• Health-Contingent Wellness Programs Offer Greater Incentive, Pose Greater Risk
  • May 12, 2015 | Author: Laura E. Caravello
  • Law Firm: Burns White LLC - Pittsburgh Office
  • Most people are familiar with “employee wellness programs” offered by employers around the country.  To many, these programs seem like a win-win for both employees and employers: employees are happier and healthier, and employers could decrease the cost of providing health benefits to their healthier workers.  In practice, though, it is far from clear whether the theoretical benefits of wellness programs can be easily realized.  Most notably, implementing certain aspects of a “wellness program” may expose employers to liability under employment discrimination statutes, particularly the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).  Even with recent Equal Employment Opportunity Commission (EEOC) guidance, employers should proceed with caution when deciding whether and how to adopt a wellness program for their employees.

    The recent proliferation of employee wellness programs likely stems from provisions in the Patient Protection and Affordable Care Act (ACA), permitting employers who offer a health plan and implement related wellness programs to recover up to 30% of the health plan cost.  However, the ACA distinguishes between “participatory” wellness programs and “health-contingent” ones, only applying the 30% incentive to the latter..  While health-contingent wellness programs present a greater incentive, they also pose a greater risk to employers.

    Unlike participatory wellness programs, which include voluntary measures such as rewards for gym memberships or optional health screening events for employees and their families, health-contingent wellness programs aim to influence employee health habits.  For example, a health-contingent wellness program might impose a surcharge on tobacco use.  Employers implementing health-contingent wellness programs may also use screenings to identify certain conditions or risk factors, and require at-risk employees to take affirmative health-improving acts not required of “normal” employees.

    These types of programs could be interpreted as discriminating against employees under the ADA or GINA.  For example, imposing extra burdens on employees deemed less “well” might be interpreted as discrimination based on an ADA-qualifying “disability” (e.g., diabetes).  In addition, the health screenings may be viewed as requiring disclosure of genetic information ordinarily protected under GINA, which prohibits employers from “penaliz[ing employees] who choose not to provide” protected genetic information.

    The EEOC, acknowledging the risks to employers trying to deploy health-contingent wellness programs, recently proposed amending ADA regulations “to provide guidance” to employers regarding when it is permissible to use financial incentives to encourage employee participation “in wellness programs that include disability-related inquiries and/or medical examinations.”  The proposed rule has three primary aims:

    1. Clarifying what is a qualifying wellness program;
    2. Defining when employee participation in such a program is “voluntary”; and
    3. Explaining employers’ obligations to preserve the confidentiality of employees’ medical information under the ADA and related provisions of the Health Insurance Portability and Accountability Act (HIPAA).

    As to the first objective, the proposed rule clarifies that a “wellness program” includes programs offered through employer-provided health plans with the twin aims of helping employees improve their health and reducing healthcare costs.  The EEOC guidance states that 30% is the permissible incentive limit, provided employers observe certain safeguards to ensure voluntariness and confidentiality.  This limitation is aimed at harmonizing HIPAA exceptions for health-contingent programs with the ADA.  Regarding voluntariness of participation, the EEOC guidance suggests both that employers must provide a “reasonable alternative” to health-contingent wellness programs, possibly including the choice to opt out, and that employers should ensure that employees are aware of the alternative.  Lastly, with respect to privacy obligations, the proposed guidance states that, in general, employers may only receive aggregate health information that does not identify specific employees’ conditions.  However, this limitation does not apply if individualized information is “necessary to administer” a group health plan, in which case the employer must comply with HIPAA obligations to certify to the plan administrator that the employer “will not use or disclose the information for purposes not permitted by” the plan or HIPAA and to abide by this certification.

    A quick reading suggests that the EEOC guidance, which remains a proposed rule until it passes through the appropriate regulatory processes, might not be entirely effective in guiding employers through the wellness program minefield. Most notably, the proposed rule is limited to ADA considerations related to employee wellness programs, and it therefore does not address employers’ potential liability under GINA.  This is a glaring omission, given the obvious danger that an employer might run afoul of GINA if, as part of a wellness program-related initiative, the employer acquires the protected genetic information of employees or their family members.

    It bears mention that bills entitled “Preserving Employee Wellness Programs Act,” which would apply retroactively to the 2010 effective date of the ACA, are currently in committee before the House and Senate.  The proposed legislation would explicitly provide that health-contingent employee wellness programs do not violate the ADA or GINA, so long as they comply with the Public Health Service Act, and that it would not be unlawful for employers to collect information about the manifested medical condition(s) of an employee’s family member.  However, given the current political climate, it seems unwise for employers to rely on this proposed legislation to immunize them from ADA or GINA liability.

    To sum up, employers should remain wary of enacting “health-contingent” wellness programs, which could be perceived as financially penalizing disabled employees and could result in employers acquiring protected genetic information and thereby opening themselves up to GINA liability.  For employers who still wish to implement wellness programs, it certainly seems safer to use the voluntary “participatory” wellness program, at least until the ADA and especially the GINA implications of health-contingent programs becomes clearer.  Although participatory wellness programs may not offer employers the same financial incentive, the reduction in potential liability could be much more valuable in the end.