Wellness Programs

The ADA prohibits employers from discriminating against an employee because of his or her disability. It also places limitations on the types of medical examinations and inquiries that employers can require.

Under the ADA, an employer cannot discriminate against an individual with a disability in the terms and conditions of employment. 42 U.S.C. ' 12112(a). A wellness program, like other benefits offered to employees, is a term and condition of employment. Therefore, the benefits of a wellness program must be made available to all employees regardless of any disability. If an employee, because of his or her known disability, is unable to participate in the wellness program, the ADA requires that the employer provide a reasonable accommodation for that person. For example, if an employer's wellness program offers an incentive to all employees who agree to run 10 miles per week, the benefit would need to be made available to an individual who, because of a disability, is unable to run 10 miles.

In addition, the ADA prohibits an employer from making medical inquiries or requiring medical exams of a current employee unless such inquiries are job-related and consistent with business necessity. 42 U.S.C. ' 12112(d)(4). The 'business necessity' standard is a high one. Generally, an employer is entitled only to information necessary to determine whether the employee can perform the essential functions of the job without posing a direct threat to himself or other employees. Even non-medical inquiries may be prohibited if they are likely to elicit information about an individual's disability.

Voluntary Wellness Programs Under the ADA

The ADA provides an exception to this general prohibition against medical exams for voluntary medical examinations, including voluntary medical histories, if the records are kept confidential and are not used for the purposes of limiting health insurance eligibility or preventing occupational advancement. 42 U.S.C. ' 12112(d)(4)(B). Any medical exams or medical inquiries under a wellness program, therefore, must be voluntary.

Unfortunately, the law is not clear as to what constitutes a voluntary exam. According to the EEOC's Enforcement Guidance, to be considered voluntary, an employer cannot require participation and cannot penalize an employee for not participating. EEOC Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees. This guidance from the EEOC leaves open the question of whether incentives for participation would render a wellness examination involuntary.

During the American Bar Assoc- iation's Committee on Employee Benefits Technical Session in May, 2006, representatives from the EEOC informally commented on 'wellness programs.' The representatives provided two examples of incentives that might render a wellness examination involuntary: 1) requiring employees to submit to a health-risk assessment as a condition for enrolling in the employer's health insurance plan; and 2) using 'punitive triggers' for employees who do not submit to medical examinations. While the comments are informal and non-binding, they provide guidance on the EEOC's position.

According to the Committee, some employers have tried to require employees to submit to a health-risk assessment as a condition for enrolling in the employer's health insurance program, arguing that participation in the assessment is voluntary because participation in the health insurance plan is voluntary. The EEOC representatives stated that denying enrollment in this context would likely be deemed a 'penalty' because of the importance of health insurance to most employees.

Similarly, some employers have sought to use 'punitive triggers' for employees who do not submit to medical exams or submit to subsequent follow-up examinations with referral specialists or disease counselors. Such punitive triggers include requiring the employee to pay a higher health-care premium or higher deductible. For example, the wellness plan may refer an individual with diabetes to a disease manager who assists the individual with controlling his or her diet, checking blood sugar, taking insulin, regularly checking hemoglobin, etc. The American Bar Association Committee asked whether an employer could penalize an employee who refuses to attend the consultations or referral examinations. The EEOC representatives stated that the 'punitive triggers' would amount to penalties for non-participation within the meaning of the regulations, thus rendering participation in the program involuntary.

If higher premiums for non-complying participants is unlawful as suggested by the EEOC's representatives, it is doubtful that an employer could lawfully do the converse, i.e., instead of increasing premiums for those who do not comply (as a penalty), lowering premiums for employees who do comply (as an incentive). The result of the incentive would be the same as a penalty ' the employee who did not comply or participate would pay more than the employee who did. In a 1998 unofficial opinion letter from the EEOC, an agency representative suggested that a monetary incentive may render a wellness program involuntary. The representative noted that voluntary means 'without valuable consideration or legal obligation,' which suggests that monetary benefits may not be used to influence a person's decision. Although the EEOC did not express an official opinion, it noted that the size of the financial benefit of an incentive would be a significant consideration in determining whether participation was voluntary, leaving open the possibility that a small incentive or reward might not render participation involuntary.

