Employer wellness programs get clarification

Proposed rules offer much-needed, significant guidance on what compliant wellness programs should look like

Chris Morehead

It’s no secret that the Pacific Northwest is a hub for outdoor enthusiasts and individuals leading (or trying to lead) an active lifestyle. That’s why the new set of rules on employer wellness programs proposed by the Equal Employment Opportunity Commission (EEOC) is worth the attention of Washington employers.

Most people understand that a “wellness program” is designed to encourage employees to live healthier lifestyles, often focusing on eating “better,” exercising, quitting smoking or even just completing a health risk assessment to help figure out what their next steps should be. Employers have a huge incentive in seeking healthier employees in their workforce because a healthy workforce means reduced healthcare costs. As these programs have become more popular, employers have expressed concerns about implementing them for fear that they could run afoul of the Americans with Disabilities Act’s (ADA) general prohibition on collecting medical information from employees. The ADA allows such gathering of information if it is done as part of a “voluntary” employee health program, but the EEOC has been silent on whether employers could offer incentives to employees to induce them into engaging in such programs. For example, could an employer offer cash prizes to the worker who wins the “Biggest Loser” weight loss competition or quits smoking? The good news is that the EEOC has now offered significant guidance on what compliant wellness programs should look like.

First, the proposed rule says that in order for a program to be compliant, it must be reasonably designed to promote health or prevent disease. This means the program must have a reasonable chance of improving the health of, or preventing disease in, participating employees. Additionally, the wellness program can’t be overly burdensome, “highly suspect” in its methods or really just a subterfuge for violating the ADA or other antidiscrimination laws. In other words, don’t get too cute or creative.

Second, to be “voluntary,” employers must not require program participation, deny or limit coverage or health benefits to nonparticipants in the program, or take adverse action against employees for not participating in the program or falling short in their fitness goals. Also, for wellness programs part of a group health plan, employers must provide a notice clearly explaining what medical information will be obtained, how it will be used, who will receive it and the restrictions on disclosure.

Third, when it comes to allowable incentives, employers may offer a maximum allowable incentive of 30 percent of the total cost of employee-only coverage, whether in the form of a reward or penalty, to promote an employee’s participation in a wellness program. The total cost of coverage is the amount that the employer and the employee pay – not just the employee’s share.

Finally, the proposed rules do not alter any of the exceptions to the confidentiality requirements, but state that employers may only receive information collected by wellness programs in an aggregate format that does not disclose, and is not reasonably likely to disclose, the identity of employees – unless such disclosure is necessary to administer the plan. Also, wellness programs that are part of a group health plan generally require employers to maintain safeguards to protect the privacy and personal health information in order to be HIPAA-compliant.

Employers should keep in mind that the proposed rule is not finalized yet, so there is time to get into compliance. It’s never too early for Washington employers to start thinking about how to structure their wellness programs to match and encourage employees’ active and healthy lifestyles.

Chris Morehead is a Washougal native and an attorney in the Portland office of Fisher & Phillips LLP, which is dedicated to representing the interests of employers. He can be reached at 503.205.8099 or cmorehead@laborlawyers.com.