Is Your Corporate Wellness Program Compliant?

Including workplace wellness programs into your company’s benefit offering can help you to improve the overall health of your employees and save your company on health insurance.  But new evidence points to concerns held by pundits surrounding the legality of these company sponsored wellness programs. 

The Popularity of Wellness Programs is Booming. But…

We can’t argue with the fact that corporate wellness is booming.  Just look at the facts provided by Fidelity Investment’s fifth annual wellness survey:

  • 95% of companies plan to offer some kind of health improvement program for their employees
  • Corporate employers plan to spend an average of $594 per employee on wellness-based incentives this year
  • Companies offering incentives to participate in these initiatives has increased from 57% in 2009 to 74% in 2014
  • 93% of companies indicated they plan to expand or maintain funding for their program over the next 3-5 years
  • 44% of companies said they plan to maintain or increase their investment in wellness programs, even if their company were to move away from direct involvement in employer-sponsored health coverage

Compliance is a Tightrope

Wellness is openly embraced, but did you know that over 10 Federal laws exist relative to company sponsored wellness programs? This said, sponsoring and managing one of these programs brings up numerous complexities around which companies must be cautious to avoid fines and penalties.

Global Law Firm Nixon Peabody took a deeper look at the programs, and found that the Affordable Care Act (ACA) was built with nondiscrimination rules surrounding wellness plans that do not address compliance with other federal laws, including the following:

  • Employee Retirement Income Security Act (“ERISA”)
  • Americans with Disabilities Act (“ADA”)
  • Title VII of the Civil Rights Act of 1964 (“Title VII”)
  • Internal Revenue Code (“Code”) Section 105(h)’s nondiscrimination provisions
  • Genetic Information Nondiscrimination Act of 2008 (“GINA”)
  • Family and Medical Leave Act (“FMLA”)
  • Multiple State Laws

Further, provisions in the ACA failed to recognize

  • Continuation coverage under Consolidated Omnibus Budget Reconciliation Act (“COBRA”)
  • Privacy rules under the Health Insurance Portability and Accountability Act (“HIPAA”)
  • Wage and hour requirements under the Fair Labor Standards Act (“FLSA”)
  • Income tax provisions of the Code
  • Collective Bargaining obligations under the National Labor Relations Act (“NLRA”)

For the full dissertation, please read Wellness Programs and the ACA (Part II).

Companies are Feeling the Pressure

Some companies are already seeing backlash on their corporate wellness programs. Retail pharmacy and tobacco-banning newsmaker CVS Pharmacies was the defendant of a class-action lawsuit filed by employees surrounding “Wellness Exams,” in which employees were allegedly asked about sexual activity and subjected to blood testing for “a variety of medical conditions” in lieu of a $600 fine.

Pennsylvania State University (Penn State) was also at the receiving end of a claim by faculty alleging a $100 monthly fine for employees declining to complete a wellness questionnaire asking for intimate details surrounding jobs, marital status, and financial situation.

The Proverbial Carrot and Stick

Where do employees and employers begin? Aside from privacy, the issue at hand is that of incentive vs. penalty.  A recent poll from the Kaiser Family Foundation found that employees approve of incentive-based wellness programs, but shun plans including penalties such as higher premiums.  Specifically, the poll stated:

76 percent of workers thought it was appropriate for employers to offer wellness programs that promote healthy behavior. But a majority opposed wellness plans that had financial repercussions for workers: 62 percent did not think employers should charge higher health insurance premiums to workers who did not participate, and 74 percent said management should not charge more to those who did not reach health goals.”

Director of the Corporate Health and Wellness Association Jonathan Edelheit had this to say about companies enforcing wellness programs:

“As we get closer to the end of the year and employers realize the mandate [for providing health coverage] and the fines are here to stay, there is going to be a big shift to the “stick’ and “penalty” approach in wellness. Employers who aren’t offering health insurance now, and do so to avoid the fines, will implement the stick approach simply as a cost savings approach and to shift some of the burden and responsibility to employees. Since the ACA doesn’t reduce healthcare or insurance costs, those with existing wellness programs are going to be forced to consider and utilize the stick/penalty approach simply as a long term way to make employees accountable and to cost shift.”

What Happens Next?

Wellness programs not only offer a service to employers and employees seeking money-saving options in the short-term and the long-term, but also to provide early detection of health issues that may otherwise go undetected.  However, many of these programs are developed by snake oil salesmen who promise unmatched return on investment, immediate cost savings, and much, much more.  As employers adopt and implement these programs, it is vital for companies to design a compliant and cost-effective option to offer a win-win for employee and employer.

This said, compliance is key.  The absolute complexity of these wellness programs need be addressed sooner than later to ensure compliance and long-term program sustainability.

We would like to thank Nixon-Peabody for Part I and Part II of their Workplace Wellness overview; Forbes for the detailed look at the legality, including quotes and cases; and the New York Times for the look at Penn State’s faculty battle.

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