Health Insurance Portability And Accountability Act

Under the HIPAA amendments to ERISA, an employer that maintains a group health insurance plan cannot establish rules for eligibility, require an employee to pay a greater premium or contribution, or discriminate in cost-sharing mechanisms such as deductibles, co-payments and co-insurance based on health-related factors. Health-related factors include 'health status, medical condition (including physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability.' 29 U.S.C. ' 1182(a)-(b). In other words, HIPAA precludes an employer from making eligibility or the costs of insurance dependent upon whether an employee receives medical care or can meet a health standard. However, HIPAA does allow a plan or issuer to establish premium discounts or rebates, or to modify otherwise applicable co-payments or deductibles in return for adherence to wellness programs that promote health and disease prevention. 29 U.S.C. ' 1182(b)(2)(B).

Final Rules on WellnessPrograms Under HIPAA

Until recently, there was no final guidance on what constituted a suitable 'wellness program' under HIPAA. On Dec. 13, 2006, the Department of Labor, in conjunction with the Department of the Treasury and Department of Health and Human Services, published final rules concerning the standards a wellness program must meet to be excepted from the non-discrimination provisions of HIPAA. These rules became effective Feb. 12, 2007 and apply to programs with plan years beginning on or after July 1.

Under the final regulations, a wellness program that conditions a reward on an individual satisfying a standard related to a health factor must meet five requirements: 1) the amount of the reward cannot exceed 20% of the cost of coverage; 2) the program must be reasonably designed to promote health or prevent disease; 3) the program must allow eligible individuals to qualify for the reward at least once per year; 4) the program must be available to all similarly situated individuals; and 5) all plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard. 29 C.F.R. ' 2590.702(f).

To satisfy the first requirement, the total amount of the reward under all of the wellness programs under the plan cannot exceed 20% of the cost of coverage. The cost of coverage includes both the employer and employee contributions for employee-only coverage, or if any class of dependants may participate in the wellness program, the cost of coverage in which the employee and any dependants are enrolled. A reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, co-payments or co-insurance), the absence of a surcharge, or the value of a benefit that would otherwise not be offered under the plan.

The second requirement is met if a program has a reasonable chance of improving the health of its participants, is not unduly burdensome, is not a subterfuge for discrimination based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease. A program may not impose an overly burdensome time commitment or a requirement that an individual engage in illegal behavior.

The third requirement is that the program must allow eligible individuals to qualify for the reward at least once per year. In other words, the program cannot base its incentives on health factors that are present when an individual first enrolls without allowing the individual to re-qualify at least annually.

To satisfy the fourth requirement, a wellness program must provide certain individuals with a reasonable alternative standard for obtaining the reward for certain individuals. The alternative standard must be available for individuals for whom it is 'unreasonably difficult' due to a medical condition to satisfy the otherwise applicable standard, or for whom during the particular period it is medically inadvisable to attempt to satisfy the otherwise applicable standard. Reasonable alternatives could include lowering the threshold of the existing health-factor-related standard, substituting a different standard, waiving the standard, or following the recommendation of an individual's physician regarding the health factor at issue. The reasonable alternative need not be developed in advance and may be different for each individual. For the alternative standard to be reasonable, the individual must be able to satisfy it without regard to any health factor. A plan may seek verification, such as a statement from a physician, that a health factor makes it unreasonably difficult or medically inadvisable for an individual to meet a standard.

Finally, all plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard. However, if the plan materials only mention that a program is available without describing its terms, this disclosure is not required.

