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The Legal Perspective on Wellness Programs

Matt Palmquist

Matt Palmquist is a freelance business journalist based in Oakland, Calif.

 

Bottom Line: Recent ADA-related challenges raise questions over corporate initiatives designed to improve employees’ health.

In recent years, an increasing number of companies have begun to offer their employees a corporate wellness program — an employer-funded initiative designed to provide the type of preventive care and screening that can both ward off employees’ future health problems and improve their current fitness levels. Indeed, 98 percent of firms with more than 200 employees that responded to a Kaiser Family Foundation survey in 2014 offered their employees some form of wellness program. And PwC’s 2016 Health and Well-Being Touchstone Survey found that 76 percent of the companies it surveyed offered such programs. By implementing preventive programs, companies can try to keep their employees in fine fettle and reduce their future insurance outlays by having a healthier workforce.

But these programs, although seemingly well intentioned, must avoid violating any federal employment laws against discrimination. Specifically, companies walk a fine line when negotiating the Americans with Disabilities Act (ADA), which mandates that firms avoid any type of disability discrimination toward their employees. For example, wellness programs often emphasize the importance of exercise, but in certain cases, people with disabilities can struggle with physical movement.

Programs, while seemingly well intentioned, must avoid violating federal employment laws against discrimination.

To provide companies with some legal perspective, the authors of a new study analyzed several recent ADA-related court challenges to corporate wellness programs filed by the Equal Employment Opportunity Commission (EEOC). For example, Orion Energy Systems offered to pay its employees’ health insurance premiums if they signed up for its wellness program — which required participants to get blood tests and divulge their medical history — but charged them the full premium if they declined. One employee who refused to participate was fired two months later. This caused an EEOC attorney to contend that the voluntary wellness program wasn’t exactly voluntary and that it violated the law because “having to choose between responding to medical exams and inquiries — which are not job-related — in a wellness program, on the one hand, or being fired, on the other hand, is no choice at all.” The case is still pending as of August 2016.

Flambeau Inc., a plastics manufacturer, was also challenged by the EEOC over its wellness program, which required employees to complete biometric testing and fill out health-risk surveys; if they did not, they would lose their medical insurance. However, a judge ruled in the company’s favor, holding that the wellness program’s provisions fell under the ADA’s “safe harbor” exception, which stipulates that the ADA cannot prohibit or restrict an employer from implementing an insurance plan that is based on underwriting or classifying risks.

Another case involved Honeywell International Inc., which asked employees and their spouses to submit to tests of their blood pressure, cholesterol, body mass index, and nicotine levels. Employees who refused to participate were assessed surcharges on their medical plan and lost certain company contributions to their health savings accounts. A judge ruled against the EEOC’s request for a preliminary injunction, while admitting, “There are a number of fascinating issues for debate at a later time.”

After reviewing the legal landscape, the researchers came up with a set of guidelines to help firms stay out of the courtroom. The authors suggest that companies:

• Seek to improve employees’ health. The best way to avoid a legal challenge is to demonstrate that a wellness initiative has a realistic possibility of increasing workers’ fitness and helping them avoid disease. The use of periodic test screenings or health questionnaires can meet this standard, but firms should always emphasize a plan’s intended potential benefits to its employees.

• Ensure that voluntary programs are truly voluntary. According to the EEOC, when it comes to voluntary wellness programs, employees can’t be forced to participate; denied coverage if they don’t join in; or be fired, demoted, or arbitrarily transferred for refusing to take part. The EEOC also states that incentives for participation can’t exceed 30 percent of the cost of the employee’s healthcare.

• Handle mandatory programs carefully. Companies that still believe they should implement mandatory wellness initiatives should at least comply with the ADA’s safe harbor rule. This means companies should make their mandatory wellness initiatives a part of their sponsored health plans and insurance risk assessments.

• Be prudent about dependents. The EEOC hasn’t made clear how it will evaluate firms’ requests for the health histories of an employee’s spouse or child. For now, companies should probably hold off on extending wellness programs to dependents.

• Accommodate employees with disabilities. This accommodation can take many forms in addition to making allowances for physical conditions. The authors cite the example of a firm hosting a smoking cessation seminar and hiring a sign language interpreter to aid hearing-impaired employees at the seminar.

• Spell things out. The EEOC requires employers to provide a written description of their wellness program. This should exist as its own separate document, and not simply be folded into other healthcare material, and it should outline what type of medical information will be assessed, who sees the data, how the information will be used, and how it will be safeguarded.

• Protect employees’ privacy. The confidentiality of medical records is a key legal issue, and the authors suggest that companies store information in aggregate to avoid identifying specific employees. Medical files must remain separate from personnel records and cannot be used by managers to make staffing decisions.

Although these measures should help companies abide by the EEOC’s rules on ADA enforcement, the authors note that different laws sometimes clash, and the managers responsible for crafting a company’s health plan must remain aware of changing regulations at both the federal and the state level. “Failure to do so could lead to a sadly ironic situation wherein a company’s financial health suffers as a result of its efforts to improve employees’ health,” the authors write.

Source:New Legal Pitfalls Surrounding Wellness Programs and Their Implications for Financial Risk,” by Carolyn M. Plump (La Salle University) and David J. Ketchen Jr. (Auburn University), Business Horizons, June 2016, vol. 59, no. 3

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The Legal Perspective on Wellness Programs