Are Wellness Programs Legal or Not?

Posted by Russ Sullivan on Dec 16, 2014 2:54:00 PM

Many employers have made wellness plans the centerpiece of their efforts to control the spiraling costs of employee health insurance.

StethescopeWellness programs use tools such as annual personal health assessments (PHA) and biometric screenings to identify employee health issues, establish baselines and develop plans to improve employee health. 

Many employers provide incentives to employees who participate.  These incentives range from cash awards to decreased employee contributions to premiums to employer contributions to HRAs (healthcare reimbursement accounts). Companies frequently extend these programs to employee spouses as well. 

Initial data on wellness programs are promising. Johnson & Johnson estimates that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade. And a study by Towers Watson and the National Business Group on Health shows that organizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9 percent vs. 15 percent). 

Sounds great, right?

Not so fast says the U.S. Equal Employment Opportunity Commission (EEOC).  The Chicago branch of the federal agency has taken several companies to task for their wellness programs.  According to the EEOC, these programs violate a provision in the Americans with Disabilities Act (ADA) that prohibits employers from requiring medical examinations or making disability-related inquiries of an employee, unless the examination or inquiry is job-related and consistent with business necessity. 

The EEOC’s position directly contradicts Affordable Care Act guidelines for establishing wellness incentives.  The ACA sets forth detailed guidance for health contingent wellness plans and incentives based on either participating in activities related to improving identified health factors or achieving certain goals also based on identified health factors. It even allows employers to provide incentives equal to 30 percent of the individual annual insurance premium (50 percent for tobacco-related incentives).

Here in Massachusetts, the employer wellness tax credit requires some type of evidence-based wellness program.  A common way for employers to gain this evidence is through PHAs or biometric screenings.

Despite the ACA’s guidelines, the EEOC has brought legal action against three employers over wellness programs:

  • In EEOC v. Flambeau, Inc., the employer’s wellness program gave employees the choice of taking a biometric screening or paying 100 percent of the health-insurance premium.  Employees who took the screening only had to pay 25 percent of the premium.  One employee who was on leave at the time the screenings were administered was not allowed to take screening upon return and had to pay 100 percent of the premium.
  • In EEOC v. Orion Energy Systems, employees could either complete the PHA and biometric screening or pay full premium.  One employee was terminated for not completing PHA and taking biometric screening. 
  • The third case, EEOC v. Honeywell, focuses on what the EEOC has characterized as surcharges for failing to take biometric screenings.  These surcharges include an annual $500 additional premium cost, a loss of $1,500 in employer contributions to the HRA and another $1,500 premium surcharge for using tobacco products.  The employer took the position that absent a biometric screening, employees were assumed to be smokers.

All three cases are currently pending in the courts.

The EEOC defines a "disability-related inquiry" as a question (or series of questions) that is likely to elicit information about a disability. The agency also defines a "medical examination" to include procedures or tests that seek information about an individual's physical or mental health or impairments, such as vision tests, genetic tests, blood pressure screening and cholesterol testing. The questions asked on a PHA and the information derived from a  biometric screening would likely fall within these definitions. 

However, the ADA allows voluntary medical exams and disability-related inquiries that are part of an employee health program.  In these instances, an employer does not have to show that the questions are job-related and consistent with business necessity. Unfortunately, neither the ADA nor its associated regulations define what is “voluntary."

So where does this leave employer wellness programs?  A few practical points might assist in keeping these programs working for the benefit of employers and employees: 

  • Remain committed to wellness as part of your health insurance strategy.
  • Do not discipline employees for not participating in the program.
  • Provide make up opportunities for employees who miss a screening deadlines.
  • Start small – the larger the incentive, the more likely it will be viewed as punitive and the program as less voluntary.

Meanwhile, AIM will monitor these and other any other cases and keep you updated on any developments

Topics: Health Care Reform, Health Care Costs, Benefits

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