Not all aspects of a wellness program must comply with these rules. These requirements apply only to a wellness program that provides a reward based on the ability of an individual to meet a standard that is related to a health factor. For example, a wellness program must meet these requirements if it conditions a reward upon the outcome of a cholesterol test or based on an individual's ability to stop smoking. However, an employer, without having to comply with the requirements, could:

• Provide voluntary testing of enrollees for specific health problems and make recommendations to address health problems identified, so long as the program did not base any reward on the outcome of the health assessment;
• Encourage preventive care through the waiver of the co-payment or deductible requirement for the costs of pre-natal care or well-baby visits;
• Reimburse employees for the cost of health-club memberships, without regard to any health factors relating to the employees;
• Reimburse employees for the costs of smoking cessation programs, without regard to whether the employee quits smoking;
• Reward employees for participation in a diagnostic testing program so long as the reward is not based on any outcome; or
• Reward employees for attending a monthly health education seminar.

Although the above wellness plan provisions would not violate HIPAA because they do not discriminate as to which individuals are eligible to receive the benefit, they nonetheless may violate the ADA if they provide an incentive for an employee who submits to a medical examination or inquiry.

Designing Lawful Programs Under the ADA and HIPAA

There are numerous options for wellness programs. Some programs do not implicate either the ADA or HIPAA. For example, requiring (or offering rewards for) all employees to attend health education classes without any kind of screening, surveys or questionnaires, would not implicate the ADA because it does not require a disability-related medical inquiry or medical exam; nor does it violate HIPAA because employees are not required to achieve any standard related to a health factor. Other examples of programs that ordinarily would not implicate the ADA or HIPAA include offering free fitness programs, health club memberships, weight loss programs or smoking cessation programs without regard to outcome.

Wellness programs, if carefully crafted and implemented, may survive scrutiny under the ADA and/or HIPAA so long as they: 1) do not discriminate against or prevent an individual with a disability from participating and receiving any reward or benefit; 2) either (a) do not involve a medical exam or inquiry; or (b) any medical exam or inquiry is voluntary (i.e., failure to participate does not result in a penalty) and any records or information from such exam are kept confidential and not used for employment purposes; and 3) either: (a) there is no reward or penalty based on the individual's health status or ability to meet a standard that is related to a health factor; or (b) the program meets the five requirements for a wellness program under HIPAA.

Conclusion

Although the ADA and HIPAA are the laws most likely to conflict with the design or implementation of a wellness program, it is important to keep in mind that other laws may be implicated as well. For example, several states have laws protecting employees from discrimination or adverse action for off-duty lawful activities, such as smoking. Wellness programs that offer incentives or penalties to curb such behavior, even if they comply with the ADA and HIPAA, could violate these state laws. In addition, wellness programs that cater to younger employees may run afoul of age discrimination laws.

The law concerning wellness programs is still relatively new and there is little case law interpreting the impact that many laws may have. Careful drafting and planning of these programs are essential to achieve a win-win situation for both employees and employers.

Patricia Anderson Pryor is a partner in the Labor and Employment Department at Taft, Stettinius & Hollister LLP, Cincinnati. Ms. Pryor represents and advises employers in all forms of litigation, and dispute resolution, including mediation and arbitration, and in managing all aspects of the employment relationship. She is a frequent speaker at legal seminars and to employers and professional groups and has been featured on the radio broadcast, Employment Straight Talk.

Wellness programs have become a popular tool for insurance companies and employers. Insurance companies market wellness programs as a method to reduce health insurance costs. Employers use these programs as both a benefit to employees and a cost-saving measure to reduce insurance costs, improve productivity and reduce absenteeism caused by injury or illness. The term 'wellness program' applies to a wide variety of programs designed to improve employee health, including fitness classes, smoking cessation programs, weight loss programs, and medical exams with medical goals based upon the results. Many programs begin with a health-risk assessment in which employees complete a health questionnaire and/or submit to height, weight, cholesterol and other screenings to obtain an assessment of their risk factors and health status. Incentives are often provided for program participation and/or achievement of health goals. Although at first glance these wellness programs seem to be a win-win for everyone ' improved health for employees and reduced costs ' they carry with them a number of inherent legal risks.

