated guidance on how the legal requirements of the ADA apply to wellness programs, but it recently indicated that guidance is forthcoming.Genetic Information Nondisclosure Act (GINA)GINA prohibits employers from discriminating based on an employee’s genetic information and also restricts employers from inquiring about family medical history. Clearly, health screenings or other questionnaires related to wellness programs could potentially involve inquiries into an employee’s family medical history. Fortunately, as an exception, GINA allows employers to request medical history information about employees when offering voluntary health services, (including wellness programs), as long as the employee provides such information voluntarily with a knowing and written authorization for the release of the information, and such information is disclosed to the employer only in aggregate form without disclosing the identities of specific employees.EEOC regulations also provide that an employer does not violate GINA when the employer offers financial incentives to employees for completing health questionnaires containing questions about family medical history, provided the employer makes it clear that the incentives are available regardless of whether the employees complete the family history questions.State Law IssuesMany states (not Texas) have “lifestyle discrimination” laws that prevent employees from being discriminated against for engaging in lawful activities away from work during non-work time. For example, 29 states and the District of Columbia have enacted smoker protection laws that prohibit employers from discriminating against employees on account of the employees’ use of lawful tobacco products, which could affect the legality of wellness programs with non-smoking initiatives. Fortunately, it is likely that many of these “lifestyle discrimination” state laws are preempted by ERISA, the federal law that governs employer benefit programs, including employer-provided health benefits. Nevertheless, it is important that employers consider such state-specific laws when drafting wellness programs.***********************************************Although there are several benefits to having a wellness program in your workplace, these programs may also impose significant risks. Even if a third-party administrator is used to run a wellness program, the employer itself will ultimately be liable in the event that the program violates HIPAA, the ADA, or other applicable law. Certainly, more clarity is needed from administrative agencies and the courts regarding the what exactly constitutes a lawful wellness program, and we will continue to keep you updated as the law evolves. In the meantime, the safest approach at this point is to structure these programs using rewards or incentives for participation (as opposed to penalties for non-participation) and to ensure that all employees have an opportunity to obtain such incentives through alternative means. – Liz Schartz, Barbara-Ellen Gaffney, and Jessica Morrison, Thompson & Knight LLP