Employer sued over wellness program

In order to avoid costly litigation, employers need to carefully design their wellness program — especially when they reward participants with incentives and discounts on their medical coverage. The EEOC recently sued a Wisconsin employer, claiming the penalty the employer imposed for non-participation in its program was too significant. The EEOC also determined the wellness requirements were involuntary under the Americans with Disabilities Act.

Employers and their advisers should pay careful attention to how the EEOC defines liability in this case, EEOC v. Orion Energy Systems. It is a reminder to stay in compliance with the Affordable Care Act’s rules for wellness as well.

"In terms of staying compliant under the ACA, the Americans Disability Act and HIPAA to protect employees’ privacy, the more you focus on giving people multiple opportunities to participate, the more attractive your program is and the easier it is to stay compliant,” explains Adam Cox, director of wellness for Heffernan Insurance Brokerage.  

He advises employers to watch their program’s design and semantics. In other words, don’t suggest to workers that activities are mandatory in order to receive a premium discount, explain to them that “if they’re involved in this process and participate in this process, that’s the easiest way to avoid penalties and challenges," he says. “Wellness is about providing people with consistent opportunities to better themselves.”

In the EEOC case, the employer paid 100% of the health insurance premiums for employees who participated in its “voluntary” wellness program. If the employee chose not to participate, the employee paid 100% of the premiums. The program contained two components. First, employees completed a health risk assessment, and second, a “fitness” component involved completing a medical history questionnaire and exercising on the employer’s range of motion machines. The complaint also alleges that there was a $50 “penalty” for not participating in the fitness component of the wellness program.

This wellness program only offered one option for participation: the in-office motion machines. Not only could some employees have been unable from a medical standpoint to use these machines, but they also may not have been available to all work shifts and employees with longer commutes may have found utilizing them inconvenient.

ACA requirements

Under the ACA, health contingent programs can come in two forms: “outcomes based” and “activity-only.” Activity-only wellness programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, although a particular outcome is not required. In such programs, an employer must provide a reasonable alternative standard for obtaining the reward to individuals for whom it would be unreasonably difficult due to a medical condition or medically inadvisable to meet the existing standard.

This employer did not offer such an alternative, such as an activity substitute or educational class for employees medically unable to participate. They could also have provided a gym substitute program so that employees who lived farther away could easily participate. Not only was this wellness program out of compliance, it also didn’t attract employees of all interests to participate.

"Just like we have different tastes in food and different senses of humor, there’s no one-size-fits-all and that’s where people pigeonhole themselves with wellness," explains Cox. He advocates having a spectrum of activities available to people. 

"If starting a wellness program, focus on how to continue to capture small groups of 10-15% of your population [through different wellness options]. And make it as fun as possible. No one wants mandatory fun," he says.  

For outcomes-based wellness programs that reward employees for meeting certain goals, such as lowering their body mass index or cholesterol, or quitting smoking, a reasonable alternative standard must also be provided for those who don’t meet the outcomes-based standard. This ensures that the wellness program is reasonably designed to improve health and is not a ruse for underwriting or reducing benefits based on health status.

Generally, most employers use outcomes-based programs to reward non-smokers with reduced health care premiums. If an employer uses biometric screenings in wellness programs for other metrics, they usually don’t penalize people for not improving their biometric score, but rather reward people who participate in wellness activities that help improve their health problem areas as determined by the biometric screening. The goal is teach participants to become better health care consumers, to be more proactive in improving their health and to encourage them to take steps to prevent further disease down the road.  

Employers have more latitude in offering incentives for wellness participation and improvement under the health care reform law. The new regulations raise the maximum permissible reward offered in connection with a health-contingent wellness program to 30%. This amount is raised to 50% for programs that seek to reduce tobacco use.

However, employers and their advisers must be wary that they are still in compliance with the ACA, ADA and HIPAA to avoid lawsuits.

Under ACA regulations, program descriptions must describe the availability of the reasonable alternatives available.

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