However, wellness programs have the potential to run afoul of both the Americans with Disabilities Act of 1990 ('ADA') and the Health Insurance Portability and Accountability Act of 1996 ('HIPAA'). The ADA prohibits discrimination against an individual with a disability, and prohibits certain medical exams and inquiries of employees. HIPAA prohibits discrimination in the provision of health insurance or its costs due to a health-related factor. Both laws provide exceptions for certain wellness programs. Unfortunately, a wellness program that complies with one law does not necessarily comply with the other.

The Americans with Disabilities Act

The ADA prohibits employers from discriminating against an employee because of his or her disability. It also places limitations on the types of medical examinations and inquiries that employers can require.

Under the ADA, an employer cannot discriminate against an individual with a disability in the terms and conditions of employment. 42 U.S.C. ' 12112(a). A wellness program, like other benefits offered to employees, is a term and condition of employment. Therefore, the benefits of a wellness program must be made available to all employees regardless of any disability. If an employee, because of his or her known disability, is unable to participate in the wellness program, the ADA requires that the employer provide a reasonable accommodation for that person. For example, if an employer's wellness program offers an incentive to all employees who agree to run 10 miles per week, the benefit would need to be made available to an individual who, because of a disability, is unable to run 10 miles.

In addition, the ADA prohibits an employer from making medical inquiries or requiring medical exams of a current employee unless such inquiries are job-related and consistent with business necessity. 42 U.S.C. ' 12112(d)(4). The 'business necessity' standard is a high one. Generally, an employer is entitled only to information necessary to determine whether the employee can perform the essential functions of the job without posing a direct threat to himself or other employees. Even non-medical inquiries may be prohibited if they are likely to elicit information about an individual's disability.

Voluntary Wellness Programs Under the ADA

The ADA provides an exception to this general prohibition against medical exams for voluntary medical examinations, including voluntary medical histories, if the records are kept confidential and are not used for the purposes of limiting health insurance eligibility or preventing occupational advancement. 42 U.S.C. ' 12112(d)(4)(B). Any medical exams or medical inquiries under a wellness program, therefore, must be voluntary.

Unfortunately, the law is not clear as to what constitutes a voluntary exam. According to the EEOC's Enforcement Guidance, to be considered voluntary, an employer cannot require participation and cannot penalize an employee for not participating. EEOC Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees. This guidance from the EEOC leaves open the question of whether incentives for participation would render a wellness examination involuntary.

During the American Bar Assoc- iation's Committee on Employee Benefits Technical Session in May, 2006, representatives from the EEOC informally commented on 'wellness programs.' The representatives provided two examples of incentives that might render a wellness examination involuntary: 1) requiring employees to submit to a health-risk assessment as a condition for enrolling in the employer's health insurance plan; and 2) using 'punitive triggers' for employees who do not submit to medical examinations. While the comments are informal and non-binding, they provide guidance on the EEOC's position.

According to the Committee, some employers have tried to require employees to submit to a health-risk assessment as a condition for enrolling in the employer's health insurance program, arguing that participation in the assessment is voluntary because participation in the health insurance plan is voluntary. The EEOC representatives stated that denying enrollment in this context would likely be deemed a 'penalty' because of the importance of health insurance to most employees.

Similarly, some employers have sought to use 'punitive triggers' for employees who do not submit to medical exams or submit to subsequent follow-up examinations with referral specialists or disease counselors. Such punitive triggers include requiring the employee to pay a higher health-care premium or higher deductible. For example, the wellness plan may refer an individual with diabetes to a disease manager who assists the individual with controlling his or her diet, checking blood sugar, taking insulin, regularly checking hemoglobin, etc. The American Bar Association Committee asked whether an employer could penalize an employee who refuses to attend the consultations or referral examinations. The EEOC representatives stated that the 'punitive triggers' would amount to penalties for non-participation within the meaning of the regulations, thus rendering participation in the program involuntary.

If higher premiums for non-complying participants is unlawful as suggested by the EEOC's representatives, it is doubtful that an employer could lawfully do the converse, i.e., instead of increasing premiums for those who do not comply (as a penalty), lowering premiums for employees who do comply (as an incentive). The result of the incentive would be the same as a penalty ' the employee who did not comply or participate would pay more than the employee who did. In a 1998 unofficial opinion letter from the EEOC, an agency representative suggested that a monetary incentive may render a wellness program involuntary. The representative noted that voluntary means 'without valuable consideration or legal obligation,' which suggests that monetary benefits may not be used to influence a person's decision. Although the EEOC did not express an official opinion, it noted that the size of the financial benefit of an incentive would be a significant consideration in determining whether participation was voluntary, leaving open the possibility that a small incentive or reward might not render participation involuntary.

Health Insurance Portability And Accountability Act

Under the HIPAA amendments to ERISA, an employer that maintains a group health insurance plan cannot establish rules for eligibility, require an employee to pay a greater premium or contribution, or discriminate in cost-sharing mechanisms such as deductibles, co-payments and co-insurance based on health-related factors. Health-related factors include 'health status, medical condition (including physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability.' 29 U.S.C. ' 1182(a)-(b). In other words, HIPAA precludes an employer from making eligibility or the costs of insurance dependent upon whether an employee receives medical care or can meet a health standard. However, HIPAA does allow a plan or issuer to establish premium discounts or rebates, or to modify otherwise applicable co-payments or deductibles in return for adherence to wellness programs that promote health and disease prevention. 29 U.S.C. ' 1182(b)(2)(B).

Final Rules on WellnessPrograms Under HIPAA

Until recently, there was no final guidance on what constituted a suitable 'wellness program' under HIPAA. On Dec. 13, 2006, the Department of Labor, in conjunction with the Department of the Treasury and Department of Health and Human Services, published final rules concerning the standards a wellness program must meet to be excepted from the non-discrimination provisions of HIPAA. These rules became effective Feb. 12, 2007 and apply to programs with plan years beginning on or after July 1.

Under the final regulations, a wellness program that conditions a reward on an individual satisfying a standard related to a health factor must meet five requirements: 1) the amount of the reward cannot exceed 20% of the cost of coverage; 2) the program must be reasonably designed to promote health or prevent disease; 3) the program must allow eligible individuals to qualify for the reward at least once per year; 4) the program must be available to all similarly situated individuals; and 5) all plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard. 29 C.F.R. ' 2590.702(f).

To satisfy the first requirement, the total amount of the reward under all of the wellness programs under the plan cannot exceed 20% of the cost of coverage. The cost of coverage includes both the employer and employee contributions for employee-only coverage, or if any class of dependants may participate in the wellness program, the cost of coverage in which the employee and any dependants are enrolled. A reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, co-payments or co-insurance), the absence of a surcharge, or the value of a benefit that would otherwise not be offered under the plan.

The second requirement is met if a program has a reasonable chance of improving the health of its participants, is not unduly burdensome, is not a subterfuge for discrimination based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease. A program may not impose an overly burdensome time commitment or a requirement that an individual engage in illegal behavior.

The third requirement is that the program must allow eligible individuals to qualify for the reward at least once per year. In other words, the program cannot base its incentives on health factors that are present when an individual first enrolls without allowing the individual to re-qualify at least annually.

To satisfy the fourth requirement, a wellness program must provide certain individuals with a reasonable alternative standard for obtaining the reward for certain individuals. The alternative standard must be available for individuals for whom it is 'unreasonably difficult' due to a medical condition to satisfy the otherwise applicable standard, or for whom during the particular period it is medically inadvisable to attempt to satisfy the otherwise applicable standard. Reasonable alternatives could include lowering the threshold of the existing health-factor-related standard, substituting a different standard, waiving the standard, or following the recommendation of an individual's physician regarding the health factor at issue. The reasonable alternative need not be developed in advance and may be different for each individual. For the alternative standard to be reasonable, the individual must be able to satisfy it without regard to any health factor. A plan may seek verification, such as a statement from a physician, that a health factor makes it unreasonably difficult or medically inadvisable for an individual to meet a standard.

Finally, all plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard. However, if the plan materials only mention that a program is available without describing its terms, this disclosure is not required.

Not all aspects of a wellness program must comply with these rules. These requirements apply only to a wellness program that provides a reward based on the ability of an individual to meet a standard that is related to a health factor. For example, a wellness program must meet these requirements if it conditions a reward upon the outcome of a cholesterol test or based on an individual's ability to stop smoking. However, an employer, without having to comply with the requirements, could:

• Provide voluntary testing of enrollees for specific health problems and make recommendations to address health problems identified, so long as the program did not base any reward on the outcome of the health assessment;
• Encourage preventive care through the waiver of the co-payment or deductible requirement for the costs of pre-natal care or well-baby visits;
• Reimburse employees for the cost of health-club memberships, without regard to any health factors relating to the employees;
• Reimburse employees for the costs of smoking cessation programs, without regard to whether the employee quits smoking;
• Reward employees for participation in a diagnostic testing program so long as the reward is not based on any outcome; or
• Reward employees for attending a monthly health education seminar.

Although the above wellness plan provisions would not violate HIPAA because they do not discriminate as to which individuals are eligible to receive the benefit, they nonetheless may violate the ADA if they provide an incentive for an employee who submits to a medical examination or inquiry.

Designing Lawful Programs Under the ADA and HIPAA

There are numerous options for wellness programs. Some programs do not implicate either the ADA or HIPAA. For example, requiring (or offering rewards for) all employees to attend health education classes without any kind of screening, surveys or questionnaires, would not implicate the ADA because it does not require a disability-related medical inquiry or medical exam; nor does it violate HIPAA because employees are not required to achieve any standard related to a health factor. Other examples of programs that ordinarily would not implicate the ADA or HIPAA include offering free fitness programs, health club memberships, weight loss programs or smoking cessation programs without regard to outcome.

Wellness programs, if carefully crafted and implemented, may survive scrutiny under the ADA and/or HIPAA so long as they: 1) do not discriminate against or prevent an individual with a disability from participating and receiving any reward or benefit; 2) either (a) do not involve a medical exam or inquiry; or (b) any medical exam or inquiry is voluntary (i.e., failure to participate does not result in a penalty) and any records or information from such exam are kept confidential and not used for employment purposes; and 3) either: (a) there is no reward or penalty based on the individual's health status or ability to meet a standard that is related to a health factor; or (b) the program meets the five requirements for a wellness program under HIPAA.

Conclusion

Although the ADA and HIPAA are the laws most likely to conflict with the design or implementation of a wellness program, it is important to keep in mind that other laws may be implicated as well. For example, several states have laws protecting employees from discrimination or adverse action for off-duty lawful activities, such as smoking. Wellness programs that offer incentives or penalties to curb such behavior, even if they comply with the ADA and HIPAA, could violate these state laws. In addition, wellness programs that cater to younger employees may run afoul of age discrimination laws.

The law concerning wellness programs is still relatively new and there is little case law interpreting the impact that many laws may have. Careful drafting and planning of these programs are essential to achieve a win-win situation for both employees and employers.

Patricia Anderson Pryor is a partner in the Labor and Employment Department at Taft, Stettinius & Hollister LLP, Cincinnati. Ms. Pryor represents and advises employers in all forms of litigation, and dispute resolution, including mediation and arbitration, and in managing all aspects of the employment relationship. She is a frequent speaker at legal seminars and to employers and professional groups and has been featured on the radio broadcast, Employment Straight Talk.